Dive Brief:
- An Alaska credit union is ending a pilot program that offered checking and savings accounts to marijuana-related businesses, according to the Anchorage Daily News.
- Anchorage-based Credit Union 1 said the program, which started last November, will end Aug. 30 because of a loss of insurance coverage.
- The credit union was told by its insurance broker that the necessary liability coverage would not be renewed because of its cannabis banking program, Credit Union 1 CEO James Wileman said.
Dive Insight:
Credit Union 1's loss of insurance coverage highlights an ongoing struggle for marijuana-related businesses (MRBs) seeking financial services, as well as the obstacles financial institutions face when trying to provide banking to the industry.
While legal in some form in all but three states, according to the Idaho Press, cannabis remains a Schedule 1 drug at the federal level. Federally regulated banks are wary to service the sector, causing many MRBs to operate as cash-only businesses.
State-chartered credit unions have been more willing to bank the industry, but they continue to face roadblocks as long as the drug remains illegal federally.
Wileman said the credit union's pilot program did not perform as well as expected. Four MRBs participated.
Providing banking services to MRBs may have been a "more reasonable prospect" if the burden of compliance was not so high, Wileman said.
"Should the federal perspective on MRBs change in the future and allow us to reduce our insurance risk, we will certainly consider exploration of another pilot," he said.
Federal legislation could be on the horizon as lawmakers from both sides of the aisle are calling for action.
The Secure and Fair Enforcement (SAFE) Banking Act, which would create protections for financial institutions that provide services to pot-related businesses, has gained bipartisan support on Capitol Hill, and the Senate Banking Committee held a first-of-its-kind hearing on the marijuana industry's banking challenges last month.
During the hearing, Sens. Cory Gardner, R-CO, and Jeff Merkley, D-OR, as well as banking and credit union executives, shared testimony related to the struggles and safety issues that come with banking MRBs.
And just last week, Committee Chairman Mike Crapo, R-ID, voiced his support for creating legislation that would resolve the issue.
"I think all the issues got well vetted. We now need to, I think, move forward and see if there's some way we can draft legislation that will deal with the issue," Crapo told Wikileaf.
