State senator Bob Hasegawa (D-11) has been championing a state-run bank for years, based on a successful state bank in North Dakota, and if you've been wondering what he's been smoking in pursuit of this seemingly quixotic effort, well, he may have just answered your question. The latest iteration of Hasegawa's bill attempts to recast his proposed state bank as "the sole depository for in-state marijuana producers, processers, and retailers."
It's a clever hack on top of Hasegawa's previous state bank proposal that provides all the benefits of helping state government while addressing a huge unmet need created by the passage of Initiative 502: the lack of access to legal banking services by Washington State's large and growing legal marijuana industry.
"I run a legitimate business that is compliant with state law," says Alex Cooley, vice president of Solstice, a marijuana grower. "Having full banking services would be of massive value."
Banks are reluctant to provide services to state-sanctioned marijuana businesses out of concern of running afoul of federal money-laundering laws—although there is no history of the Feds prosecuting banks for serving medical marijuana businesses. And some in the marijuana industry are reluctant to deposit large sums in banks out of fear of leaving their assets open to federal seizure.
The result is a largely cash-based business in a state industry that is projected to soon generate more than $2 billion of legal revenue a year. It's not even clear that banks will accept deposits from the state of the $533 million a year in marijuana tax revenue Washington is expected to clear by 2015.
SB 5955 would address these problems by creating the "Washington publicly owned trust" to accept deposits from government agencies and legal marijuana businesses. The state would be required to deposit marijuana tax revenue in the trust, although businesses would be free to use private banks if they chose. The state, rather than the Federal Deposit Insurance Corporation, would guarantee deposits, providing additional protections from federal seizure, while profits from banking operations would be returned to the state. As a lending institution, the trust would also help the state with an additional mission to "facilitate investment in, and financing of, public infrastructure systems that will increase public health, safety, and quality of life, improve environmental conditions, and promote community vitality and economic growth."
But the big news for marijuana businesses is that they would finally have a bank willing to serve them. "Oh God, I'd love that," exclaimed one hash-oil manufacturer, who insisted on remaining anonymous for fear of losing his current bank account. "We all have problems banking. I'd be able to trust people more. I wouldn't feel like I could be robbed."
In addition to services that most businesses take for granted, like credit card processing and lines of credit, Cooley says he is eager to free himself of the burdens that come with a cash business. To avoid flags that could freeze his account, Cooley limits cash deposits to less than $10,000 at a time and less than $20,000 a month. Which is difficult to do, Cooley explains, "when the majority of your customers are on an all-cash system."
"Forcing us into an all-cash system makes us targets for crime," Cooley explains, while making appropriate regulation difficult.
Hasegawa's state pot bank would solve this. And if the legislature really wants to make I-502 work, it will finally give his state bank proposal the serious consideration it deserves.