Nearly all banks have refused to open accounts for the hundreds of marijuana businesses in Colorado and other states with similar laws, leaving the businesses to operate in an all-cash economy with the significant dangers that accompany such large sums. Many small-business owners in the state have had to improvise with safes, armored cars and other alternatives to banking.
Colorado’s state government has said that the lack of access to banks is a public safety issue, as well as a deterrent in the state’s effort to collect taxes. The Fourth Corner Credit Union in Denver applied in November to the Federal Reserve for a “master account,” which would allow it to interact with other financial institutions and open its doors to some of the hundreds of state-licensed marijuana businesses in Colorado.
Mark Mason has been leading the credit union’s creation. Mr. Mason won the state’s backing for his venture after he brought on money-laundering experts to build its policies. The credit union was granted a state license last year, on the condition that it still had to receive approval from the Fed before opening for business.
Although recreational marijuana is legal in Colorado, it is still illegal under federal law, discouraging most traditional banks from working with pot businesses. The Fed’s branch in Kansas City, which has been reviewing the application, privately informed the Fourth Corner Credit Union earlier in July that it had not been approved for a master account, the credit union said on Thursday. Mr. Mason said that after months of answering the Federal Reserve’s queries, he was unsurprised by the denial.
Andrew Freedman, Colorado’s director of marijuana coordination, said he was disappointed by the Fed’s decision. The credit union, which has the backing of Colorado’s governor, fired back on Thursday night by filing a lawsuit in federal court in Denver against the Fed, demanding “equal access” to the financial system.
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