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CUs in all 50 states feel impact of marijuana industry

Creditunions all across the U.S. are being impacted by the burgeoning marijuanaindustry regardless of whether they operate in a state that has legalized thedrug.

Wisconsin,for example, has not legalized marijuana for any purpose but is home to multiplebusinesses that make millions servicing the industry, said Brian Knight,general counsel for the National Association of State Credit Union Supervisors."It seems to me that's marijuana money flowing into Wisconsin," hesaid. "So it affects all of you."

Hesaid businesses that do not grow, transport or sell marijuana but provide otherservices to the state-licensed businesses that do may be conducting businesswith a credit union. For example, the owner of a strip mall that rents astorefront to a dispensary is being paid rent "and depositing marijuanaproceeds," he said.

Manystates have now legalized cannabis in one form or another. Additionally, thereare multiple ballot initiatives on the issue this year, and at least five ofthose are well-funded and well-organized, Knight said during the annual NASCUSsummit last week in Chicago.

ThisNovember, Arizona, California, Maine, Massachusetts and Nevada are all lookingto legalize recreational marijuana. Arkansas, Florida, Montana and North Dakotaare proposing medical marijuana legislation. Deirdra O'Gorman, president andCEO of The Fourth Corner Credit Union, said all eyes will be on Californiabecause the common thinking is that "once California goes everyonefollows. We'll have to see if that is the change that spurs national action."The Fourth Corner secured a state charter in November 2014 with plans toexclusively serve the marijuana industry but has been unable to open its doors.First, the National Credit Union Administration denied the institution depositinsurance and then the Federal Reserve Bank of Kansas City denied it access toa master account.

Speaking at the NASCUS summit, O'Gorman said the credit union went to afederal judge seeking relief from the feds' rejection. U.S. District Judge R.Brooke Jackson was supportive to the cause, O'Gorman said, but dismissed thesuit because access to the Federal Reserve would be in conflict with theControlled Substances Act. The credit union appealed that ruling, and its nextcourt date is Nov. 16 in appellate court. O'Gorman said the next stop would bethe Supreme Court.

Thatcase is still under judicial review, O'Gorman said.

Bignews was made in the marijuana industry recently when the Drug EnforcementAdministration denied petitions to reschedule marijuana from a schedule 1 drugto schedule 2. O'Gorman said although the schedule 1 categorization means thatit has no medicinal value and is highly addictive, which makes access to thedrug difficult, she was not unhappy with the ruling. "I think a lot ofpeople are surprised by my response when I say that I'm glad the DEA did notreschedule it to a 2," she said. But that's because cocaine and meth areschedule 2, and that's not going to help move the conversation forward."

O'Gormansaid Colorado has 26,000 employees working in the marijuana industry that wouldall be potential members of The Fourth Corner CU. There are also about 12,000families on the waiting list of Realm of Caring, a non-profit that helps kidsget access to cannabidiol oil, or CBD oil, for medical reasons. They too wouldbe potential credit union members, she said. 

MarkPowell, supervisor for the Indiana Department of Financial Institutions, saidhe has heard that the promises of additional revenue that would be created tobenefit infrastructure, schools, etc. in Colorado have not been realizedbecause of the offsetting increased cost of law enforcement. But O'Gorman saidthere has not been an increase in crime or incidents of driving under theinfluence in Colorado since the state legalized marijuana. Shesaid about $165 million in tax revenue from the industry has flowed intoColorado and has helped the state in many ways, although she said there havebeen some social challenges.

Knightsaid that by the middle of 2015 about 250 banks and credit unions in the U.S.had shown interest in serving the marijuana industry, and by March of 2016 thatnumber had reached 301. He said about one-fifth of the invitationsthat NASCUS receives to speak at events include requests to discuss marijuanabanking. And that includes events held in states where there is no medicinalmarijuana, no recreational marijuana and those in which none of the neighboringstates have legalized it. "It is an issue that is front and center infinancial services," he said. "Everyone is working to figure out theconflict between state and federal law."