It’s a bummer for the state. Medical marijuana has been legal in California since voters passed Proposition 215 in 1996. But federal law still classifies pot as a Schedule I drug, which the U.S. Justice Department defines as having, “no currently accepted medical use in the United States.” That means the national banking system is supposed to be off-limits to medical marijuana dispensaries, which have to pay their state taxes in cash.
According to the Sacramento Bee, Board of Equalization Member George Runner “said a recent tax delivery to his district office in Sacramento involved about $200,000 in cash.” That makes such couriers easy marks for robbery.
To get around that problem, BOE Member Fiona Ma is proposing a state-run bank, as described by CBS News San Francisco, “where cannabis businesses could make cash deposits and electronic transfers to the Tax Board. … Ma says not only is the cash-only system dangerous, it’s also hurting state coffers. California is losing out on millions of dollars in sales tax.” No U.S. state has such a bank.
We are sympathetic to the dilemma of legal businesses forced by misguided federal policy to rely on cash, but this notion of a government bank for marijuana sellers should be snuffed out. For one thing, the issue is moving rapidly. Four states and the District of Columbia recently legalized marijuana not just for medical use, but for recreational use. At least five more states, including California, could do so by initiative in 2016.
The industry in 25 states also has been examined by Dynamic Securities Analytics. “One thing is clear: A wide swath of financial institutions in both (legal and illegal marijuana) states are having to deal with the reality of the fast growing legal marijuana industry,” DSA found. “While we do not yet have a complete picture, the available data suggests a slight opening of financial services to” marijuana-related businesses.
Any California banking legislation would have to be introduced in 2016 at the earliest, and quickly could be overcome by events.
We also worry that this could become a precedent, with state-run banks set up for other political purposes. This is not the time to grow a new bureaucracy.
— The Riverside Press-Enterprise Aug. 7
