A Small Win for Cannabis Industry Banking

Wednesday, July 05, 2017

Denver-based credit union, Fourth Corner, has another shot at bringing banking to the cannabis industry. Since the beginning, banking has always been an issue for cannabis businesses since cannabis is still federally illegal, but this marks a small step forward in progress.

Fourth Corner opened in 2014, the same year recreational weed sales became legal in Colorado. The state gave the credit union a charter, but they were denied a master account from the Federal Reserve–something they need for basic banking transactions.

The credit union challenged the denial but a district court upheld the it, dismissing the case with prejudice in January 2016. The U.S. District judge overseeing the case ruled that granting access to the Federal Reserve would “facilitate criminal activity.”

Fourth Corner again appealed the decision, and this month they met with success when the U.S. Court of Appeals for the Tenth Circuit vacated the 2016 ruling. The ruling means that the credit union can submit a new application to the Federal Reserve Bank of Kansas City.

Mark Goldfogel, the executive vice president of industry relations for Fourth Corner, said, “That really is, at its core, the same question: Does a cannabis- or marijuana-related business have rights to normal business protections and legal protections? And that’s changing literally right in front of us.”

The 10 Circuit’s ruling did come with a caveat, however: Fourth Corner’s member base would be limited to marijuana industry supporters such as nonprofits and advocates as long as marijuana remained illegal on the federal level.

Deirdra O’Gorman, Fourth Corner’s chief executive officer, said, “This really wasn’t a huge change to our business plan,” she said. “Our ultimate goal is to give these directly licensed businesses legitimate (banking services).” She added that Fourth Corner would be reapplying for a master account “sooner rather than later.”

However, even if the credit union is approved for a master account from the Federal Reserve, they still have the additional hurdle of obtaining insurance from the National Credit Union Administration. Fourth Corner’s application to the federal regulator of credit unions also met with denial in January 2016.