Marijuana: Legal but Illegal


When you make money from marijuana, you must pay taxes on it. So says the IRS. Possessing, distributing, or selling marijuana, however, is illegal. So says the federal government. No matter how you look at it, pot is a booming business that one part of the government recognizes for its purposes, while another part considers it a crime. Unfortunately, plenty of people are stuck – namely, marijuana distributors and banks.


Who’s holding the cannabis cash?

Pot laws are the modern-day version of prohibition. Cannabis might be illegal, but plenty of people are finding ways to grow it, sell it, and make money from it, even though handling money that can be traced to any marijuana-related transaction is considered money laundering for pot suppliers and distributors.

So how do cannabis industries handle their revenue stream when banks won’t touch them to avoid their own legal risk? By hand. Think bags and satchels and pockets bulging with cash, just like the movies. Employees, rent and utilities are paid with cold, hard cash. Groceries and supplies for growing marijuana are paid with cash. And, yes, taxes are paid in cash.

In a culture that relies on credit cards and e-wallets without a shred of paper money in sight, walking around with a wad of dough in your pocket is a perilous undertaking. The players in the marijuana industry, nevertheless, don’t have much of a choice.


Banks won’t take a risk with marijuana money

Banks put themselves in danger by serving any individuals and entities within the marijuana industry. This includes not only growers and retailers but, according to the American Bankers Association explains, vendors, suppliers, landlords, and employees indirectly tied to the cannabis industry. Identifying every single tie to the pot industry is nearly impossible for banks, so it’s easy to see that the legalization of pot would be a big boon to financial institutions that simply can’t take a chance now. There is one entity, however, that’s not afraid to push the legal limits.

Safe Harbor Private Banking, an arm of credit union Partner Colorado, is making its name by being one of the few banking entities willing to dabble in pot banking, providing checking accounts expressly for the marijuana industry. They’re violating federal law, but they consider it a duty to provide a safe harbor for the people involved in this massive industry. And the over $900 million deposited in 2017 by the marijuana industry proves the need is there.

The mostly cash deposits that Safe Harbor accepts keeps the pot money out of back rooms and desk drawers and puts them in a secure place, minimizing the ever-present threat of robbery to people in the cannabis business. That safety concern finally got some attention in a February 2019 Congressional hearing – six years after a draft bill allowing banks and pot to interact was introduced.


Is marijuana legislation on the way?

Marijuana business owners are easy targets for crime. If an armed robber knows an employee is walking home with thousands of dollars in their pocket on payday, they’re happy to take advantage of the temptation.

Rep. Ed Perlmutter, D-Colorado, co-sponsor of the bill heard by Congress in February, said the focus is solely on taking cash off the streets and creating safer communities. Violent crimes come from cash-only operations, and marijuana leads the pack. This draft bill would address the conflict between state and federal laws, protecting financial institutions from potential federal penalties for providing banking services for licensed cannabis businesses.

The road is long for marijuana legalization. The industry continues to grow, and there will be casualties of all sorts along the way. While many people cite addiction and danger as reasons to temper progress in the cannabis arena, the dollar seems to be the driving force in making the industry both legal and safe.