The market sometimes behaves irrationally.
The latest example of this: Banks are turning away medical marijuana dispensaries, denying them the ability to open accounts and seriously hampering their ability to do business.
This is more than merely illogical. If this practice is allowed to continue, it not only flies in the face of the will of Coloradoans, but it could also contribute to increased crime and further the stigma associated with use of medical marijuana — which, in case anyone needs reminding, is legal in Colorado.
It’s legal because voters approved Amendment 20 back in 2000.
The medical marijuana industry has seen huge growth in the past couple of years. Dispensaries, which supply the legal drug, have multiplied many times over.
Better yet, municipal tax revenues have multiplied as the industry has grown to rely on the services of other small businesses, such as security system installers, HVAC companies and garden supply businesses, and, of course, landlords who are all too happy to see vacant retail space fill up.
All of this has happened in full obedience of the law.
So, why are banks turning away business from medical marijuana dispensaries?
The answer, it appears, lies partly in their desire to protect reputations.
This is a bit ironic, sadly, given the behavior in the past couple of years of some units of some of the nation’s lending institutions.
The banks also cite federal law, reminding us that marijuana possession or distribution is still illegal at the federal level.
Here’s how one prominent local bank president put it to the Business Journal’s Amy Gillentine last week:
“We’re a nationally chartered bank, and we have to follow federal laws,” he said. “Our attorneys believe this is the best way to follow banking laws and regulations.”
Sounds reasonable, except that there are no laws, federal or otherwise, barring banks from doing business with marijuana dispensaries.
Aware of this, a state representative joined a group of lawmakers recently to send a complaint to Congress.
“The effects of this denial of service include an increased risk to public safety with potential theft or robbery that any cash-only or cash-reliant business faces; a decreased likelihood that medical marijuana vendors will have the ability to accurately account for tax liability; and an affront to fundamental fairness,” he wrote.
Banks should set aside their misplaced misgivings about the medical marijuana industry and treat dispensaries as they would any other legal business.
The sooner, the better.