Attorney General Jeff Sessions hasn’t launched any raids or prosecutions since he revoked the Cole Memo on Jan. 4, but he’s created the same familiar chaos at the bank — and that might be enough.
It’s been more than two weeks since Attorney General Jeff Sessions escalated the federal government’s war on legal marijuana.
Anger and resistance, speculation and anxiety, and some histrionics have filled the time since Sessions revoked the Cole Memo, an Obama-era Justice Department policy directive, interpreted as tacit acceptance for (state and local) law-abiding cannabis businesses. But since Sessions’s announcement, the federal government hasn’t followed through on the attorney general’s threat. There’s been no prosecutions filed by U.S. attorneys, no Drug Enforcement Administration raids and little further on the topic from Sessions or his lieutenants.
However, if his follow-through is in doubt, there’s no denying that Sessions didn’t need to immediately act on his threats in order to cause trouble for cannabis. Because of Sessions’s announcement on Jan. 4, marijuana banking is now back in the same familiar state of chaos.
On Jan. 4, Sessions announced the “rescission of previous guidance documents” related to marijuana enforcement. Most of the attention has gone to the elimination of the August 2013 memo from former Deputy Attorney General James Cole, but this policy change may have been mostly symbolic.
Other “guidance documents” include a 2014 document from the Financial Crimes Enforcement Network, or FinCEN, that instructed financial institutions how to do business with marijuana companies. Sessions’s announcement made no mention of FinCEN or whether that memo was also revoked — but according to Reuters, which reported on Jan. 11 that the news blindsided FinCEN, those “protections” are still in place.
But those are weak protections, and the fact that it took a week for federal regulators themselves to figure out what was going on says it all. Uncertainty and confusion reigns, and this is how Sessions has caused the most trouble.
Marijuana’s banking troubles are well known. Dispensaries have had to hire armored cars and armed guards to ferry stupendous shipments of cash in order to pay taxes due to federal and state governments. Prior to Jan. 4, things had been improving somewhat: Some cannabis operations quietly opened accounts with a few bold community banks and credit unions, which used the Obama-era instructions to convince board members and shareholders that they could accept cannabis deposits without issue.
John Chiang, California’s state treasurer and a candidate for governor, launched an official study group to examine the problem (and suggest solutions, none of which have been implemented). In the study group, a few have floated the idea of a state-run “public bank” to handle the flood of cannabis money.
Even then, private banks accepting marijuana money didn’t exactly advertise: One Maryland-based institution, named publicly by some of its customers in a Washington Post article, did what it could to reduce its public profile, and with good reason.
Before the announcement from Sessions, there was still significant risk associated with marijuana banking, of the same stripe that’s convinced insurance agencies to not underwrite marijuana operations, but it wasn’t crisis level.
Now, however, the institutional panic has set in once again, as CNBC noted, and right when California’s $7 billion recreational marijuana market is set to rapidly expand with the beginnings of retail sales of recreational cannabis.
“The withdrawal of the Cole memo really couldn’t have come at a worse time, because now is the time that the types of banks and credit unions that are willing to take on more risk would have been entering the market,” said Robert McVay, a Seattle-based cannabis law attorney, in an interview with CNBC.
In the weeks since Sessions’s annoucement, it appears McVay’s opinion may have been premature, as the FinCEN guidance is still in effect. But plenty damage has still been done.
“Some have stopped taking on new accounts,” added Dustin Eide, the CEO and founder of CanPay, a mobile-payments app that’s done business with marijuana operations, and made news in September 2017 by landing a deal to handle official marijuana business in Hawaii—but with the cover of the FinCEN memo.
Since then, “we do know of one institution that was getting ready to launch cannabis banking program that has decided to suspend their launch indefinitely,” he told CNBC.
So now what? That’s the $7 billion question. State elected officials, including Oregon’s attorney general, have pleaded with Congress to do something — the same something, banking reform, that marijuana-friendly lawmakers have been trying to accomplish in Washington for years with no luck.
In the meantime, California’s cannabis economy is back in a familiar place: Sitting on a mountain of money with nowhere to put it, a situation created by the very government that’s due a portion of that mountain in taxes.
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