California's Marijuana Industry Is Still Cash-Only
And that's exactly what California's legal, taxpaying marijuana industry has had to do since banks started closing cannabis-related accounts and refusing additional banking customers in 2010 and 2011.
Last week, the Treasury and Justice departments made big news by announcing an end to the comical situation of lawyers, accountants and landlords receiving duffel bags of $100 bills from their very busy commercial clients and tenants: Banks could take marijuana accounts, provided that the bank file a "suspicious activity report" for every transaction, and provided that the cannabis business followed statewide regulations.
And that's the rub in cash-only California: there are no statewide regulations. This means Bay Area businesses that clear tens of millions of dollars a year will continue to do so all in greenbacks (or pricey cashier's checks, as the IRS does not appreciate truckloads of pennies).
This could finally compel the Legislature to act and pass a statewide regulation bill currently pending in the state Senate -- but since the Legislature already ignored similar direction from the Justice Department last year, it might not.
Dealing in all cash is a giant pain in the ass: with no business checks or credit cards, simple transactions like $5,000 for a load of t-shirts or a new point-of-sale system requires a trip to a bank -- the same banks who won't accept a new account -- for a cashier's check, said David Spradlin, one of the operators of Oakland's Magnolia Wellness in Jack London Square.
"Banks look at you like, 'What are you doing?'" he said. "And then you're worried about the manager not issuing the cashier's check."
Friday's new rules from the Treasury and Justice Departments are centered around the same situation outline in an Aug. 29 memo last year: the feds will stay away from a cannabis industry that follows statewide regulations.
This is why, to date, federal law enforcement has not shut down the legal weed industry in Colorado, or moved to derail Washington's before that state's legal adult marijuana market goes online.
According to California NORML executive director Dale Gieringer, the banking rules probably don't apply to California. Banks would still run the risk of angering the Treasury Department by accepting a California-based account.
"The guidelines repeatedly call on financial institutions to check for state licensing," Gieringer wrote Friday. "Because California doesn't have a state licensing system, only local ordinances regulating medical marijuana collectives, it's questionable whether these guidelines apply in California."