After being on the favorable end of a “historic” ruling in federal court, a Denver marijuana credit union will again apply for a master account with the Federal Reserve Bank of Kansas City, the credit union’s CEO said Thursday.
Fourth Corner Credit Union formed in 2014 — the same year Colorado initiated legal adult-use sales — to provide banking services to a marijuana industry struggling to bank by traditional means amid conflicted federal and state laws. The credit union landed a state charter, but was denied a master account by the regional bank for the Federal Reserve System.
That denial was upheld in January 2016 by a district court ruling, which dismissed Fourth Corner’s case with prejudice. Fourth Corner appealed that decision.
Earlier this week, a three-judge panel for the 10th U.S. Circuit Court of Appeals vacated that lower court’s ruling and remanded the case with instructions to dismiss the amended complaint without prejudice. The ruling leaves Fourth Corner free to pursue another master account and provides a legal fallback in case that bid were to be quashed.
“We believe that this is historic,” said Deirdra O’Gorman, Fourth Corner’s chief executive officer.
The ruling doesn’t just establish that the Federal Reserve Bank of Kansas City does not have the discretion to deny issuance of a master account as long as the applicant meets its standards, she told The Cannabist. It also frees Fourth Corner to pursue its business plan serving the burgeoning marijuana industry.
The Federal Reserve Bank of Kansas City declined to comment on the decision and does not comment on individual applications, said Bill Medley, a spokesman for the regional reserve bank.
The 10th Circuit ruling, however, came with a caveat: Fourth Corner’s member base would be limited to marijuana industry supporters such as nonprofits and advocates as long as marijuana remained illegal on the federal level.
“I think that was a big stumbling block for the judges who were deciding the case,” O’Gorman said.
That restriction is not a death knell for the credit union, she said, noting that the charter intended for members to include legalization supporters as well as businesses. It’s not yet clear as to whether the business restriction could extend to ancillary businesses — those that provide services and products to the marijuana industry but don’t directly handle the plants, O’Gorman said.
“This really wasn’t a huge change to our business plan,” she said. “Our ultimate goal is to give these directly licensed businesses legitimate (banking services).”
Fourth Corner plans to reapply for a master account “sooner rather than later,” O’Gorman said.
But that’s just one step in the process.
Fourth Corner would need to obtain insurance from the National Credit Union Administration, the federal regulator of credit unions, which previously denied its application for share deposit insurance.
Fourth Corner filed a lawsuit against NCUA in federal district court in Denver. That case is pending.