WASHINGTON’S legal-marijuana market is still in its infancy, but in the first month of stores being open for business, the state has collected about $750,000 in state excise taxes.
That’s welcome news, because those sales represent a poke in the eye — albeit a small jab — at the underground black market. Revenues will grow.
But when they do, the problem with banking access for the marijuana market will also grow. The state Legislature hasn’t tried to untangle that problem, and the federal response thus far has been anemic.
The problem could be seen in the bags of cash heaved into the Liquor Control Board’s offices this month by marijuana merchants. Nearly one-third of the excise taxes were paid in cash. That’s right, in cash.
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That amounts now to a few hundreds of thousands of dollars. When the excise tax haul grows to hundreds of millions, as it is predicted, it will be open season for armed robbers, let alone tax evasion.
This is not a Washington state problem. More than one-third of Americans now live in medical-marijuana states, and the number is also growing rapidly. A measure on Florida’s ballot this fall legalizing medical marijuana was backed by 88 percent of voters. Oregon and Washington, D.C., appear ready to join Washington and Colorado with full legalization regimes in November.
The federal Financial Crimes Enforcement Network (FinCEN) in February issued guidance for banks doing business with marijuana businesses, but it did little good. FinCEN director Jennifer Shasky Calvery disclosed that 105 U.S. financial institutions were now banking with marijuana businesses, which she declared a success, according to a copy of her speech given to American Banker magazine.
That is a premature victory lap. Before the February rules, 87 financial institutions were doing marijuana business in Colorado alone, according to a FinCEN report in 2012. The feds’ fix has done little good, because they did not remove enough of the risk for touching marijuana money.
“After a series of red lights, we expected this guidance to be a yellow one. This isn’t close to that,” said Colorado Bankers Association president Don Childears.
Colorado tried to address this with state regulation, but it also hasn’t worked well, because of the interstate nature of banking. Washington hasn’t tried.
A handful of local institutions, including Seattle-based Salal Credit Union, publicly said they would provide banking services to businesses licensed under Initiative 502. Helpful, but that alone does not make a functional banking system.
Bringing marijuana businesses into the federal mainstream is a federal issue. A bill sponsored by U.S. Rep. Denny Heck, D-Olympia, passed the House in July, but is sitting in the Senate.
The clock is ticking. Colorado has already seen armed robberies at its retail shops. Washington has not — yet.
Editorial board members are editorial page editor Kate Riley, Frank A. Blethen, Ryan Blethen, Sharon Pian Chan, Jonathan Martin, Erik Smith, Thanh Tan, Robert J. Vickers, William K. Blethen (emeritus) and Robert C. Blethen (emeritus).