In 2012, Colorado voters passed Amendment 64, legalizing recreational marijuana. Marijuana, however, remains an illegal controlled substance under federal law. As a result of federal anti-money laundering laws, financial institutions risk prosecution if they provide services to customers whose funds derive from illegal activities. The Obama Administration issued guidance to help both law enforcement and financial institutions navigate this murky area. This guidance directed U.S. Attorneys to focus their resources on prosecuting persons whose activities implicate any federal priority designated by the Department of Justice. If state-legal marijuana businesses adhere to state law and financial institutions follow proper protocol, there should be little chance of prosecution. However, the guidance provides no guarantees, and most financial institutions refuse to take the risk.

The lack of available banking services forces marijuana businesses to function as cash-only operations. This not only leads to tax, payroll, and vendor problems, but also makes the operation a target for crime. To tackle this problem, Colorado passed legislation to create cannabis cooperatives, which would allow marijuana businesses to pool their resources and offer bank accounts and credit to members. For the state to implement these cooperatives, according to the legislation, the Federal Reserve must approve the plan.

This Comment examines the federal banking laws that inhibit financial institutions from offering services to state-legal marijuana businesses and the Obama Administration's guidance. This Comment will also consider the obstacles marijuana businesses face due to the lack of banking services and the problems with relying on administrative guidance. This Comment posits that, in the absence of congressional action, Colorado can provide a short-term solution by implementing cooperatives, without approval from the Federal Reserve, under the authority of its traditional police powers.



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