Court Ruling Means Continued Uncertainty For Pot Banking

June 30, 2017 at 8:55 am 2 comments

The legal lunacy surrounding a state chartered Colorado credit union formed to provide banking services to marijuana businesses took another bizarre turn Tuesday, which is great news for lawyers and bloggers, but lousy news for credit unions looking for definitive guidance in states where it is legal.

When I last wrote about The Fourth Corner Credit Union in Colorado, it had sued both the NCUA, which had denied it share insurance, and the Federal Reserve Bank of Kansas City,  which had denied it a “master account” needed to access the  federal reserve system.  A federal district court ruled that these actions were entirely appropriate. The district court explained that forcing the Federal Reserve bank to provide the CU services would be forcing the bank to “facilitate criminal activity.” The CU appealed.

On Tuesday a three judge panel of the Court of Appeals for the 10th circuit  ruled on the credit union’s appeal,  THE FOURTH CORNER CREDIT UNION, a Colorado state-chartered credit union, Plaintiff – Appellant, v. FEDERAL RESERVE BANK OF KANSAS CITY, Defendant – Appellee.., No. 16-1016, 2017 WL 2766364, at *1 (10th Cir. June 27, 2017).

The good news is that the court sent the case back for further fact-finding. The bad news is that the credit union will have to explain how it will uphold its pledge to provide banking services “in strict accordance with state and federal laws, regulations and guidance” even as its business model is to serve businesses violating federal drug laws.

This is not an issue that can be or should be decided by the courts. Here are the short to medium-term options:  Regulators could reclassify marijuana under the controlled substances act, or the new Justice Department could explain if it is going to adhere to the Obama Justice Department’s policy of not prosecuting businesses in states where marijuana is legal provided strict conditions are followed.

I know that there are institutions that already provide these banking services, but many institutions remain justifiably hesitant to help marijuana businesses. Ultimately, Congress and only Congress can amend federal law to reflect the reality that legal marijuana businesses are here to stay. After all, cannabis possession is now legal in some form in 29 states and the District of Columbia, and that number is likely to grow.


Entry filed under: Legal Watch, Regulatory. Tags: , .

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2 Comments Add your own

  • 1. Anonymous  |  July 3, 2017 at 9:11 am

    Actually, the issue could have been resolved by the Attorney General and DOJ if they had exercised their legal authority to add OR REMOVE substances from the schedules under the Controlled Substances Act instead of putting out the Cole Memorandum and deepening the bureaucratic muck surrounding the issue.

  • 2. Pot Banking Up In Smoke | new york's state of mind  |  January 5, 2018 at 9:00 am

    […] share insurance. A resulting lawsuit has done nothing to clarify the confusion. An Appellate Court ruled that the Federal Reserve acted within its authority but that Colorado could try again to show how […]


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Authored By:

Henry Meier, Esq., General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association.

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