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Colorado Credit Union Allowed to Serve Cannabis Businesses, But Only If They Don’t Touch the Plant

Fourth Corner Credit Union has been fighting for the right to serve the cannabis industry since 2014.

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After years of legal battles, a Colorado credit union has finally won conditional approval from the Federal Reserve Bank to serve ancillary canna-businesses. Back in 2014, Fourth Corner Credit Union received a charter from the state of Colorado allowing it to serve state-legal cannabis firms. Federal law prohibits any bank from dealing with a business that handles funds relating to an illegal drug, however, and the Federal Reserve Bank of Kansas City denied the credit union's request for a master account on these grounds. A master account allows a bank to access the nationwide banking system, and the credit union would not be able to operate without it.

In response to this challenge, Fourth Corner altered their charter, announcing that they would only open accounts for businesses that indirectly serve or support the cannabis sector, such as legalization advocacy groups, and accountants or lawyers with clients in the industry. Hence, the bank would technically would be operating legally, as long as they’re not handling funds directly related to growing, processing, or selling marijuana. Regardless of the change, the Federal Reserve continued to deny the bank's request for a master account. Fourth Corner sued the Feds in 2016, and after losing the first round in court, finally won the right to a federal master account last summer in the U.S. Court of Appeals.

Despite the court's ruling, the Kansas City Fed still had not given the credit union their account by last fall, so the bank filed a civil complaint in the U.S. District Court in Denver. After years of disagreement, this month the Federal Reserve finally granted conditional approval to Fourth Corner. To secure the deal, the bank has agreed not to serve state-licensed dispensaries or any other business that directly handles cannabis funds. The Federal Reserve bank also warned Fourth Corner that “this letter does not express the policy views of” the Federal Reserve as a whole, “nor does it contain any supervisory, regulatory or enforcement guidance or precedent,” the Wall Street Journal reports.

Even though the Fed has shied away from calling their decision a precedent, it could be the first step towards legal canna-banking. Mark Mason, one of Fourth Corner's co-founders, believes that his company's victory could signal banking regulators' growing acceptance of the cannabis industry. “It’s been the mission of the Fourth Corner Credit Union to bring about fully legal banking to the marijuana industry,” Mason said to the Wall Street Journal. “As a matter of public safety and good monetary policy, the billions of dollars being generated by the state [legalized] businesses need to be in banks.”