United States: Banking On The Green Rush: Financial Institutions Face New Challenges In Serving The Legal Marijuana Industry

I. Introduction

Financial institutions that either serve, or seek to serve, marijuana-related businesses face significant uncertainty with respect to marijuana's legal status under state and federal law. As sections of the cannabis industry seek to migrate from black markets to legal markets due to changes in state law, the legalization of marijuana is expected to generate substantial value for industry business owners and the economy. Thus far, financial institutions have been slow to serve the growing legal marijuana industry, but the tide may be turning. On the heels of positive guidance issued by both the Department of Justice ("DOJ") and the Financial Crimes Enforcement Network ("FinCEN"), some financial institutions appear willing to dip their toes into the growing pool of small business customers operating in the marijuana industry.

As of September 2015, twenty-three states and the District of Columbia have legalized some form of marijuana.1  Colorado alone has approximately 1,200 licensed marijuana businesses, and there are an estimated 2,000 medical dispensaries and retail shops throughout the United States.2 These businesses are expected to generate at least $10 billion in economic value in 2015, and another $30 billion each year for state and local economies by 2019.3 Despite this remarkable growth, marijuana remains a controlled substance under federal law and federal regulations have generally prohibited financial institutions from serving the industry. As a result, many financial institutions are hesitant to extend even the most basic financial products and services to those in state-legalized marijuana markets. This has left many small business owners without access to cash management resources, checking accounts, merchant and payroll services, remote deposit, bill payment, and Automated Clearing House ("ACH") credit transfers.

Earlier this year, access to these financial products and services seemed inevitable for Colorado business owners, as state banking officials approved a charter for Denver-based Fourth Corner Credit Union—the first credit union seeking to provide financial services specifically for the cannabis and hemp industry. However, the Federal Reserve's recent refusal to approve its master account application and the National Credit Union Administration's ("NCUA") denial of federal share insurance has slowed that forward momentum. Proposed federal legislation has also remained relatively stagnant,4 and financial institutions are left to weigh the current risk of enforcement with the potential reward of acquiring new customers and accounts from a blossoming industry.

II. Unmet Banking Needs of State-Licensed Marijuana Businesses

Financial institutions currently provide few, if any, services to state-licensed marijuana businesses given the substance's current federal legal status. Many banks remain wary of federal scrutiny or prosecution for aiding illegal drug activity should they allow these businesses to open accounts, receive loans, or utilize their credit cards or electronic funds transfer systems. Of the 13,118 banks, savings and loan associations, and credit unions currently operating in the United States, only an estimated 105 banks and credit unions currently service the cannabis industry.5 With a less than one percent service rate, many of these businesses are foreclosed from accepting debit cards, credit cards, checks, or mobile payments from their customers. This, in turn, has forced a majority of state-licensed businesses to deal primarily on a cash basis.

Beyond the risk of robbery, skimming and theft, tax evasion, and other types of fraud inherent in an all-cash economy, the absence of financial services has restricted the overall growth of the market. Sellers can keep only so much currency on-site before banking workarounds and alternative and secure cash storage become insufficient. Problems associated with payments to employees and vendors, as well as a lack of clarity in accounting and auditing procedures, also underscore the difficulty of operating these businesses under a framework of opposing state and federal law.6

For this reason, the inability of marijuana businesses to open bank accounts has become a growing point of contention between state and federal regulators. For example, Colorado politicians have attempted to bring clarity to the issue by sponsoring bills in both the House and the Senate, and the Senate Appropriations Committee recently approved a measure that would allow banks to provide financial services to state-legalized marijuana dispensaries.7 Despite this movement, significant federal barriers remain, and financial institutions are left to monitor the ever-changing landscape of marijuana banking legislation and regulation for insight on how these issues might be resolved moving forward.

III. Federal Legal Barriers and Changing Enforcement Priorities

Even in those states where the sale of marijuana is legal, significant federal deterrents remain for financial institutions interested in serving the industry. Financial institutions that engage with marijuana-related businesses face a range of regulations and potential violations of the Controlled Substance Act ("CSA"),8 the Bank Secrecy Act ("BSA"),9 the Racketeer Influenced and Corrupt Organizations Act ("RICO"),10 certain provisions of the USA Patriot Act, and other federal statutes. The recent refusal of master accounts and federal deposit insurance for financial institutions seeking to engage with state-legalized marijuana businesses has made entry into the market even more difficult.


1  Matt Richtel, First Bank of Bud, New York Times (Feb. 5, 2015), available at http://www.nytimes.com/2015/02/08/business/marijuana-industry-in-colorado-eager-for-its-own-bank-waits-on-the-fed.html.


3  Becky Olson, Exclusive Chart: Marijuana Industry to Create $10B+ Economic Impact in 2015, $30B By 2019, Marijuana Business Daily (May 4, 2015), available at https://mjbizdaily.com/exclusive-chart-marijuana-industry-create-10b-economic-value-2015-30b-2019/ .

4  In July 2015, Colorado Senators Michael Bennet and Cory Gardner introduced the Marijuana Businesses Access to Banking Act, legislation that would open up banking services to state-legal marijuana businesses. A similar bill was introduced in the House of Representatives in July 2013. That legislation, titled the Marijuana Businesses Access to Banking Act of 2013, sought to prohibit a federal banking regulator from, among other things: (1) terminating or limiting the deposit insurance of a depository institution solely because it either provides or has provided financial services to a marijuana-related legitimate business; or (2) prohibiting, penalizing, or otherwise discouraging a depository institution from providing financial services to a marijuana-related legitimate business. The bill has seen no movement since its referral to the Subcommittee on Crime, Terrorism, Homeland Security, and Investigations in September 2013.

5  Jennifer Mann, Chart of the Week: The Challenging Banking Climate for Marijuana Businesses, Marijuana Business Daily (Jan. 12, 2015), available at http://mjbizdaily.com/chart-of-the-week-snapshot-of-the-challenging-banking-situation-facing-marijuana-businesses/; Remarks of Jennifer Shasky Calvery, Director of FinCEN (Aug. 12, 2014), available at http://www.fincen.gov/news_room/speech/pdf/20140812.pdf (noting that "there are currently 105 individual financial institutions from states in more than one third of the country engaged in banking relationships with marijuana-related businesses").

6 Jeffrey Stinson, States Find You Can't Take Legal Marijuana Money to the Bank, Pew Charitable Trusts (Jan. 5, 2015), available at http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&ved=0CB8QFjAA&url=http%3A%2F%2Fwww.pewtrusts.org%2Fen%2Fresearch-and-analysis%2Fblogs%2Fstateline%2F2015%2F1%2F5%2Fstates-find-you-cant-take-legal-marijuana-money-to-the-bank&ei=mu1IVYmnNbOwsATZ8YCQCg&usg=AFQjCNE9IV1y5WYmS5W2gva3A4TblYTXtQ&bvm=bv.92291466,d.cWc.

7 S. Comm. on Appropriations, 117th Cong., FY2016 FSGG Appropriations—Merkley Marijuana Banking Amendment (July 23, 2015), available at http://www.appropriations.senate.gov/sites/default/files/hearings/FY2016%20FSGG%20Appropriations%20-%20Merkley%20Marijuana%20Banking%20Amendment.pdf.

8 21 U.S.C. §§ 801 et seq.

9 12 U.S.C. § 1829b; 12 U.S.C. §§ 1951-1959e; 31 U.S.C. §§ 5311 et seq.

10  18 U.S.C. §§ 1961 et seq.

Download >> Banking On The Green Rush: Financial Institutions Face New Challenges In Serving The Legal Marijuana Industry

The content of this article does not constitute legal advice and should not be relied on in that way. Specific advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Seyfarth Shaw LLP
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Seyfarth Shaw LLP
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions