After a long wait, a much-anticipated cannabis banking decision by the 10th Circuit Court of Appeals is in the books. On June 27, 2107, the Fourth Corner Credit Union, sometimes referred to as the First Bank of Pot, won a reversal and a legitimate possibility of ultimately obtaining the master account from the Federal Reserve that it needs to conduct business. Nonetheless, cannabis businesses hoping for a breakthrough in their ability to access conventional financial institutions lost big. The one thing that the entire three-judge panel could agree on in the case was that a financial institution serving "marijuana-related businesses" ("MRBs") would violate federal drug laws. This threatens to
Back in January of 2016, a federal district court in Colorado dismissed Fourth Corner's complaint against the Federal Reserve Bank of Kansas City for denying Fourth Corner a master account. The court determined that dismissal was appropriate in large part based on Fourth Corner's admitted intention to serve federally-prohibited MRBs. The dismissal came despite the fact that Fourth Corner had filed an amended complaint stating that it would serve MRBs only if doing so were permitted under state and federal law. The district court refused to accept Fourth Corner's allegations that it would follow the law as fundamentally contradictory to "the Credit Union's raison d'être."
A three-judge panel of the Tenth Circuit Court of Appeals heard oral argument in November of 2016. Seven months later, the judges issued their decision. Whatever they were doing with that time, it was not consensus-building. The three judges each wrote a separate and divergent opinion. Fourth Corner's right to a master account.
The net result of these opinions is that the dismissal of Fourth Corner's complaint will stand, but will be without prejudice, rather than with prejudice, allowing Fourth Corner to reapply for a master account, making clear its intention not to serve MRBs in violation of federal law.
All three judges, however, unequivocally agreed that Fourth Corner's plan to service MRBs would have violated federal drug laws. Fourth Corner had argued that compliant with the Cole Memorandum and the FinCEN guidelines would render its plan legal under federal law. This argument was always something of a Hail Mary due to marijuana's continued status as a Schedule 1 narcotic under the Controlled Substances Act, but it's unequivocal rejection will give cold comfort to those financial institutions considering entry into the cannabis industry. As a result, many cannabis businesses will remain unable to obtain a bank account.