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California legislators considered a plan April 22, 2019, intended to encourage more banks to do business with marijuana companies that have been frozen out of thousands of financial institutions.

Most Americans live in states where marijuana for adult use or medical use is legal. But most financial institutions don't want anything to do with money from the cannabis industry for fear it could expose them to legal trouble since the federal government still considers marijuana illegal.

The conflict between state and federal law has left businesses in California's emerging legal cannabis industry in a legal dilemma, shutting many out of everyday services such as opening a bank account or obtaining a credit card. It also has forced many businesses to operate only in cash — sometimes vast amounts — making them ripe targets for crime.

California has attempted to charter a financial system for the cannabis industry, but lawmakers have rejected the effort. A report by the state treasurer in December 2018 warned that a state bank would lose money.

An Assembly bill would authorize state regulators to share detailed sales, cultivation, and shipping information collected from cannabis companies with banks, a step supporters hope will provide additional assurances to financial institutions that a retailer or grower is operating within the law.

A marijuana plant grows in San Luis Obispo, California on Sept. 11, 2018. California lawmakers would allow regulators to share details of cannabis businesses with banks, in an effort for the largest marijuana market in the U.S. to have access to financial services afforded to other businesses. (Associated Press file photo/Richard Vogel)

During the Obama administration, the Justice Department issued guidelines to help banks avoid federal prosecution when dealing with marijuana businesses in states where the drug is legal. But most banks don't see those rules as a shield against charges that could include aiding drug trafficking. And they say the rules are difficult to follow, in effect placing the burden on banks to determine if a marijuana business is complying with all legal rules.

Cara Martinson of the California State Association of Counties told members of an Assembly committee that the bill represented an incremental step until a solution is reached at the federal level.

“This could help move the ball,” she said.

The number of banks and credit unions willing to handle cannabis cash is growing — more than 400 nationally — but they still represent only a small fraction of the industry.

— Michael R. Blood

Featured Image: Interstate 5 Farms displays its marijuana clones during the Kushstock Festival on Oct. 20, 2018, in Adelanto, California. Marijuana businesses like this one could finally have access to banking services if a bill now under consideration by the California Assembly in Sacramento is passed. (Associated Press file photo/Richard Vogel)