It's Legal To Sell Marijuana In Washington. But Try Telling That To A Bank.

Nov 16, 2012
Originally published on November 19, 2012 2:03 pm

Voters in Washington and Colorado just approved measures legalizing marijuana for recreational use. But businesses that want to sell marijuana in those states will face a problem: No bank wants to do business with them.

I called several banks in Washington. I called a local credit union, a tiny bank in the San Juan islands. Everybody said basically the same thing. Even if selling marijuana is legal under state law, it's still illegal under federal law. And banks and credit unions worry that this could get them in trouble.

So people who want to go into the marijuana business — who want to legally grow, distribute, sell marijuana in the state — are going to have to operate, basically, like drug dealers. They're going to have to run a cash business.

John Davis has been through the problem that future marijuana businesses are going to have. He sells medical marijuana in Seattle (medical marijuana has been legal Washington). And he had a really hard time finding a bank willing to work with him, so for a while he did business in cash.

Payroll was a mess. It's impossible to order supplies — baggies, lights, display cases — without a credit card. PayPal works for some things, but not for others.

"How do you pay your taxes?" Davis says. "You can't go into the Department of Revenue and give them a wad of cash."

Davis learned a bunch of tricks for operating an all cash business, and even teaches a course called "canibusiness."

In the end, Davis found a work-around that may be he best option for other people who want to get into the industry: Be vague with the bank. Don't tell them exactly what line of work you're in.

Davis says he doesn't feel great about toying with the truth. But, he says, he has a legitimate business, and he needs a bank.

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Voters in the states of Washington and Colorado have approved measures legalizing marijuana for recreational use. That means there should be lots of new, licensed businesses opening in those states, selling cannabis. These brand-new businesses are going to need banks, to deposit their earnings. Chana Joffe-Walt, with our Planet Money team, has been wondering: How is that going to work?

CHANA JOFFE-WALT, BYLINE: If you walk into any bank and say you're opening a business, you will likely get a seat across from a guy like Todd Pietzsch, at BECU in Washington state, selling you...

TODD PIETZSCH: We could certainly offer you a business checking account; potentially, a line of credit, maybe even a loan - depending on what your needs are.

JOFFE-WALT: And what if I tell you that my business is to sell marijuana?

PIETZSCH: Then we would say unfortunately, at this point in time, we're unable to establish a commercial business account for you.

JOFFE-WALT: Pietzsch says the problem is that selling marijuana may be legal in Washington state, but it's still a federal crime. He just doesn't know if that kind of account would get his bank in trouble. BECU is actually a credit union; and I thought because they only operate in Washington state, they may put more weight on state law than - you know - a big, national bank would. But Pietzsch says, we're federally insured. It's just too big a risk.

So I went as local as I could find - Islanders Bank, serving customers only in one, tiny corner of Washington state.

BRAD WILLIAMSON: We're on the San Juan Archipelago. We are the definition a small, local bank

JOFFE-WALT: But Brad Williamson, the CEO, told me: If we did open accounts for licensed marijuana businesses, we just don't know whether the feds would come after us.

WILLIAMSON: The risk to reward - I mean, say the feds don't do anything. OK, so you've got yourself a customer; hopefully, a good customer. But as a banker, dang - you know? I mean, you're on the hook if you're doing business with people that are doing illegal activity. I mean...

JOFFE-WALT: But it's not illegal now.

WILLIAMSON: It's not illegal in Washington state.

JOFFE-WALT: And we're back where we started. Still a federal crime; he says no. So we have Colorado and Washington state deciding they want legal marijuana. And those states will probably license hundreds - maybe thousands - of marijuana sellers, growers, distributors. What are these businesses going to do, just operate all-cash, like drug dealers? Which, I guess they are. I asked a drug dealer: How does that work?

JOHN DAVIS: Well, you're going to want to figure out a good way to have money orders, that sort of thing.

JOFFE-WALT: John Davis already has the problem that future marijuana businesses are going to have. He sells medical marijuana in Seattle. Medical marijuana is legal in Washington state. But John says he has a really hard time finding a bank willing to work with him - which, he says, causes all sorts of problems.

DAVIS: OK, so with your vendors, OK, your vendors are supplying you with cannabis. You're paying that in cash. What that does - firstly - is, it puts you at risk of robbery.

JOFFE-WALT: Payroll is a mess. It's impossible to order supplies, Davis says - baggies, lights, display cases - without a business credit card. Sometimes, PayPal can work; but not for some things.

DAVIS: How do you pay your taxes? You know, there's sales tax. You can't go into the DOR - the Department of Revenue - and, you know, give them a wad of cash.

JOFFE-WALT: Davis has learned a bunch of tricks for operating an all-cash business. He teaches a course about this, called "Canibusiness." But in the end, Davis says, a marijuana seller's best option is really not a great option at all. Go to the bank, and do what he did.

DAVIS: Just didn't tell them the details of my business. When asked what we do - well, we make money. (LAUGHTER)

JOFFE-WALT: Davis says he doesn't feel great about toying with the truth. But, he says: I have a legitimate business. I need a bank.

Chana Joffe-Walt, NPR News.

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