Business owners across Colorado may be cashing in on the state’s billion-dollar legal marijuana industry, but it’s a surplus of cash that has state officials worried about the industry’s lack of banking options.
Despite the fact that theColorado’s recreational marijuana market opened for business more than two years ago—while medical sales have been legal since 2000—banks in that state, and in others where the drug is legal in some form, are still reluctant to associate with businesses that handle a drug that’s still very much illegal on the federal level.
Fortune has written before about the trouble marijuana-related business owners have finding banks, large or small, to allow them to open an account and deposit proceeds from an industry that is federally illegal, even if their business is fully legal in their given state. The banking industry’s apprehension—which typically stems from a fear of losing federal insurance—causes a variety of problems for marijuana business owners. Those include the increased difficulty of performing customer transactions (cash only), not to mention the need for heightened security to store, guard, and transport all of the cash that businesses pull in and would normally deposit at a bank.
Cynthia Coffman, Colorado’s Attorney General, told the Wall Street Journal that while she opposed the 2012 ballot referendum that legalized recreational pot in her state, she is “concerned” about the cash-heavy aspect of the industry as a public-safety matter. The Republican is now pushing for federal regulators to allow banks to work with companies in her state that handle marijuana directly, noting also that the lack of banking options also makes money laundering more prevalent in the industry.
“I believe it fuels the interest of cartels and traffickers in coming to Colorado and doing business. We definitely have seen an uptick in that activity,” Coffman told the Journal.
As the Journal notes, Colorado had one possible solution go up in smoke earlier this year when a federal court threw out a lawsuit filed by a credit union established for the marijuana industry (and approved by the state of Colorado) that had tried to win the approval of federal banking regulators to help solve the industry’s banking issues. Some federal regulators have issued guidance detailing how banks can work with marijuana businesses without running afoul of federal laws, but most banks (especially national institutions) will likely to continue waiting on the sidelines as long as marijuana remains a Schedule 1 drug in the eyes of the federal government.
Meanwhile, with April around the corner, tax season is approaching and marijuana businesses are once again looking at the potential hassle of a steep federal tax bill due to wrinkles in the U.S. tax code that predate the current spread of legalized marijuana across the country (not to mention the prospect of paying their tax bill in cash).
In addition to Colorado, Alaska, Oregon, Washington, and Washington, D.C. have also legalized recreational pot, while medical marijuana is legal in 23 states, while several more states have votes planned on legalization for November. Colorado’s legal marijuana industry pulled in nearly $1 billion in revenue last year, while the industry as a whole is estimated to reach $6.7 billion in total U.S. sales this year—and that number could even approach $22 billion by 2020.
