In January, days after Californians were first allowed to buy recreational marijuana in the state, Attorney General Jeff Sessions issued a memo to federal prosecutors instructing them not to shy away from enforcing federal pot laws. “Marijuana is a dangerous drug,” Sessions wrote. “Marijuana activity is a serious crime.”
The memo, which overturned the official stance of Barack Obama’s Department of Justice on the issue, added confusion to an already puzzling situation. Under the Controlled Substances Act, marijuana is an illegal drug at the federal level, with possession and distribution prohibited. But it has been approved in numerous states for medical and recreational use. That creates problems for businesses regulated at the federal level, particularly banks. If financial institutions take deposits from marijuana businesses, they could face federal prosecution for facilitating criminal conduct. Though smaller banks and credit unions were beginning, under Obama, to take deposits more frequently from the dispensaries, growers, distributors, and other ancillary businesses that have sprung up across the United States in recent years to service its almost $10 billion marijuana industry, the Trump administration’s hard-line stance may now give them pause.
For California, this is a serious problem. Without financial services, its marijuana growers and retailers would face difficulties getting small business loans. Some have no choice but to operate solely in cash, paying their taxes with sacks of bills. This also sidelines billions of drug dollars currently just sitting in safes that banks could use to finance loans or mortgages. So in late January, California State Treasurer John Chiang and Attorney General Xavier Becerra commissioned a feasibility study on chartering a state bank to take deposits from pot businesses. That public bank could theoretically guarantee deposits from the pot industry without utilizing any federal financial processes Sessions could target.