Marijuana Inc. Given One More Ounce of Legitimacy by U.S. Treasury


Another big step forward has been taken in the relaxation of laws against marijuana — both medical and recreational. As the L.A. Times reports, the U.S. Treasury has made its stance known to the banking industry, alerting banks that they will be able to offer financial services to the robust and growing marijuana industry.

As more and more states are going green, the need for more legitimate infrastructure in the marijuana industry only becomes more pressing. There are already twenty states in the U.S. with medical marijuana laws in place, and several more with legislation pending. Florida and Pennsylvania may soon be joining those ranks.

On top of the medical marijuana legislation, some states have even been working on recreational marijuana laws. Colorado led the charge when it legalized marijuana for recreational use, and since the law went into effect, the industry has raked in cash. But, that was part of the problem. Because the marijuana laws are only in place on the state level, banks could have run into trouble if they dealt with dealing companies. So, these companies have been operating in cash, without banks in which to store their money.

In just the first five days after Colorado’s recreational marijuana laws took effect at the beginning of this year, $5 million in sales were recorded by the National Cannabis Industry Association, and tens of millions of dollars are expected over the year. That much cash is dangerous to have just sitting around at a business, and U.S. Attorney General Eric Holder expressed his concern about the dangers of businesses operating in cash.

treasury buildingTo rectify this precarious situation, the U.S. Treasury let banks know they could interact with the marijuana companies. This change will not only protect the companies selling pot — as they won’t have huge stores of cash on site that could be targeted for theft — but it also benefits the public.

Having the earnings of these companies flow through banks makes the accounts trackable, auditable, and thus forces the companies to be more accountable for their business. This will help to prevent money laundering, tax evasion, and revenue going to criminal organizations.

This would address the concerns of the Department of Justice, as the L.A. Times reported that it is focused on diverted revenues to criminal organizations, sales to minors, and the sale of harder drugs. Oversight of the accounts will help the DOJ see if companies are making more than they should be off of marijuana sales, and moving away from cash transactions may make it harder for minors to purchase marijuana at dealerships.

This type of rule is only going to become more important as time goes on. As more regions are joining the “other” green movement — even Washington, D.C., has marijuana decriminalization legislation in the works — it will be important to ensure that marijuana companies can operate within the law in order to ensure they don’t turn to illegal means of operation.

With the large potential for tax revenue to be had from the up and coming industry, it’s a smart move for the government to ensure that money goes to all the right places and none of the wrong ones.


More from Wall St. Cheat Sheet:

Follow Mark on Twitter @WallStMarkSheet