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MARIJUANA

Pot Is Legal in Washington, but Banks Won't Lend

Small businesses looking to branch out find themselves in the weeds of federal law

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by Mary Noble

Senior Editor t +

Image: 420 Magazine

If you want to open a pot dealership in the state of Washington, where it's now perfectly legal, you might run up against a financial hurdle. No bank will lend you the money to get off the ground.

Banks are often federally licensed, meaning they have to follow federal law, including the federal prohibition against making profiting from marijuana.

Not even local credit unions are willing to led to prospective pot dealers, according to NPR. Which means that anyone wanting to sell marijuana will have to run a cash-only business.

John Davis, a medical marijuana seller from Seattle, told NPR about the day-to-day hassles a cash-only enterprise can bring: how do you order supplies online with no credit card? And how do you pay your taxes - since you can't pay the IRS in cash?

Davis's workaround was to get a bank account by simply not telling the bank his true business. But this doesn't sound like a scalable solution. Banks are likely to be anxious about following federal law, and may well check up on customers to make sure they're not on lists of state-licensed marijuana sellers, Reuters reports.

Via NPR and Reuters.
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Will the banks' refusal to lend will slow the sale of legal marijuana in Washington?

56 Comments (view in Forum)

  • Antiecm
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    It is no business of any bank what business anyone is in. They only need to know if you pay your bills. But since they asked, I would see to it that no one working for the bank could buy my pot. Ban them from the place.
  • Real4WheelDrv
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    Um actually it is the bank's business to know for their own safety, since they have to follow federal law. That's the whole point. Look how harshly banks are criticized for "predatory" loans to homeowners...in spite of the fact that there was likely some pressure to ease loan restrictions for the sake of economic fairness. Look at how villified banks are now, if I ran one I sure as heck would like to know who that money is going to.
  • DogLady_1
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    @Real4WheelDrv - laws against predatory lending protect borrowers, not lenders. Banks have been villified for their own illegal activities, not those of their depositers. And when a small business owner comes to borrow money, they have to disclose who they are, and banks do indeed know where their money is going. The laws protect CONSUMERS of financial products... the laws scrutinize the activities of the bankers, not the lenders...
  • Real4WheelDrv
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    @DogLady_1 That's my whole point, a lot of those predatory lending practices were unfair, but you know why part of it happened, "Oh, you wanna borrow thousands of dollars, and buy more house/car/whatever than you can afford, with an established or growing family and a barely financially adequate job? Suuuure! Ordinarily we wouldn't do that but we don't wanna get in trouble for discrimination..."
  • DogLady_1
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    @Real4WheelDrv - Victims of predatrory lending practices cross all sectors of society... Financial hardship and ignorance of lending policies is not unique to some select group of minorities that would be protected under anti-discrimination laws. Low income individuals of all races/ages/genders were preyed upon by unscrupulous bankers. They knew what they were doing when they did it... and I doubt seriously that they were more willing to be convicted of fraud than of discrimination.
  • Penn1699
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    I'm not in banking. However banks are for the most part federally regulated. There is likely a law or two on illegal drug money lending and laundering.
    Yes I am aware the State is ok with it, but until the Fed is it appears a no go with the banks.
  • PNWest
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    It is up to the banks to decide whether or not someone is a good credit risk. Would you lend money to someone who wanted to build a business that the Feds might walk in and shut down? I sure wouldn't. Look's like the financing will have to come from unconventional methods.
  • DogLady_1
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    Cannabis sellers have been running cash-only businesses for years now... what's the problem??? Start small... Washington's new (and smart) laws have just started... give it time. You really didn't think that just because cannabis is now legal that suddenly all the prohibition infratsructure would just disappear overnight, did you? be patient...
  • justice
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    You got banks standing behind mitt romney ,gay rights , and everything else that's a flop why not support the weed heads, crack heads, meth heads, etc. This world already headed to the greater part of hell anyway why not arrive high.
  • Comment removed for Engagement Etiquette violation. Replies may also be deleted.
  • FollowTheMoney
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    The Feds won't give up until they must. Too much money to be lost in law enforcement jobs. I suggest they turn the unnecessary DEA agents in to border patrol and customs. Then they might actually be protecting our interests.
  • PoliticalSpice
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    Three points. We would all be better off in a cash society. Reliance on other payment options reduces privacy, simplifies surveillience and control and makes it easier to infringe on liberties. Point two, a bank account for such an enterprize is risky, as the feds can (and have in california) impound and forefeit the assets. Third point, in the sixties and seventies most pot dealers could not get loans or open business accounts in banks, they did perfectly fine, unless the cops busted them. And, although I support washingtons decision, cannabis remains illegal under fed law and it seems unreasonable to expect a bank to get involved considering the consequences...Realistically what is going on here is a dance of federalism, we are well into the dance (17 medical marijuana, 2 legalized marijuana, with varying fed enforcement actions and s ct decsions sp far), and the evdning is young. Let's see what song the feds play next...
  • DARSB
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    All drug laws are slightly crazy, but nothing compared to the behavior of the DEA. I complain a lot about the USA PATRIOT Act, but the erosion of personal privacy and liberties really began with the war on drugs.
  • kyrebel
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    I thought drug dealers was always cash only or they would trade for stolen items. What's the problem? They sell there drugs like always, they can't know how much taxes to pay. If they do keep track of the cash, they are gonna lie and cheat on the taxes.
  • FollowTheMoney
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    How is the drug dealers not paying taxes any different than corporations, wall street and congress for that matter? They all cheat on paying taxes, Some are just better at covering their tracks than others.
  • erbmrb
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    @FollowTheMoney If they would go ahead and legalize it on the Federal level then they would have to pay taxes and believe me it would be P L E N T Y.

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  • Jasonopolis
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    Why would it not be sold from pharmacies? Or at the very least from those who hold a liqueur license? Is there absolutely zero regulation in it's sale? So any Joe-blow can set up a table in his front yard - like a lemonade stand - and sell it?...that sounds safe...
  • jessejaymes
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    We're two weeks into the infancy of legal marijuana sales in two states. There will be clarification and regulation. Think about it. Joe Blow will not get to set up weed sales at his garage sale for very long. No traceable tax money and the reality is that legalization is all about more tax money. Besides, even if Joe-Blow does set up in his garage there will be pharmacy graded sales and who would you buy from? I'm going for what is inspected and graded. I don't smoke cartel dirt pot now with a medical marijuana card. Some do, so always will but they will make their tax dollars from msot.
  • PoliticalSpice
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    Not sure what the initiative provides, but as to pharmacies, this is not a medical marijuana initiative, but a measure to legalize for all use. Liquor stores are very stringently regulated by states, and might lose a liquor license for selling cannabis. Lemenade stand might be appropriate considering that it leads to dryness in mouth, but the regulation is probably spelled out in the actual law which was on the ballot. Propably available on line...
  • PoliticalSpice
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    Oh yes, and pharmacies would never risk selling cannabis, they need a federal dea licence to operate, and dea would not be very understanding on this point...
  • Denizen_Kate
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    @jessejaymes - It's true, most American's don't understand a discerning palate where cannabis is concerned. That being the case, many years ago a friend and I made up a new verse to Janis Joplin's "Mercedes Benz" song:

    Oh lord, won't you buy me
    Some outrageous dope
    'Cause you know that when I'm high, lord
    That's the only time I have hope.
    Gimme some of that EYE-talian sticky bud
    That's been blessed by the Pope.
    Oh lord! Won't you buy me
    Some outrageous dope.

    ;-)
  • Jasonopolis
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    @jessejaymes I find it difficult to believe that it would go from illegal to a complete free for all. I don't touch the stuff myself, but I worry about you potheads getting sick..etc,etc...

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  • jessejaymes
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    Boy talk about the pot calling the kettle black. For many years bank after bank has been caught money laundering for illegal drugs. About 10 years ago a study declared that the U.S. Banking system would collapse if all drug money was to dry up suddenly. Banks worked with the CIA and Reagan's illegal Contra War moving money to and from Iran and Nicaragua illegally. Banks work with people like Bain Capital to spirit money out of the country and into hiding. But you won't loan money to a pot grower where it's legal? Probably because it might affect your Cartel money huh?
  • tohickon
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    So....what? Medical marijuana has been legal there since 1998. The plants are already there growing, the dispensaries are already operating under a buisness model and i'm sure have saved up a few dollars to increase production. Just like everything in life, marijuana too can be done without a bank.
  • jessejaymes
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    You know people I don't speak to Heroin. I don't know anything about heroin. You can go online and find someone saying whatever you want them to say about anything. That sort of "documentation" is only documenting what you wanted to hear in the first place.

    I do know about pot. I smoked my first joint at 19.(First beer at 14. Beer is the gateway drug). I never liked the taste of beer or hard liquor. Once I started smoking pot I stopped drinking. Haven't consumed alcohol since. Tried other peer pressure drugs back in the 1970's but I just wasn't a druggie like so many of my age group. I smoke pot. That's what I do. I'm a double type A personality, always hard charging, hyper, aggressive, attention disorder. But with pot, I slow down, focus, get things done, stay on task.

    In the 43 years I have smoked pot I have never been arrested, I don't sell pot, I don't smoke pot with minors, I don't party with people and then drive. I smoke pot in my own home. Legally today with California Medical Marijuana. Pot will stop a headache for me faster than aspirin.. My chronic back and knee problems from playing football in the 1960's is dealt with by pot. Not pharmaceuticals, not surgery. My last treadmill heart test the doctor said I have the heart of a 35 year old.

    While dying of cancer my wife smoked pot instead of becoming a morphine zombie as most do. She wanted those last precious months to be able to know those around her. She was a Principal and a PHD. We raised three kids all of whom are more successful than their parents. One smokes pot, two don't. In the thirty years before I retired I never missed a day's scheduled work and had my own successful business.

    It just irritates the hell out of me that people will make claims that they have no basis in fact. A 10 year study that the Clinton administration refused to acknowledge (although funded by govt.) found that even hard drug addicts had an equal job performance record while alcoholics were less than half as productive. Pot smoker employees were found to far more productive than beer drinkers. Every mom and pop. chain, convenience store in America makes their living from selling beer. I can't go into one of these stores without seeing an obese beer belly 20-30 something buying cases of beer. Yet at over 60 years old I am 6' 180. Don't tell me that pot is dangerous while you're guzzling your way into a heart attack due to obesity. Pot even helped me lose weight. Most people get "the munchies". So do I. But I wanted to lose weight so I filled the house with good food. With correct food. And smoked my pot. And when you're high you'll eat that good food. Because it tastes good. When you're not it sucks and you'll just go to Wendy's. I lost 30 lbs smoking pot. Imagine that.

    Might want to know what you're talking about when you speak to marijuana.
  • martydotcom
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    The entire article is based upon an erroneous premiss Pot is not legal in Washington. Regarding drugs thus far, no SCOTUS case, federal law trumps state law, banks are federally chartered and prohibited from lending to illegal business
    CASE CLOSED
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