Colorado and Washington State may have given the green light to legal marijuana sales, but the signal so far from federal officials remains cautionary yellow for banks that would like to process pot purchases made with credit or debit cards.
The delicate pot paso doble between federal regulators and card-issuing financial institutions has taken on the frenzy of a “Dancing with the Stars” finale since New Year’s Day, when Colorado became the first state to legally sell marijuana to anyone over 21 without a prescription.
While possession of an ounce of cannabis has been legal in the Mile High state since 2012, being able to walk into a state-sanctioned store and buy it is new. The first question pot buyers might ask upon purchasing it over the counter for the first time at more than two dozen authorized stores is, “Can I charge it?”
So far at least, the short answer is: uh, maybe.
Here’s the dope, so to speak: As part of the ongoing war on drugs, the feds have long forbidden banks from having anything to do with the sale of controlled substances; no deposits, no card charges, nothing. However, those hard-line banking regulations have come under scrutiny in recent years as 20 states and the District of Columbia now permit the sale of marijuana for medicinal purposes. While the feds largely opted to ignore medical pot unless trafficking reared its ugly head, it left its zero-tolerance banking regs in place.
But now that retail stores are dispensing a legal Rocky Mountain high (Washington is expected to follow in late spring), banks and the burgeoning legal pot industry will soon receive what they’ve long sought: clarification on how to expand this lucrative, cash-only business to other forms of payment without running afoul of the banking regs.
Revised guidelines are expected within the next three months that would elaborate on the U.S. Justice Department’s August notification that it, in essence, plans to turn a blind eye to state-approved legal pot sales.
Jack Finlaw, chief legal counsel to Colorado Gov. John Hickenlooper, told the Denver Post he hopes the update “will give maybe not a green light but a yellow light” for banks to extend credit and debit card processing services to legal marijuana distributors and growers, and by extension, their customers.
The banking equivalent of “don’t ask, don’t tell” that has arisen around the legal sale of pot has been a bum trip for card issuers, legal distributors and consumers. Although Visa and MasterCard have both vowed to keep illegal transactions out of their networks, Visa recently softened its position, saying it would leave it to the merchant banks to sort out what constitutes a legal versus illegal transaction.
Although pot stores in Colorado report that upward of half their sales since Jan. 1 have been with credit and debit cards, many banks still refuse to do business with them, forcing some to accept credit through means other than a traditional business account.
While first timers to the Rocky Mountain high shops may have been surprised to be able to charge a doobie, they shouldn’t be shocked when those purchases show up on their statement as “agricultural products,” “fresh herbs” or my flower-power favorite, “floral bouquet.”
Earlier stories: Buying legal marijuana with a credit card still banned, Medical marijuana sellers can’t take their 420 money to the bank