Northwest Marijuana Guide
When state-licensed cannabis companies start selling sinsemilla later this year, perhaps the biggest conundrum for state regulators will be where to put all that marijuana money. Federal laws against money laundering forbid banks and other financial institutions from depositing dope dollars—a well-known problem in the pot world. Some entrepreneurs secure bank accounts through "white lies" and by omitting certain financial details, but still, the state's medical cannabis industry is mostly cash-based.
"I've had my bank accounts pulled. I've had my credit-card privileges pulled," says Dawn Darrington from CWC Gardens in Seattle, who estimates that at least half of cannabis businesses have no bank account. "Anyone who walks into a bank and says, 'I'm going to dispense medical marijuana,' is not going get an account."
Never mind the actual pot businesses—which are used to running cash-based enterprises. Where will the state government deposit our marijuana taxes?
State deposits run through Bank of America, according to state treasury spokesman Chris McGann, who says the agency isn't experienced with large cash-based accounts. "We do have a vault, but it's not really set up for storing cash. It's mostly used right now to store bond documents."
The state currently deposits pot sales tax, but those funds are commingled with many other deposits. How is Bank of America going to view state money earmarked for our Dedicated Marijuana Fund? According to bank spokeswoman Britney Sheehan, "If the proceeds can be directly tied to cannabis operations, we would not bank it."
So the state will face the same banking problem as dispensaries. Here are three possible solutions to our cash-stashing problem:
Federal Exemption: Assuming the Feds haven't been planning a raid for the last four months, it seems quite plausible that the US attorney general is compiling a list of conflicting codes that must be corrected to legally allow these experiments to happen. The people may have flipped the bird to the Feds, but state regulators could politely ask the federal government to tweak banking rules to accommodate legalization laws in Washington and Colorado.
Bitcoin: Established in 2009, Bitcoin is a digital, peer-based currency; nearly 11 million Bitcoins currently trade at more than $90 each—a billion dollar market. This is roughly the amount the state's Office of Financial Management predicted our pot market would generate each year. Bitcoin requires no bank approval, but the young currency's exchange rates have been volatile, making it perhaps a risky alternative to centralized banking.
State Depository: A state bank requires millions of dollars in start-up capital, but a state depository requires only a large enough safe—like the one storing bond documents at the treasurer's office. A pot-bank scheme might avoid federal regulation if it acts only as a safe-deposit box for the state's cannabis cash—no transactions with other banks, no federal deposit insurance, etc.
Whatever route, the state will be frank with banks. "We're not going to lie about where we think money is coming from," says McGann. "That is not an option."