The Federal Reserve Bank of Kansas wants a federal judge in Denver to dismiss a lawsuit asking the court to force its hand and issue a master account to a credit union for marijuana businesses, saying that to do wo would compel it to “facilitate criminal activity.”
“Even transporting or transmitting funds known to have been derived from the distribution of marijuana is illegal,” said a motion filed Wednesday by the Fed in U.S. District Court in Denver.
The motion came in response to a , which was set up to serve Colorado’s $700-million-a-year marijuana industry. The credit union can’t open without a master account and has been waiting since December for an approval that typically takes only a few weeks.
Last year, the U.S. Treasury Department issued rules for how banks can accept pot money.
But the Fed’s motion says it does not intend to allow a penny connected to the sale of pot to flow into the federal banking system because marijuana remains illegal under federal law.
Colorado’s legal marijuana industry, , struggles with banking. Many pot businesses run on a cash-only basis — even paying their federal taxes in currency — because banks fear having them as customers will put them afoul of federal banking regulations.
Marijuana Industry Group executive director Michael Elliott said Congress needs to pass a law so that marijuana is no longer considered a dangerous, schedule one drug.
“Banking remains a top concern. In Colorado we are doing everything we can to solve this problem but we can’t change the federal banking law in Colorado,” he said.
Elliott said marijuana businesses are put at risk by having to stash cash that could be deposited in banks. “This is a public safety problem that is being caused because federal law has not been updated to address this issue.”
Federal law may preempt state laws when they conflict or obstruct federal law, the motion says. And condoning Colorado’s marijuana trade would be akin to supporting other illegal enterprises, the document says.
“The court would not entertain other such attempts — such as if Colorado enacted a scheme to allow trade in endangered species or trade with North Korea in derogation of federal laws, and then chartered a credit union to handle the finances for companies conducting such illegal trade,” the motion says.
Marijuana businesses are caught between pursuing a business that Colorado declared legal but which violates federal laws, which the U.S. Federal Reserve must uphold.
“Simply put, a court of equity will not permit its process to be perverted to any illegal purpose,” the lawsuit says.
Kirk Mitchell: 303-954-1206, kmitchell@denverpost.com or @kirkmitchell or denverpost.com/coldcases
The Associated Press contributed to this report.
