With nearly a dozen state initiatives legalizing recreational marijuana on the November ballot, the market for legalized marijuana is certain to expand. But, because marijuana continues to be classified as a Schedule 1 drug by the Drug Enforcement Agency (DEA), private banks are effectively prohibited from fully participating in this market — the compliance burden is too high and individual employees face the threat of prosecution. A network of city, county and state-owned public banks, sharing best practices, may be an effective way to offload the compliance burden so that marijuana-related businesses can confidently accept payments and deposits can be placed into a network of public banks, which could develop the systems needed for legal compliance with the Department of Justice and federal regulatory agencies. Short of legalization of marijuana, this may be the best way to protect local businesses and banks from a market that is fraught with risk.
The Recreational Marijuana Market
The creation of the recreational marijuana market by the state governments of Washington, Oregon, Alaska and Colorado has directly led to the establishment of a variety of marijuana-related businesses — from growers to retail stores. These businesses are quickly growing revenues and profits. As one of the fastest-growing industries in the United States, national legal sales of all forms of cannabis were $4.6 billion in 2014, $5.7 billion in 2015, and are projected by ArcView Market Research to be $7.1 billion in 2016. If all 50 states and the District of Columbia were to legalize recreational marijuana, GreenWave Advisors projects the total value to top $36 billion.
With licensing and tax revenue in Colorado alone expected to be $135 million in fiscal year 2015-16 (up from $70 million the previous year), elected officials in cash-strapped cities and states recognize the potential budgetary windfall of this market and are eager to bring the industry under their legal purview…