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Fourth Corner Loss Could Be a Gain for Banking Reform

Fourth Corner Credit Union’s dream is dead — for now. But the Colorado credit union’s defeat in federal court yesterday could end up having positive implications for the political fight over cannabis banking when the U.S. Senate reconvenes next week.  

U.S. District Judge Brooke Jackson dismissed Fourth Corner’s bid for legitimacy on Tuesday, declaring that he could not use the court’s power “to issue an order that would facilitate criminal activity.” Leafly has obtained Jackson’s full nine-page order

Fourth Corner, formed in March 2014, has been granted a charter by the state of Colorado but needs a master account with the Federal Reserve. Without it, as Jackson wrote, “The Fourth Corner Credit Union is out of business.” 

The Federal Reserve Bank of Kansas City denied Fourth Corner’s application in July, and the credit union sued in federal court. Jackson’s decision ends that suit unless Fourth Corner appeals the ruling at the 10th Circuit Court of Appeals. 

Jackson’s ruling is a setback, but it isn’t all bad for those awaiting the next generation of cannabis banking. The decision contains strong language criticizing the federal government’s current “look the other way” approach to marijuana-related businesses (MRBs), and calls on Congress to resolve a situation Jackson termed “untenable.” 

Over the past two years, the U.S. Department of Justice and the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) have outlined a rough path that banks and credit unions must follow to offer services to MRBs. (See Leafly’s recent analysis, “Here’s How Cannabis Companies Are Banking Legally on the Down Low."

Jackson calls those policy memos “something of a sleight of hand.” Which is, actually, a step up from how he described them in court a couple weeks ago, when he coined the instant-classic legal term of art “nothingburger.” 

One such document, the Cole banking memo, “directs federal prosecutors to apply certain priorities in making enforcement decisions, but it does not change the law,” he wrote. And federal law clearly states that marijuana is illegal. Prosecutors and banking regulators might ignore that fact, the judge said, but “a federal court cannot look the other way.” 

Interestingly, Jackson cited a recent decision by the 10th Circuit regarding a marijuana-related bankruptcy case, In re Arenas. In that case the court held that “while the debtors have not engaged in intrinsically evil conduct, the debtors cannot obtain bankruptcy relief because their marijuana business activities are federal crimes.” 

In the end, Jackson seemed to sympathize with the plight of marijuana-related businesses and the credit union that would serve them. But he found his hands tied by one simple fact that could not be overcome: Cannabis remains federally illegal. If there is an upside here, it’s that Jackson’s decision may put more pressure on Congress to move federal banking reform into law in the coming year. The “untenable” situation, the judge ruled, is one only the House and Senate can resolve.

Fourth Corner Credit Union v. Federal Reserve Bank of Kansas City — Dismissal Order

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