Christopher J. Pippett, a partner in Exton offices of Fox Rothschild LLP, was recently featured in a Yahoo Finance article titled “The Federal Reserve is Refusing to Endorse the Pot Industry.” The article focuses on the unusual situation in Colorado where a tiny credit union has been denied the right to start operations by the Federal Reserve due to its plans to help fund the growing legal marijuana industry.
The goal of the Fourth Corner Credit Union was to help Colorado’s growing legalized marijuana industry resolve its cash management issues as it currently has difficulty gaining access to banking services. However, as the credit union would work primarily with clientele in a business still not legalized at the federal level, the Fed has limited options and as a result has refused to allow the credit union to start its operations.
The Kansas City branch of the Federal Reserve rather bizarrely equated the possibility of allowing the credit union to start operation as the same as “a scheme to allow trade in endangered species or trade with North Korea in derogation of federal laws,” according to its latest court filing. They also asked the Colorado District Court to dismiss the lawsuit, filed by the credit union against the Federal Reserve, after it refused to approve its applications for regulatory approval and insurance.
However, this isn’t just the case of the Fed being difficult, according to Christopher J. Pippett. “The Fed’s hands are tied,” he said. “The federal law governs their activities, and the Fed, just like any other bank, can’t handle the proceeds of illegal activity.”
It is no surprise however, that the National Cannabis Industry Association is less than pleased with the decision. Without the go ahead from the Fed, the credit union simply cannot be opened nor gain access to the U.S. banking system including the ability to do electronic transactions.
“When the Fed stonewalls a solution crafted with the cooperation of state officials and designed to meet the Treasury Department’s own guidelines, it’s clear this conflict has gone too far,” said Taylor West, deputy director of the Denver-based National Cannabis Industry Association.
