Colorado Made $5M in 5 Days Off Pot. Problem: It's Illegal to Put the Money in Federal Banks
The news: Ka-ching! Colorado has sold more than $5 million in pot in the first five days of legalized sales.
The only problem? Retailers aren't allowed to put the money in any federally regulated banks, thanks to legislation designed to prevent drug dealers from laundering money. That means that the entire marijuana industry in Colorado has to be conducted in cash transactions. Aside from being incredibly inconvenient, it exposes the industry to infiltration or targeting by criminals.
The Denver City Council unanimously proclaimed on Monday:
"... Forcing Colorado's legal marijuana industry to operate on a cash-only footing creates heightened risks of crime — risks that marijuana businesses themselves will become targets of crime, risks that criminal elements will seek to become involved in the marijuana industry, and thereby risks that governments will be defrauded, employees will be victimized, and customers and nearby neighborhoods will be put in danger ...."
According to Denis Berckefeldt, a spokesman for the Denver auditor, "Anytime you do this much business in cash, it's a target for crime — and it's pretty apparent that's been going on here over the last couple of years. And you can't account for this money. How much have you sold? Are you paying the taxes you're supposed to be paying? How much is hidden? If you don't have a paper trail, you can't track it, and all the seed-to-sale systems in the world won't solve the problem."
The background: According to the council's Charlie Brown, the cash-only system currently in place is so dysfunctional that marijuana shops have taken to using decoys in order to distract potential armed robbers from hijacking the day's sales.
Currently, pot shops have to use state banks to deposit their tax revenues, which are technically free of the federal regulatory requirements due to a lack of language explicitly dealing with marijuana profits. Everything else has to be done with cash.
The Obama administration has previously hinted at a fix, but hasn't taken any action on the issue. Officials in Denver are beginning to get frustrated.
Even Gov. John Hickenlooper, a fierce opponent of legalization, wants the federal government to give some leeway to the Colorado marijuana industry. In a letter to senior D.C. banking officials sent in October, Hickenlooper and Washington Gov. Jay Inslee argued that "In order to achieve the mutual federal and state goal of establishing tightly-controlled marijuana regulatory systems, we urge you to issue inter-agency guidance that will allow legal, licensed marijuana businesses access to the banking system."
The bottom line: There's a clear lack of regulatory oversight on the marijuana business, which could undermine legal pot's benefits to the state government and encourage crime. Even more alarmingly, by not giving businesses clear operating parameters, the federal government is leaving the door open to future crackdowns under a future presidency less amenable to legalization.