Colorado Gov. Jared Polis and the state Department of Regulatory Agencies released an initiative on Monday aimed at increasing the number of financial services available in the state to businesses in the recreational marijuana and industrial hemp industries.
“As the first state to establish a legal marijuana industry and one of the first to implement an industrial hemp program, Colorado has become a national economic leader in the cannabis industry,” Polis said at the Arvada office of Partnership Colorado Credit Union, which has pioneered offering some services to marijuana-related businesses.
“We are excited to release a bold, forward-thinking roadmap to provide much-needed guidance, clarity and support to state-chartered financial service providers that work with or are interested in working with the state-legal cannabis industry.”
The initiative addresses a problem faced by legal marijuana businesses unable to access financial services — including banking, lending and insurance — because the drug remains illegal at the federal level, discouraging many banks and other financial institutions from handling the industry's money.
Retail sales in Colorado last year topped $1.6 billion through November, putting 2019 on track to post record revenue since the state became the first jurisdiction in the world to establish a legal recreational marijuana market in 2014.
U.S. Rep. Ed Perlmutter was on hand to applaud the state program and pitch federal legislation he's sponsoring to clear up issues at the federal level.
The Secure and Fair Enforcement Act of 2019, known as the SAFE Banking Act, passed the U.S. House with broad bipartisan support and is awaiting action in the U.S. Senate, where Colorado U.S. Sen. Cory Gardner is a key supporter.
Perlmutter noted that he began working on the issue with Polis, when the governor was a member of Congress, in 2013, the year after Colorado voters legalized recreational marijuana.
"This is a real public safety issue," Perlmutter said. "Because marijuana remains illegal under federal law, businesses in Colorado and 46 states, four U.S. territories and the District of Columbia are forced to deal in cash. These businesses and their employees and ancillary business cannot access the banking system as any other legitimate business might, leaving them as targets for crime — robbery, assault and other crimes due to the conflict between state and federal law when it comes to cannabis banking."
Even though marijuana is legal in some form for more than 97% of Americans, it's still largely a cash-based business, creating a "significant risk to public safety," State Treasurer Dave Young said at the press conference.
”By providing essential banking services to cannabis businesses, Colorado can lead the way in protecting public safety and promoting financial transparency," he said.
DORA Executive Director Patty Salazar said the lack of clarity at the federal level "creates a level of uncertainty and apprehension" for state-chartered banks and credit unions in Colorado working with the industry.
“This roadmap is designed to lay out a path whereby our state-chartered financial institutions can explore whether or not they are in a position to provide services to this industry.”
The roadmap's element include "providing clear regulatory guidance, encouraging new and emerging technologies in the banking and financial services space, reducing barriers while upholding consumer protection guardrails, and demonstrating state support for financial businesses wishing to explore cannabis banking."
Perlmutter told Colorado Politics he's optimistic the federal legislation can clear a few hurdles and start moving but said in the meantime Colorado's approach will be a big help to state businesses.
"The roadmap the state is providing says, look, so long as you're meeting the FinCEN guidance" — 2014 rules issued by the Department of Treasury's Financial Crimes Enforcement Network — "and the business that you're providing services to are legal, have their licenses and aren't out of compliance, then we, the state, are going to have your back," he said. "But we still have to get this federal fix."
A goal of the plan is to increase the number of financial-service providers serving the cannabis industry by 20% by June 30.
Salazar wouldn't say how many state-regulated institutions are currently working with the industry — the law prohibits disclosing that, she said — but the Associated Press reported in October that roughly 35 banks and credit unions were providing services to cannabis-related companies at that time.
Jeff Hunt, director of Colorado Christian University's Centennial Institute and a persistent critic of legalized marijuana, denounced the initiative.
"The science is clear: marijuana harms developing brains, lowers IQ, and can lead to psychosis," Hunt told Colorado Politics. "Gov. Polis and others are demonstrating that the marijuana movement is really only about making money off the harm of others. We should be encouraging people not to use drugs instead of encouraging financial investment in the harmful marijuana drug industry."
The government affairs director for Boulder-based cannabis company Terrapin Care Station called the announcement encouraging.
“While we remain hopeful that Congress will find a long-term solution to cannabis banking, exploring alternative financial options on the state level is a necessary path in the absence of a more robust system," Nico Pento said in a statement.