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Legal in Connecticut, illegal under federal law: Marijuana sellers struggle to do business without a bank

Peter Apicella, a University of Connecticut grad student, works with a cannabis plant in a UConn greenhouse growing THC-free hemp.
Mark Mirko/The Hartford Courant
Peter Apicella, a University of Connecticut grad student, works with a cannabis plant in a UConn greenhouse growing THC-free hemp.
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Businesses that grow or sell marijuana in Connecticut and nearly three dozen other states face a problem unknown to other enterprises: functioning without a bank.

Cannabis is illegal under federal law. As a result, financial institutions are prohibited from providing banking services — checking accounts, access to credit, use of credit and debit cards — to legitimate and licensed cannabis businesses permitted by state law. One solution has emerged with legislation that passed recently in the U.S. House of Representatives giving access to the banking system for hemp and marijuana-related businesses in states where marijuana is lawful.

Rep. Joe Courtney, D-2nd, a cosponsor of the measure, said the legislation will help farmers and small businesses in Connecticut to gain access to financial services “they deserve and that they need to run their businesses.” Marijuana is legal in Connecticut for medical use, with 15 dispensaries in business.

Even industrial hemp, which is not on Schedule 1, defined by the federal government as having no accepted medical use and a high potential for abuse, falls under the ban, he said. “The concern is still that hemp could be an issue for financial institutions that do mortgages and lending,” Courtney said.

Making marijuana legal on the federal level would be a solution, too. But Courtney said passing the Secure and Fair Enforcement Banking Act act was “more politically feasible” in Congress. The legislation is now before the Senate.

Laurie Zrenda, dispensary manager and pharmacist at the Thames Valley Relief Medical Marijuana dispensary in Uncasville, said it operates on cash and debit cards. The dispensary relies on a “cashless ATM” that debits a customer’s account, for a $2.75 fee, and credits the dispensary’s account when the patient swipes a card, she said. It does not dispense cash.

“It’s the only way to get around this thing,” she said. “It’s a virtual cash transaction.”

Only a few banks in Connecticut are working with marijuana businesses and no credit card processing is available. Just two banks that she would not identify have worked with Thames Valley in the five years it’s been in business. “There are special hoops they have to jump through” with the Federal Deposit Insurance Corp., which insures bank deposits, Zrenda said.

The federal legislation is a “baby step in the right direction,” she said.

“It just opens a lot of doors that normal businesses have that we don’t,” she said.

Thomas Mongellow, president of the Connecticut Bankers Association, said the legislation would allow banks to do business with those related to marijuana production beyond growers and dispensaries, including electricians that provide lighting, plumbers who install irrigation and others. If the legislation ultimately is enacted into law, “you’ll see more banks tiptoe into this business because there’s demand for it,” he said.

The legislation, which passed in the House with a wide margin, 321-103, included critical support from 91 Republicans. GOP lawmakers had previously opposed legislation giving the cannabis industry access to banking, seeing it as a step toward legalization.

Increasing Republican support might help in the Senate, which is controlled by GOP lawmakers, Courtney said. Referring to Senate Majority Leader Mitch McConnell of Kentucky, he said, “There are a lot of hemp farmers in Kentucky. It may give it some legs.”

Sen. Mike Crapo, an Idaho Republican who chairs the Senate Banking Committee, has has said he’s working on cannabis legislation.

That may be a signal the measure will be brought up for a vote in the Senate, said John Hudak, a senior fellow at the Brookings Institution.

“It’s purely speculation, but typically a chairman will not come out with such vocal support for a bill if his party leader is vehemently opposed,” he said.

Another consequence of opening banking services to the cannabis industry, dominated by older, white businessmen, will be to make capital available to women and racial minorities, Hudak said.

“One argument is that because a lot of minority-owned and women-owned businesses struggle to raise capital, one way to open an avenue of capital is have access to basic services,” he said. “It’s one way to level the playing field.”

Stephen Singer can be reached at ssinger@courant.com.