Federal regulators have rejected a banking bid from the marijuana industry in Colorado as it is considered as an illegal drug on a federal level. A credit union that was formed to serve the expanding marijuana industry has sued the banking regulators, after they were denies access to electronic banking system on Thursday.
In November, Colorado regulators approved and asked the Federal Reserve in Kansas City, to grant a “master account” to the Fourth Corner Credit Union in Denver. This allowed the credit union to conduct financial operations with other institutions, and opened its doors to hundreds of state-licensed marijuana businesses in Colorado. Though recreational marijuana is legal in Colorado, federal regulators are discouraging banks to work with pot businesses.
“I felt all along the way they were trying to figure out a way to deny our application,” said Mark Mason, who runs a law firm in South Carolina.
The National Credit Union Administration (NCUA), an independent federal agency that charters and supervises credit unions has declined to grant deposit insurance to the Fourth Corner. The credit union then sued NCUA and Federal Reserve in Kansas City, appealed to the federal judge for “equal access” to financial system, and to overturn their decisions on Thursday.
As a result, almost all banks have refused to open accounts for hundreds of marijuana businesses, and they have to operate in an all-cash economy. Small business have to use safes, armored cars and other alternatives due to the significant dangers. Colorado director of marijuana coordination Andrew Freedman said he was disappointed by the feds decision.
The decision shows the growing concern of the state-level regulators who have seen voters repeatedly approve recreational and medical marijuana all over the country. The growing marijuana industry hoped that banking would be a breakthrough for their financial issues. Colorado Gov. John Hickenlooper has promised that they will continue to push the federal government to allow banking for this industry.