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Colorado Looks to North Dakota for Cannabis Banking Solution

July 1, 2020

Colorado continues to live up to their long standing reputation as pioneers of the cannabis industry. Federal banking regulations are just one of the ways in which the cannabis industry is still being pigeonholed into the stigma of illicit drugs. However Colorado Governor Jared Polis (D) sees the inherent danger of exiling cannabis dispensaries and the need to provide traditional services to cannabis banking.

 Even banks and creditors on a local level eventually have to answer to a federally insured institution making every level of bank exposed to this problem, but there are voices in the Colorado government that want to see that changed.

Due to big banks being federally insured in the United States, they naturally can’t engage with businesses who deal in  federally illegal products which still include cannabis. This situation is nothing new, and anybody familiar with the industry knows how dependent it is on cash. Up to now, there’s been virtually no pressure at the federal level to enact any change.

For Safety’s Sake

One of the biggest criticisms of the current cash-only system is its potential for abuse. No, that doesn’t mean employees are more likely to steal, but if someone is picking between holding up a liquor store and holding up a dispensary, the choice would seem pretty easy with the latter being a booming market, flush with literal cash. 

Representing just 1% of businesses in Denver, cannabis retailers accounted for 10% of all business burglaries from 2012-2016. While that’s certainly better than the crime rate caused by black market cannabis, it still represents a concern for business owners, investors, and even employees. At this point, more Americans live in a place with some form of legal marijuana than those who don’t, so why isn’t the banking system onboard? The answer to cannabis banking may lie in an unexpected place. 

Tip of The Spear

A single state-owned and state-run bank exists in the United States, and it resides in North Dakota. It came about in 1919 to protect the interests of disgruntled farmers, and it works in a clever way. Every agency of the State of North Dakota must use this bank to deposit funds, thus giving it capital to work with and then operate as a bank like any other. There are fascinating questions this raises, but in terms of cannabis banking, the benefit is clear. 

Since North Dakota’s bank is insured by the state, there’s a layer of protection from the Federal Government. While North Dakota only recently voted medical marijuana legislation into law and they don’t use their unique banking system for cannabis, other states are taking notes, and Governor Polis of Colorado referenced North Dakota’s system when talking about his own state’s issues.

Cannabis Banking Going Forward

If places like Colorado adopt similar banking systems for cannabis retailers, there’s suddenly an inequity. It would behoove big banks to lobby in favor of marijuana legalization on a federal level since they would benefit greatly from handling the money from a massive, ever-growing industry. While each state with any form of legal cannabis could potentially benefit from a system like in North Dakota, what may be more valuable is the pressure exerted on the Federal Government and big banks. 

As of now, they’re not missing out on any revenue since they’ve made it impossible for cannabis retailers to operate alongside them. If smaller, state-run banks gave businesses that option, it may be the tipping point that forces the government or big banks to take a stance and go where the green is.

Colorado Encouraging Progress

In a recent press release, Governor Polis announced that “We [Colorado] are excited to release a bold, forward-thinking roadmap to provide much-needed guidance, clarity and support to state-chartered financial service providers that work with or are interested in working with the state-legal cannabis industry.”

The plan includes seven goals to get them on track, including:

  • Providing clear guidance on regulations
  • Encouraging new and emerging technologies in the banking and financial services space
  • Reducing barriers while upholding consumer protection guardrails
  • Demonstrating state support for financial businesses wishing to explore cannabis banking


Contributed by Rob Docherty