In an effort to help California’s marijuana businesses to enter the financial mainstream, California Treasurer John Chiang is calling for the state to study the idea of creating a state-run bank. This is one of several recommendations made by Chiang’s after a year of studying the matter. Chiang said he and the state attorney general’s office will start such a study soon.
Under current federal guidelines, in order to accept deposits from cannabis businesses, banks are required to certify that those businesses are not selling to minors, affiliated with organized crime or breaking a handful of other rules. This basically has the effect of keeping most banks out of the marijuana business.
Last year, after the passage of Proposition 64, which legalized recreational marijuana, Chiang created a working group of public officials, bankers and cannabis companies with the aim of coming up with solutions to address this problem and help cannabis businesses pay their taxes and open bank accounts.
Another of Chiang’s recommendations is to form a multistate group to lobby Congress to ease federal restrictions on cannabis. At a news conference held Tuesday announcing the recommendations, Chiang said that without Federal deregulation, “a definitive, bulletproof solution will remain elusive,” but that that is not an excuse for inaction.
Over the last year, Chiang’s group held public meetings around the state, hearing from cannabis companies, banks, and public officials about their concerns.
The group’s report, released Tuesday, makes four recommendations aimed at addressing the issue. Cannabis business owners called the recommendations useful but incremental at best.
The main recommendation, the creation of a public bank owned by the state of California, also offers an alternative to profit-driven Wall Street institutions.
Creating a state-run bank will not be easy. The potential cost to the state is high, and the plan is not guaranteed to solve all the problems the industry is facing.
Another of the group’s recommendations to help local agencies collect marijuana tax payments, and to reduce the risks involved in transporting tax payments in cash, is that the state hire armored car services to pick up tax payments from businesses. The cash could then be deposited at banks on behalf of the state rather than cannabis businesses.
Chief executive of Oakland’s Dark Heart Nursery, Dan Grace, said being able to pay taxes without hauling cash to government offices would be helpful, but not a complete solution. “My payments to the government are at most one-quarter of my monthly payments, so that still leaves everything else. It still doesn’t solve the issue in a meaningful way,” Grace said.
The report also suggests the creation of a coalition made up of government agencies in states where marijuana is legal. The goal of the coalition would be to empower cannabis-legal states speak with one voice in Washington. Whether or not it can happen or if it would actually make a difference remains to be seen.