The state’s top marijuana official is floating the idea of a state-run financial institution to bank marijuana deposits.
Steve Hoffman, chairman of the state’s Cannabis Control Commission, told the Boston Globe in an interview that no local banks or credit unions have committed to providing financial services to recreational marijuana shops, as they’re concerned about federal restrictions.
“There’s a high degree of urgency, so it’s something we need to start talking about,” Hoffman said. “Unfortunately, it’s a real possibility” that the recreational industry won’t have access to any banking services.
“We’re working as hard as we can to preempt that, but we can’t force any bank or credit union to service this industry,” Hoffman added.
Meeting minutes show that the commission has been trying to work with local banks and credit unions to get them to bank recreational marijuana, which is slated to begin in July.
The commission agreed at its Dec. 14 meeting that the commonwealth should draft an agreement, on behalf of licensees, with state-chartered banks and credit unions allowing retailers to make cash deposits.
Per the agreement, the state’s Department of Revenue and the commission would have had no involvement in cash handling. Retailers would have been allowed to transact electronically without concerns of bank accounts being shut down and the DOR would have provided deposit banking information to retailers for deposit or transfer of funds.
The commission also agreed in the meeting to establish the use of larger cash handling machines to deposit tax revenues at secure DOR locations across the state, in which the commonwealth would have covered the costs associated with the machines, the processing of deposits and logistical costs associated with location, security and customer service support.
But the situation became more difficult in January when U.S. Attorney General Jeff Sessions rescinded the Cole memo, Obama-era guidance that essentially said the federal government would not interfere with marijuana programs in states in which they are legal.
Massachusetts’ U.S. Attorney Andrew Lelling followed that up by saying that he would not rule out bringing criminal cases against participants in the forthcoming state-legal retail marijuana industry.
According to the Globe, the Baker administration said it has no plans to create a state-run pot bank at this time.
In Massachusetts, banks have been wading into the waters of marijuana cautiously. As Banker & Tradesman has reported, state-chartered banks and credit unions have been making loans on properties with medical marijuana operations.
Century Bank is the only confirmed bank in the state to bank deposits for medical marijuana operations, but a Massachusetts marijuana investor last year at a cannabis conference in Dedham told a group of private equity firms and venture capitalists that there are currently three state-chartered banks working with marijuana businesses.
While banking marijuana deposits is extremely complex, the industry represents a huge opportunity for state-chartered banks because most large banks are staying away due to the fact they are more likely to trigger a federal crackdown, and recreational sales in the state are expected to hit $1 billion by 2020.
Massachusetts is not the first state to consider a state-run pot bank.
California State Treasurer John Chiang and Attorney General Xavier Becerra in late January said they would begin a feasibility study to test whether a state-run bank is a good option for California’s pot industry.
“We are contending with the emergence of a multi-billion dollar cannabis industry that needs banking services, and a private banking industry that is stymied by federal law in meeting the needs of the new industry,” Chiang said in a teleconference, according to The Hill.
