A bill before the California Senate would seek to create limited-service banks and credit unions for the cannabis industry, which is largely banned from using the regular banking system.
Senate Bill 930, which would allow marijuana businesses to write special checks to pay some of their businesses expenses, was approved on a unanimous vote by the Senate Bank and Financial Institutions Committee on Wednesday. The legislation was introduced in January by Sen. Robert Hertzberg, D-Van Nuys.
Under the bill, the state would allow for the creation of limited-charter licenses for bank and credit unions overseen by the Department of Business Oversight, the state’s financial regulator. The special-charter institutions would be allowed to issue special checks that could be used to pay state or local fees and taxes, rent on property associated with cannabis businesses and vendors of the pot businesses, or to buy state or local bonds or warrants.
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“The idea is to not have these businesses show up at state offices with suitcases of cash to pay their taxes,” said Katie Hanzlik, press officer with Hertzberg’s office.
The limited-use checks would not be in the traditional federal checking system, known as the automated clearinghouse, or ACH.
Even though California has legalized the use of cannabis by adults, it is still illegal under federal law. That means when cannabis-related money touches the federal money transfer system, it poses legal risks for federally chartered or federally insured banks or credit unions. Nearly all banks and credit unions are federally insured or chartered.
That federal-versus-state conflict has kept the majority of recreational marijuana transactions in cash, and prevents cannabis businesses from using electronic payments or direct deposits.
The California Department of Business Oversight has not taken a position on the legislation, “but we are trying to be helpful to the author,” said Thomas Dresslar, deputy commissioner for the department.
He said the department has been working for years to solve the problem of the cannabis industry being stuck largely in cash.
“It’s a public safety and worker safety problem,” Dresslar said. “It’s a real issue and it’s a real problem.”
“From the industry’s perspective, the solution has to come from the federal government,” she said.
The California State Treasurer’s Office, likewise, has no position on Senate Bill 930, said spokesman Marc Lifsher.
The Treasurer’s Office has been studying the potential creation of a state bank that could serve cannabis businesses.
“Nothing is going to change until the federal government takes (cannabis) off of being a Schedule 1 drug,” Lifsher said. The Schedule 1 designation, under the federal Controlled Substances Act, puts marijuana in the same category as powerful drugs such as heroin, peyote and ecstasy.
Bankers can be prosecuted criminally for knowingly banking cannabis businesses under the Bank Secrecy Act, the USA Patriot Act, and the Racketeer Influenced and Corrupt Organizations, or RICO, Act.