Medical marijuana companies in Nevada might get some banking relief in the future, with a little help from the state.
An amendment to a bill that’s now before Nevada’s governor calls for the creation of new savings and loan institutions that could potentially solve many banking issues for cannabis dispensaries, growers and related businesses about to begin operations.
The amendment, written into a mortgage lending bill, would change the rules so savings and loan companies wouldn’t have to obtain insurance from the Federal Deposit Insurance Corporation. The legislation would also remove a provision from state law that limits the operation of savings and loan companies (called “thrifts” in the banking world) to those that received a license prior to 1997, said Patricia Farley, a co-sponsor of the amendment.
The governor has 10 days, not including Sundays, from the end of the session to sign the bill. If he doesn’t, it passes into law without his signature.
The current session ended last week.
Currently, there are no thrifts open in the state, as the last of them closed during the recession about seven years ago, said Farley, who indicated she’d heard from at least two companies that want to start savings and loan companies.
Thrifts could potentially become the go-to financial institutions for cannabis companies – and if the experiment works in Nevada, other states might adopt similar legislation.
Under the amendment, thrifts would be allowed to seek deposit insurance from private insurers rather than the FDIC, and more closely resemble credit unions than traditional banks.
To be sure, non-traditional banking hasn’t exactly been the savior for cannabis companies, as some credit unions have failed at attempts to work within the industry. They must also have in place agreements with the U.S. Federal Reserve to take their cash, which can prove problematic.
Still, if they work as well as the amendment’s co-sponsors hope, savings and loan companies could potentially alleviate a very large problem for cannabis businesses that are about to open in the state since banks aren’t openly taking deposits from marijuana companies.
“Hearing about the amendment gives me hope because we have this fledgling industry just getting ready to open … and these are multi-million investments that have no access to banking,” said James Slatic, a part-owner of a company called Nevada Highlands that was awarded grower, processor and dispenser licenses in the state.
The difficulties cannabis companies and their owners have with banking was underscored, Slatic said, when he received his deposit and incorporation papers back for a business completely separate from his marijuana venture. The bank, which he didn’t name, said because he’s a prominent business person in the cannabis industry, it wouldn’t open an account for a separate business. That type of discrimination is the reason the amendment was written. Lawmakers also want to reduce the amount of cash marijuana business owners have to carry around to pay bills, said Sen. Richard Segerblom, who co-sponsored the bill with Farley.
“We’re doing everything can from state level to get some type of financial institution for these businesses because it’s not healthy to have that much cash running around,” Segerblom said.
While the amendment would make allow savings and loan companies to start up and could lead to the resurgence of such financial institutions in the state, it doesn’t mean cannabis companies will be able to walk in and drop hundreds of thousands of dollars into a vault.
Among the biggest hurdles, banking experts said, is working out an agreement with the U.S. Federal Reserve so it will take cash deposits.
It’s a similar problem to the one faced by Fourth Corner Credit Union in Colorado, which has been waiting months for federal banking officials to make a decision on whether they will take cash from a financial institution that does business with cannabis companies. Normally, banks and credit unions receive an answer from the feds in a matter of days, Fourth Corner executives have said.
And while the Nevada thrifts will be allowed to seek private insurers, that doesn’t mean any will necessarily do business with them.
It’s a step in the right direction and could prove fruitful in the long run, but it doesn’t solve the industry’s immediate needs, said Nevada Highlands’ Slatic, whose company plans to open a dispensary called The Nevada Wellness Project in downtown Las Vegas.
“Of course anything that gives us another avenue for legitimate business to banking, we encourage,” Slatic said. “It’s a viable alternative, regulatory wise, but it has a long lead time and is not a solution for today.”