Sen. Elizabeth Warren, D-Massachusetts. Photo by Pete Marovich | Bloomberg

In January, when U.S. Attorney General Jeff Sessions rescinded the Cole Memo, Obama-era guidance that said the federal government would not interfere with states that legalized marijuana, many feared most financial institutions currently banking or considering banking marijuana businesses would get cold feet. 

Earlier this month when lawmakers recently unveiled the STATES Act – legislation that would permit marijuana-legal states to make their own laws without federal interference – there finally seemed a path for banking marijuana.  

In actuality, most financial institutions appear to have stayed relatively stagnant in their position, regardless of the way the federal government has tilted its head.  

After the Cole Memo was rescinded in January, the number of financial institutions actively banking marijuana remained largely the same.  

At the end of December of 2017, there were 412 banks and credit unions in the U.S. actively banking marijuana businesses, and at the end of March that number was 411, according to data from the Financial Enforcement Crimes Network. That number did get as low as 401 at the end of February but bounced right back up. 

Similarly, when Sen. Elizabeth Warren (D-Massachusetts) and Sen. Cory Gardner (R-Colorado) introduced the STATES Act, which appeared to garner a lot of support including from President Donald Trump, it didn’t appear to stir too much commotion in the banking community, at least in Massachusetts, according to experts and lawyers. 

“I haven’t heard of new banks coming in,” Valerio Romano, a partner in the Boston office of the marijuana law firm Vicente Sederberg, told Banker & Tradesman. “A lot of people are skeptical about when it might pass.” 

James Smith, a founding partner at Boston-based law firm Smith, Costello & Crawford, which represents marijuana companies, said unless Century Bank changes its policy, he does not foresee financial institutions banking recreational marijuana in the commonwealth anytime soon. 

Banker & Tradesman reached out to at least seven banks and credit unions, all of which did not respond to requests for comment or declined to comment.  

“There’s no real way of knowing when that will happen,” said Smith. “The state would love to do something about it, but they can’t start their own bank.”  

Politics 

The introduction of the STATES Act is certainly encouraging for financial institutions. 

Paul Gentile, president and CEO of the Cooperative Credit Union Association, wrote in a letter to Sen. Warren that the CCUA supports the legislation, which he thinks “will help credit unions open the welcome door” to marijuana businesses. 

Scott Moskol, co-chairman of the Cannabis Advisory Group at the Boston-based law firm Burns & Levinson, said a lot more financial institutions – while not necessarily considering taking deposits – are contemplating starting to make real estate loans to marijuana businesses. 

And Romano said he thinks the federal government will delist marijuana as a scheduled 1 drug within two years. 

But part of the reason financial institutions may not be mobilizing right away is due to the unpredictable climate in Washington D.C. 

“I think people are guardedly optimistic because it is co-sponsored by a Republican senator from Colorado,” said Moskol, referring to the STATES Act. “But other types of bills have been introduced in the past… I am very jaded when it comes to the political process.” 

Valerio said that right now the House would be unlikely to pass the bill. 

Banking marijuana, whether medical or recreational, is not a light undertaking; it requires financial institutions to have a separate vault for the cash, a compliance team and for the bank to regularly fill out suspicious activity reports, among a host of other requirements. 

Then wouldn’t it make sense for banks and credit unions to get a head start? 

Not necessarily, said Romano, because if legislation such as the STATES Act does pass, the U.S. Department of the Treasury, which houses the Financial Enforcement Crimes Network, might change compliance requirements, making them easier for financial institutions banking marijuana. 

Still, the STATES Act could be the very thing that finally breaks the dam, allowing financial institutions to overcome their fears of federal interference and bank the cash-heavy marijuana industry. 

“Everyone is really encouraged that it (the bill) has gone through with bipartisan support,” said Romano. “But nobody expects anything to happen until November.”