Now that residents of the Golden State have approved Proposition 64, California joins the District of Columbia and the states of Alaska, Colorado, Maine, Massachusetts, Nevada, Oregon, and Washington in legalizing the recreational use of marijuana for adults. Together, these eight states and the U.S. capital generate about one-quarter of U.S. gross domestic product (GDP). If they were one nation-state, that entity would rank as the world’s third largest economy.
Based in one of those states, Nevada, Singlepoint, Inc. (OTC: SING) is poised to profit from these promising presentiments. It recently revived its SingleSeed subsidiary, which several years ago began offering payment-processing services to dispensaries in Colorado and Washington State. The company intends on leveraging these footholds to be a “first mover” in the market.
These nine jurisdictions may have enough economic clout to make the Feds allow banks to open accounts for marijuana businesses, and California is already testing that proposition. A report in the LA Times (http://nnw.fm/ZjP2u) last Friday revealed that California State Treasurer John Chiang had ‘appointed a working group to figure out how to address problems caused by the unwillingness of federally regulated banks to handle money from pot businesses’. Mr. Chiang also wrote the President-elect, Donald Trump, seeking guidance on the issue.
The root of the problem is that, by federal law, cannabis remains a Schedule I substance under the Controlled Substances Act of 1970. Accordingly, “even transporting or transmitting funds known to have been derived from the distribution of marijuana is illegal”, said the Federal Reserve Bank of Kansas City in a recent court case. The suit in that case, brought to compel the Fed to approve a ‘master account’ for the first credit union for marijuana in Colorado, was dismissed by the court. The judge said that unlike federal prosecutors, who might not enforce the law if financial institutions observed certain guidelines for dealing with the marijuana industry, a court could not ‘look the other way’.
The guidelines referred to were issued in February 2014 by the Financial Crimes Enforcement Network (FinCEN) of the U.S. Treasury Department. They offered financial institutions clarification on how they could provide services to marijuana-related businesses consistent with their Bank Secrecy Act obligations and were designed to ensure that marijuana was kept out of the hands of minors, that marijuana businesses were not operated by or associated with criminal enterprises, and that the industry did not exacerbate gun violence nor adversely affect public health.
Since these guidelines were published, a number of community banks and credit unions have sought to offer services to marijuana outfits, but the larger national banks have kept their distance. The lawsuit referred to above was filed by Colorado chartered Fourth Corner Credit Union in Denver after the Federal Reserve Bank of Kansas City turned down its application for a ‘master account’, an account a financial institution holds at one of the reserve banks.
Cases like this one show the barriers standing in the way of legitimate marijuana establishments. As Treasurer Chiang’s letter to the President-elect points out:
“This conflict between federal and state rules creates a number of problems for the states that have legalized cannabis use, including difficulties collecting tax revenue, increased risk of serious crime, and the inability of a newly legal industry under state law to effectively engage in banking and commerce.”
Of course, it is Congress that will have the final say. It seems impossible for this impasse to be resolved unless cannabis is de-scheduled. For marijuana shops, for banks and for Singlepoint, Inc., the day that happens will be a bank holiday.
For more information, visit the company’s website at www.Singlepoint.com
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