California considers state-run bank for pot businesses

California considers state-run bank for pot businesses
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Two top California officials are pushing ahead with plans to establish a state-run bank to handle billions of dollars in transactions related to the newly legal recreational marijuana industry.
 
 
The state-run option may be necessary, Chiang said in a teleconference Tuesday, because private banks are leery of accepting deposits from marijuana businesses. Private banks are regulated by the federal government, and marijuana remains an illegal product at the federal level, setting up potential legal issues for banks that handle money from marijuana businesses.
 
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“We are contending with the emergence of a multi-billion dollar cannabis industry that needs banking services, and a private banking industry that is stymied by federal law in meeting the needs of the new industry,” Chiang said. 
 
Marijuana businesses in states where recreational sales are now legal have voiced concern about their lack of access to the banking system. Many of those businesses operate largely in cash, raising more concerns that they could become targets for burglars and robbers. State officials also say cash sales could mean taxes go unpaid.
 
Chiang said Attorney General Jeff SessionsJefferson (Jeff) Beauregard SessionsKey GOP lawmaker throws cold water on Rosenstein impeachment With new immigration policy, Trump administration gutting the right to asylum Homeland Security advisory council members resign over family separations: report MORE’s decision earlier this month to rescind the so-called Cole memo — the Obama-era federal guidance to U.S. attorneys deprioritizing the legal marijuana industry as a potential target for prosecution — had heightened the urgency in establishing a state-run bank.
 
“California and other states will need to lead when it comes to bringing the cannabis industry out of the shadows so that it can be properly regulated to prevent sales to minors, to protect the public’s health and safety, and ensure cannabis businesses behave as legitimate tax-paying members of our economy,” Chiang said.
 
Chiang in 2016 established a Cannabis Banking Working Group, which held six public meetings with industry stakeholders around the state. The next step, he said, would be a feasibility study that examined whether a public bank could work. Becerra’s office will handle the legal side of the study.
 
Opponents of the concept of a state-run bank say it would create new opportunities for scandal and abuse of taxpayer money. The Consumer Choice Center, an anti-regulatory group with ties to the network of conservative mega-donors helmed by Charles and David Koch, said creating a bank would be a burden for state taxpayers.
 
“Opening the banking sector for cannabis-based businesses is necessary, but a government-owned and operated bank in California will only invite more problems and prove disastrous for California’s residents and taxpayers,” said Yael Ossowski, deputy director of the Consumer Choice Center. “A state-controlled bank will only invite scandal and mismanagement, and significantly limit growth for the industry in the long term.”
 
Only one other state, North Dakota, has opened a state-run bank. That bank, established in 1919, was meant to bolster North Dakota’s agriculture industry.
 
California became the sixth state — along with Washington, Oregon, Colorado, Alaska and Nevada — to legalize recreational sales of marijuana earlier this year. In California, the legal pot industry is expected to generate $7 billion in sales in coming years, and early sales have been faster than expected.
 
Maine and Massachusetts will open their own recreational markets in the coming months.