Shut out of the traditional banking system by federal laws, the country’s largest legal marijuana market in California could benefit if the state approves a measure creating a special class of banks to handle pot money.
The state Senate voted 35-1 on Tuesday to pass a bill that would allow people to start banks and credit unions that could accept cash deposits from marijuana retailers.
Those banks could issue special checks to the retailers that could only be used for certain purposes, including paying taxes and California-based vendors.
State lawmakers also say such banks would make it easier for licensed pot retailers to pay their taxes, which fell far short of expectations in the first year after legalization.
“This is as close as we can get until the federal government changes its policy,” said Sen. Bob Hertzberg, a Van Nuys Democrat and the author of the bill that now goes to the Assembly.
Marijuana has been legal in California since January 2018, but it’s still illegal under federal law.
U.S. statutes also prohibit banks from handling money that comes from criminal activity. Banks that knowingly accept money from licensed marijuana retailers haven’t been able to get federal deposit insurance.
Meanwhile, pot businesses can’t get debit or credit cards or use checks, according to a report by legislative staffers.
The result, according to Hertzberg, is “millions of dollars buried in barrels.” He called it a public safety issue, putting retailers at risk of robbery.
Marijuana tax collections were $100 million short of expectations in August. Earlier this month, marijuana revenue projections by the state through June 2020 were cut by $223 million.
Republican Sen. Jeff Stone said the state is losing “probably hundreds of millions” of dollars in taxes each year because marijuana retailers can’t write a check to the state.
“They’ve got to come in with wheelbarrows to carry in all the cash,” he said.
Retailers have also blamed low tax collections on sluggish sales due to a still flourishing black market.
Last week, lawmakers rejected a bill that would have temporarily lowered taxes on growers in an effort to help licensed retailers compete with the illegal sellers.