Marijuana Credit Union Idea Blocked By Federal Reserve

AP

Fourth Corner Credit Union in Denver according to reports obtained by the New York Times. 

• January 31: Lack of banking a drag for marijuana companies in Colo.
• April 10: Federal banking official to meet with Colorado pot shops
• July 16: U.S. House votes to allow marijuana-related banking

The first-of-its-kind credit union, Fourth Corner, had asked the Federal Reserve to open a "master account"-- a financial set up that would have let it connect Colorado's hundreds of marijuana operations with banking services like electronic transactions and credit cards.

Banks have previously refused to work with marijuana outfits since the businesses violate federal law even though they are legal in the state. At best, that situation has been an inconvenience for customers and businesses who now need to rely on cash to float the growing marijuana industry. At worst, the piles of cash have created public safety issues and deterred tax collection, which is why the credit union has the support of the Colorado state government. 

“We thought it was a good solution to the problem," said Andrew Freedman, Colorado's director of marijuana coordination. and a supporter of the credit union concept. "Here was a place willing to take on the risk of banking this underbanked group — and that could do rigorous compliance."

Sam Kamin, a law professor at the University of Denver, says the conflict between state and federal law makes it hard for marijuana businesses not only to find a bank, but to find an insurer or attorney, as well.

"Everything is made complicated by the fact that these businesses are still engaged in conduct that is illegal under federal law," he said.

The credit union quickly retaliated with a lawsuit filed Thursday night demanding the Fed allow it "equal access" to the financial system.

While that further legal action gets resolved, Fourth Corner has a building in Denver ready and waiting to open for business. 

CPR's Pat Mack contributed to this report.