As Massachusetts strives to implement the new medical marijuana law, passed last November, numerous stumbling blocks have emerged. One of these is the laws that prohibit banks from engaging in criminal activities. Although owning and operating a marijuana dispensary is now legal in the Commonwealth, if you have received one of the certificates of approval from the Department of Public Health, involvement in this type of business is still technically illegal at the federal level. Banks doing business with a marijuana dispensary or growing company, while legal in the state, may be at risk of an accusation of drug racketeering charges at the federal level.
This has left the new business entities created to open and operate the Massachusetts dispensaries without support from a bank. This has hampered the financial operations of these developing companies as they have not been able to obtain lines of credit, process payroll or negotiate mortgages through lending institutions. This also puts them at risk for criminal activities as they must maintain large amounts of operating cash on hand to conduct business. This could also make it difficult to levy taxes on this industry, a potential goldmine for the federal and state governments in the future.
There are now two states that have legalized recreational use of marijuana and 17 states, including Massachusetts that allow medical marijuana dispensaries. Industry analysts see a steady progression toward complete legalization throughout the country in the near future. This also opens major business opportunities for entrepreneurs and potential tax windfalls for federal and state governments.
Last week the Obama administration, through the justice Department and Treasury Department issued guidelines that are supposed to make it easier for banks to engage in Massachusetts’s new marijuana dispensary business. However, banking industry leaders expressed doubts about these guidelines and feel they have not addressed the problems.