Pubdate: Tue, 23 Jan 2018
Source: Chicago Tribune (IL)
Copyright: 2018 Chicago Tribune Company



As the legal marijuana industry navigates uncertainty on the federal
level, state attorneys general are asking Congress to pass a law
allowing banks to work with cannabis companies.

Along with Illinois, 28 other states, Washington, D.C., and several
U.S. territories have legalized medicinal cannabis, and eight states
and the District of Columbia allow recreational use. But in the eyes
of federal law, weed is still illegal, and the cash earned selling it
is drug money.

Illinois' highly regulated medical cannabis industry, operating under
a state pilot program, has been fighting to expand. Earlier this week,
a judge ordered the state to add intractable pain -- pain that's
resistant to treatment -- to the list of 41 conditions that qualify
patients to use medical marijuana.

The state Department of Public Health plans to appeal, but if the
court ruling stands it could greatly expand access to the drug.
Without banks, though, operations and growth could be hindered.

The federal government has issued guidance for how banks can work with
with cannabis companies, but without a law, banks hesitate to enter
the growing industry. Illinois Attorney General Lisa Madigan and 18
other attorneys general -- from 16 states, the District of Columbia
and Guam -- signed a letter this week saying they want that to change.
Madigan was not available Wednesday for further comment.

Passing a law "would bring billions of dollars into the banking
sector, and give law enforcement the ability to monitor these
transactions," according to the letter. "Moreover, compliance with tax
requirements would be simpler and easier to enforce with a
better-defined tracking of funds. This would, in turn, result in
higher tax revenue."

In Illinois, there are a handful of financial institutions that
provide banking services to medical marijuana growers and sellers.
Operators in the state say having that stability has helped the
industry grow.

Revolution Enterprises' two Illinois medical marijuana cultivation
facilities -- each about the size of five Millennium Park ice skating
rinks -- are allowed under their state licenses to get much, much bigger.

"Banking here has been smooth for the most part, but it's very
tenuous," said Ross Morreale, co-founder of Ataraxia, which owns a
cultivation facility in southern Illinois and co-owns three
dispensaries. "If something were to happen to (the few banks that work
with us), it would be a bad situation."

Marijuana companies in some states have learned to operate without
banks, paying bills with duffel bags full of cash and finding other
workarounds. But all-cash businesses can become targets for criminals.
Losing banks also would take away one factor that legitimizes the
industry, said Mark de Souza, CEO of Revolution Enterprises, which
owns cultivation facilities in downstate Delavan and Barry.

Even with banking relationships that allow Illinois cannabis
businesses to deposit and distribute funds, there are still
limitations, said Charles Bachtell, CEO and co-founder of Cresco Labs,
which operates three cultivation facilities in Illinois.

"We still don't have access to lines of credit or any of those other
financial mechanisms that traditional industries have access to," he

Banks that have ventured into the cannabis industry took guidance from
an Obama-era policy that discouraged prosecution of those operating
under state marijuana laws. But U.S. Attorney General Jeff Sessions
rescinded that policy earlier this month.

Now it's even more urgent to get the cash the industry generates into
traditional banks, according to the letter from the state attorneys

Illinois medical marijuana businesses maintain that existing laws will
protect them, but Sessions' recent announcement led one of the main
financial institutions that works with the industry to re-evaluate its

Bank of Springfield recently told some of its cannabis clients that it
is reviewing the recent Justice Department decision, sources said. The
bank also is waiting to see whether Congress takes action to preserve
a federal law that prohibits the department from using federal funds
to prevent states from implementing medical marijuana programs, the
sources said. That law is set to expire Friday.

The bank declined to comment.

Banks that work with the cannabis industry can take further guidance
from the Treasury Department's Financial Crimes Enforcement Network.
But, again, that's just guidance.

"That's not enough for the national and international banks," said
Cresco's Bachtell, who has a background in mortgage banking. "They're
not comfortable with guidance; they want real regulation."

The letter from the state attorneys general asks Congress for
legislation that would provide a "safe harbor" for financial
institutions that work with cannabis companies in states where the
drug is legal in some capacity. It points to a bill that was
introduced in the Senate in May that would do just that.

A judge has ordered Illinois officials to add intractable pain as a
qualifying condition for medical marijuana, a ruling that could
greatly expand access to the drug.

More banks would likely expand operations into the marijuana industry
if such a law were instituted, though it might take time for financial
institutions to become comfortable with it, said John Hudak, a senior
fellow at the Washington, D.C.-based Brookings Institution.

"It would absolutely, without a doubt, be a game-changer," he said.
- ---
MAP posted-by: Matt