Colorado agrees to cannabis "credit co-ops"

Colorado's pioneering marijuana industry continues to break new ground, especially when it comes to confronting financial and legislative issues surrounding cannabis.

Colorado Governor John Hickenlooper on Friday signed into law HB 1398, a bill that allows legal marijuana businesses in the state to create what the measure calls "marijuana financial services cooperatives," referred to in the statute as "cannabis credit co-ops."

Twenty-two states and the District of Columbia have legalized the use of medical marijuana, and earlier this year Washington state and Colorado legalized the recreational use of cannabis for adults.

A big challenge for Colorado's burgeoning marijuana industry is that most of its transactions are on a cash-only basis. That's because cannabis remains illegal on a federal level and most banks and financial institutions won't do business with marijuana-related businesses out of fear of federal prosecution.


In February, however, the U.S. Treasury Department's Financial Crimes Enforcement Network, working with the Justice Department, issued guidance for financial institutions seeking to provide services to cannabis-related businesses. The goal? To promote "greater financial transparency in the marijuana industry and mitigate the dangers associated with conducting an all-cash business."

Those dangers are real. CBS station KCNC-TV, quoting data from the Denver police, says there were 40 burglaries and one robbery at marijuana businesses in the city during the first four months of this year.

"We are all having nightmares about this issue," Michael Elliott, executive director of the Denver-based Marijuana Industry Group, told KCNC.

In a statement issued last month, Elliot said the lack of basic banking services was causing "serious public safety and accountability issues" in the cash-dominant marijuana industry.

"HB 1398 is likely not a solution to the banking problem," he added, "but an opportunity to move the conversation forward. It will allow cannabis credit co=ops to form, and seek permission from the [Federal Reserve] to access merchant services and checking."

Financial experts acknowledge the new measure will probably not solve the marijuana industry's inability to use banks and other financial services.

"We don't think it will do anything other than allow the state to say, 'We've tried everything we can think of and it won't work, so Congress it's now up to you'," Don Childears, president and CEO of the Colorado Bankers Association, told the Denver Business Journal on Friday.

"They'll never get access to the Federal Reserve System," he continued, "and if they can't do that, the co-ops will never be formed."

Meanwhile, one group benefiting from the current cash-only basis of Colorado's marijuana industry are private security firms. Ted Daniels of Blue Line Security told KCNC he can't hire armed guards fast enough to protect the cash-filled dispensaries.

"If you ask me to grow marijuana, I wouldn't know the first thing," Daniels said in an interview. "But I know how to protect it."

  • Bruce Kennedy

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