The Obama Administration May Have Just Sparked a Marijuana Tidal Wave

Photograph by Jeremy Nathan/iStock Collection/Thinkstock by Getty Images.

The marijuana industry just got a critical boost in its effort to become a massive and completely legitimate business. On Friday, two federal law-enforcement agencies released coordinated statements clearing the way for banks to take deposits from and offer financial services to marijuana producers and retailers without fear of prosecution for money laundering. 

To say that this will ignite a revolution in the still upstart industry would be an egregious understatement. "It is imperative that this legal industry have access to banking the same as every other business sector," said Mike Elliot, executive director of the Medical Marijuana Industry Group. "To continue doing business on a largely cash basis creates serious safety issues for owners, employees, and customers."

An industry awash in cash
As the legal marijuana industry develops in Colorado and Washington -- click here to access our recent in-depth series on the business of legal marijuana -- entrepreneurs have run up against a major problem: Banks won't provide them financial services or, for that matter, even accept their deposits, leaving retailers and wholesalers awash in copious amounts cash.

The reason is that marijuana remains an illegal drug under federal law. As a result, banking statutes and regulations make it a crime for financial companies to handle the proceeds of any business engaged in the production, distribution, or sale of the drug. In short, it would be considered money laundering.

While the coordinated guidance issued at the end of last week by the departments of Justice and Treasury doesn't change this, it does send a strong signal to financial institutions that they won't be prosecuted for providing services to the marijuana industry so long as their customers don't run afoul of eight "enforcement priorities" laid out by the Justice Department in the middle of last year.

Photograph by Randy Faris/Fuse/Thinkstock.

These include preventing the distribution of marijuana to minors, preventing revenue from the sale of marijuana from going to criminal enterprises, and preventing the interstate trafficking of marijuana, among others. Short of "significant" violations like these, the Justice Department is now instructing its law-enforcement officers to concentrate their "limited investigative and prosecutorial resources" elsewhere.

For participants in the fledgling field, this is a critical step -- assuming, of course, as I believe to be true, that banks heed the guidance. In the first case, it relieves business owners of the security and accounting issues associated with conducting business in cash. In the second case, it could very well be the first step in making additional capital -- i.e., loans -- accessible to those in the industry. The latter in particular would serve as a potent catalyst for growth and expansion.

Does this mean the nation's banks will soon become accomplices in the drug trade? Yes and no. It seems safe to assume that many community banks will jump at the opportunity to curry more business, especially if it equates to a substantial increase in demand deposits like checking accounts, which pay little to no interest.

By comparison, the risk/reward analysis will be different at the nation's largest lenders. Just last year, Bank of America (NYSE: BAC  ) struggled over the decision of whether it would provide banking services to the state of Washington -- that is, the government itself -- given that a portion of the state's tax revenues derives from excise and sales taxes on marijuana. The Charlotte, N.C.-based bank eventually decided to do so, but the controversy alone spoke volumes.

Meanwhile, in response to a reporter's inquiry on Friday, a spokeswoman for Wells Fargo  (NYSE: WFC  )  said that "It is currently Wells Fargo's policy not to bank marijuana businesses, based on federal laws -- under which the sale and use of marijuana is still illegal." Though, to be fair, she did qualify the statement by noting, "We are reviewing the guidance."

It's still too early to say what the impact of these nonbinding guidelines will have on the banking industry. However, there's much less ambiguity about the significance of this to people in the marijuana business. Love it or hate it, the momentum behind this movement is clearly growing.

Get in on the bank industry's $20.8 trillion secret
Do you hate your bank? If you're like most Americans, probably so. While that's not great news for consumers, it certainly creates opportunity for savvy investors. That's because there's a brand-new company that's revolutionizing banking, and is poised to kill the traditional bricks-and-mortar banking model. And amazingly, despite its rapid growth, this company is still flying under Wall Street's radar. For the name and details on this company, click here to access our new special free report.

Read/Post Comments (32) | Recommend This Article (52)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On February 16, 2014, at 4:58 PM, rockinr1 wrote:

    Hey man,I am growing marijuana on my farm and I need money to expand my green houses and irrigation system.

    The banker says,Oh you are growing pot? How much do you need? NOT!

    Federal law has little to do with the transaction.It's a bank lending money to a business,whatever business still needs to pass the requirements of the bank. I don't see any rush.

  • Report this Comment On February 16, 2014, at 4:59 PM, herbwarrior420 wrote:

    Members of Congress Send Letter to President Obama Urging Reformation of U.S. Cannabis Policies


    February 12, 2014

    by TheJointBlog

    A bipartisan coalition of 18 federal lawmakers sent a letter today to President Obama, urging him to put an end to cannabis prohibition by removing it as a Schedule 1 substance.images

    “Dear Mr. President: We were encouraged by your recent comments in your interview with David Remnick in the January 27. 2014 issue of the New Yorker, about the shifting public opinion on the legalization of marijuana”, begins the letter. “We request that you take action to help alleviate the harms to society caused by the federal Schedule 1 classification of marijuana.”

    The letter continues; “Lives and resources are wasted on enforcing harsh, unrealistic, and unfair marijuana laws… Classifying marijuana as Schedule 1 at the federal level perpetuates an unjust an irrational system. Schedule 1 recognizes no medical use, disregarding both medical evidence and the laws of nearly half of the states that have legalized medical marijuana.

    We request that you instruct Attorney General Eric Holder to delist or classify marijuana in a more appropriate way, at the very least eliminating it from Schedule 1 and 2.”

    The letter states that billions of dollars are spent each year arresting hundreds of thousands of people, and also notes that African Americans are roughly four times more likely to be arrested for cannabis than someone who’s Caucasian.

    The Congressmen and Congresswomen who signed on to the letter: Earl Blumenauer (Or.), Dana Rohrabacher (Calif.), Steve Cohen (Tenn.), Sam Farr (Calif.), Raúl Grijalva (Ariz.), Mike Honda (Calif.), Jared Huffman (Calif.), Barbara Lee (Calif.), Zoe Lofgren (Calif.), Alan Lowenthal (Calif.), James McGovern (Mass.), Jim Moran (Va.), Beto O’Rourke (Texas), Jared Polis (Colo.), Mike Quigley (Ill.), Jan Schakowsky (Ill.), Eric Swalwell (Calif.), and Peter Welch (Vt.).

  • Report this Comment On February 16, 2014, at 5:15 PM, skidskilson wrote:

    We just went from crawling to baby steps. At the least, we should have Federal decriminalization by 2016. And lawful medical usage in all states.

  • Report this Comment On February 16, 2014, at 5:25 PM, PaulSell wrote:

    POT PLOY! This is what this subject changer is about! When asked specifically about the "cooking of the books" on OB☭M☭C☭RE ● enrollment numbers, Kathleen smiled and said, "Pull my finger." When the exact question was also posed to Barry, he tucked in his chin and gave a big toothy smile and said, "I just love that Yahoo picture of me with the Great Seal behind my pointy head, that looks like a halo on me. In addition I just want you all to know, "I have a Bic Pen and an Obamaphone."

    Republicans are now just waiting for Barry & Company to work the kinks out of his legacy legislation OB☭M☭C☭RE●! After all this isn't just more of your Dear Leader's shuck and jive stuff, this is about millions of people's lives. The Republicans have promised to get right on immigration, as soon as

    OB☭M☭C☭RE● smoothes out with the millions of lives it has disrupted. Barry was quoted as saying, "When I go out and say the, "You like it you can keep it's... for years and still just as recently as the SOTU, constantly fudge my numbers and get 4 Pinocchios from the Washington Post the next day for it, I JUST CAN NOT UNDERSTAND WHY "YOU PEOPLE" STILL DON'T BELIEVE MY SHUCK & JIVE SH!T ANYMORE? I know you're all struggling and I want you to just reflect back to Christmas. It only cost you tax paying suckas' $800,000 to bring my main squeeze "Snuff Lip" back from her extended stay in Hawaii. Now, for you millennials: "Welcome to YOUR OB☭M☭C☭RE●! The Liberals, that now have to survive re-election with this albatross hanging around their socialist necks, STILL have to convince you soft headed millennials into another suicide vote for them again. Maybe we, Barry & Company, can just chat up Pot Legalization, minimum wage increase, and Income Inequality, while carefully avoiding your slim to none chances at even getting a job. We Dems are still just going to encourage you boneheads into believing that the lying Dems are actually going to make your lives so much better."

    OB☭M☭C☭RE ● NOW has DEATH SPIRAL written all over it. I do hope the Republicans are meeting with Insurance Companies, as I write, figuring out how to defuse this Economic time bomb, when they regain the Senate in 2014 with their new plan.

  • Report this Comment On February 16, 2014, at 6:35 PM, Cerberus82 wrote:

    How many millions of dollars pass through banks on a daily basis that were gathered in the illegal drug trade? More than you think!

  • Report this Comment On February 16, 2014, at 8:00 PM, Pete50 wrote:

    In my opinion only, the legalization of Marijuana is a good thing on many fronts, (other than the recreational and medical use that seems to have captured the public awareness, that is).

    As explained in a paper from Purdue University, the usefulness of this plant beyond the scope of "getting high," should have made it legal long ago.

    "Cannabis sativa is extremely unusual in the diversity of products for which it is or can be cultivated. Popular Mechanics magazine (1938) touted hemp as “the new billion dollar crop,” stating that it “can be used to produce more than 25,000 products, ranging from dynamite to Cellophane.”

    No matter how you look at it, this plant can be nothing short of a boon to the US economy. One that is sorely needed.

  • Report this Comment On February 16, 2014, at 8:07 PM, jgjggggggj wrote:

    A doped up population is easier to totalitarians to control. Marijuana is the soma of Brave New World.

  • Report this Comment On February 16, 2014, at 8:41 PM, boots164 wrote:

    jgjggggggj, if that were true it would have been legalized years ago. If you knew anything about weed you would know that it actually makes people question things more. That's why some of the most brilliant men have smoked weed.

  • Report this Comment On February 16, 2014, at 10:46 PM, koblen123 wrote:

    I think the banks told the government whats up.

  • Report this Comment On February 17, 2014, at 2:56 AM, greenknight32 wrote:

    Pot smokers want to make love, not war - the last thing the military-industrial complex wants.

  • Report this Comment On February 17, 2014, at 6:17 AM, nativeguy wrote:

    It will hurt America badly but make some wealthy just like the nut cases that collected our phone calls and then sold them. They phone companies wanted people to be nasty online so they can appear needed as a patrol squad so they set up nasty business's. Drugs will also cause great harm as it will be laced for certain people as wanted to control and then they will be blamed as doing to themselves.

  • Report this Comment On February 17, 2014, at 7:01 AM, theya10 wrote:

    Lord have mercy on this country. How in the world you expect our child to be productive young adult if big wigs keep on putting everything they need to fail in their faces. We don't need our children havingto go tthrough all of that .

  • Report this Comment On February 17, 2014, at 7:10 AM, JoelCox wrote:

    Wow....please tell me that everyone reading this article is not this ignorant.

    Wells Fargo has been 100% documented laundering billions of dollars of drug money.

    The CIA is the biggest drug dealing entity in the world. FACT.

    Can you people not see the pathetic irony, and tyranny that these scumbag bankers are doing?


    Don't be a fool.

  • Report this Comment On February 17, 2014, at 8:18 AM, harwas wrote:

    President Obama, Please take marijuana Off the Class 1 Drug list. Pot is Not addictive and it does have medicinal value.

    If you agree with this please post it everywhere, you never know, maybe he will get the message.

  • Report this Comment On February 17, 2014, at 9:40 AM, AllenElliott wrote:

    For it is written, I will destroy the wisdom of the wise, and will bring to nothing the understanding of the prudent. Where is the wise? where is the scribe? where is the disputer of this world? hath not God made foolish the wisdom of this world?

  • Report this Comment On February 17, 2014, at 9:41 AM, lm1b2 wrote:

    Its still against the Federal Law for people to grow,sell,and possess marijuana until Congress changes the law,how can a sitting President violate this law,when its his job to enforce our laws as long as there on the books? The same goes for all federal Laws,when is the Congress,and the Courts going to stop this law breaker?

  • Report this Comment On February 17, 2014, at 10:03 AM, dogjudge wrote:

    I'm surprised that this hasn't happened a LOT sooner.

    Simple reason. TAXES.

    That's one of the reasons that governments jumped on this bandwagon.

    As anyone who has any knowledge of the restaurant industry knows, you want money to be traceable.

    Without the ability to trace things, governments have no real idea of how much money the business is collecting. If the business is paying withholding taxes, etc. for their employees.

  • Report this Comment On February 17, 2014, at 10:26 AM, rockhunter74 wrote:

    Just legalize it on the federal level....the rest will fall into place like most things (usually overthought) do. I for one am less interested in the money boom with this but more focused on the personal freedom to treat myself with things I have proven to be effective in my life. I don't advocate the pothead stigma and I try to do the opposite. I do not believe by sending armies of tattooed,body pierced 21 year olds to take to the "limelight" as the "keynote "speakers (if you will) on this subject. I can promise that only adds to the stigma of what some of the populace feels. I think if everyone just treats it like it is a blessing and still leave it on the taboo side, we can lessen the negativity focused on marijuana.smoke yer'bud , enjoy your music/food. educate yourself in things you've never dreamed. change your life from the inside out.rejoice in the miracle of life and the sparse moments of fulfillment in ones soul. I used a lot in my early childhood and I believe it would've benefited me more to abstain at that age. At the age of 39 , I have no problem with limitations on age for consumption. All of the finetuning can happen later by people whom have no financial "fish to fry" . I use daily for the most part as does my wife with M.S. it truly helps her with the muscle spasms and the depression she struggles with due to the disease and prognosis of limited function later down the road. Her limping has been self treated to the point of non existence without the use of all the pharm drugs they've pushed on her. To all the anti pot people, I understand your dislike/distrust with weed folks but please try and understand there are legitimate people being helped with various ailments all across the nation. We humans are universally known to not fully care until it affects us....I am guilty of this . I will try to be more compassionate to others plights in the future.

  • Report this Comment On February 17, 2014, at 11:14 AM, numbnut wrote:

    i really hate it when our government does this...they make it plainly clear that they will eventually make it legal...they are just going to drag their knuckles in doing about you just legalize it and stop the games...

  • Report this Comment On February 17, 2014, at 11:24 AM, mikes1reason wrote:

    Slowly we shall over come this foolish prohibition.

  • Report this Comment On February 17, 2014, at 1:11 PM, bk2000p wrote:

    Mr. Fool, Reading your many past opinions, I can conclude that you are a strong conservative who hates liberals positives and ignores negatives of capitalism. So let me ask you simple question, i.e. since Reagan presidency which GOP president produced balanced budget, offset tax cuts with spending cuts, started paid war, reduced trade deficits and reduced drug use?

    Mr. Fool, we know President Obama has has his own faults but trashing him is not enough to solve our problems. You have to make sure that you are not blind towards your beloved GOP presidents and leaders...

  • Report this Comment On February 17, 2014, at 1:35 PM, nmwander wrote:

    Once the American population is adequately stoned, they will be more docile, more compliant to authoritarian rule, and more apathetic to lower standards of living.

    We'll all just sit around and goof on the the instructions from the Central Scrutinizer.

  • Report this Comment On February 17, 2014, at 1:50 PM, SELLmtg wrote:

    My opinion:

    Buy XTRM ( a marijuana and hemp company that has opened escrow on a 40 acres of land to grow BOTH

    marijuana and hemp) XTRM's pps = 0.0339 (went up

    13% on 2/14/2014) and XTRM will go up higher when

    it closes escrow (it will close escrow soon) and more

    states legalize marijuana this year.

    Please go to, key in XTRM, to read news dated 2/10/14 and 2/11/2014.

  • Report this Comment On February 17, 2014, at 2:48 PM, Joesbox wrote:

    Just a couple of questions. How can banks that are protected by the feds open business to marijuana when it still is against the federal law and if the banks are going to take these accounts why are we still waiting for them to change and make marijuana legal? Everybody thinks the law will change eventually. Lets see its been over fifty years and hasn't changed yet. What are we waiting for again ?

  • Report this Comment On February 17, 2014, at 4:00 PM, icepump wrote:

    its about time the mob was makeing all the money, now the goverment will take over and the goverment will in turn be the new mob and keep a big cut of the pie. instead of spending billions keeping it out. which it always made its way in the country because of the public demand.and stop making criminals out of a pot smoker....and ruin he or she the rest of there lives.....

  • Report this Comment On February 17, 2014, at 4:57 PM, HamSammie wrote:

    It was already massive. It doesn't need government or anything else to help it "become" massive. Government because it's massive to begin with.

    This is not a new idea. It's been brought up hundreds of times in congress for many decades. And for one dollars.

    If we see legalization...we will not see the ability to grow....other than under strict government guidelines. And that's not for safety, control or any other reason other than tracking the tax dollars.

    Governments biggest issue with marijuana, is the ability to grow it, use it and sell it taxfree.

    And those of you saying pot growers will seek funding, I highly doubt that will happen. Pot growers don't need funding. If any do ask for will be because of greed, and because of government pressuring growers to fund.

    The US of dollar dollar bills yo.

  • Report this Comment On February 17, 2014, at 6:08 PM, travr6 wrote:

    As long as alcohol is legal, there is no rational or logical argument against marijuana being legal.


  • Report this Comment On February 17, 2014, at 6:23 PM, flameone2014 wrote:

    don't care what the guidelines or price or taxes on legal marijuana will be.JUST HURRY UP AND LEGALIZE IT FOR RECREATIONAL AND MEDICINAL AND HEMP USE.

  • Report this Comment On February 17, 2014, at 6:58 PM, boots164 wrote:

    nmwander, It's good to see that you're one of those DAREheads that believe exactly what your government told you. It makes your hypocrisy that much more laughable.

  • Report this Comment On February 17, 2014, at 8:55 PM, ibme2now4u wrote:

    ABOUT 30 years OVERDUE ! ! !

  • Report this Comment On February 18, 2014, at 4:35 AM, samueljanovici wrote:

    I read the newest rules in detail and I think they are an insult to an industry that has grown from a passing fad in the early 1960's into the $110 billion cash-and-carry cottage industry it is today. Now the bankers want in now that they learned none of the assets involved in the production of cannabis are not leveraged. They buy what they need as they go and few need to borrow money to operate. Most growers are debt free and most have equity in their land or they own it outright.

    To bankers the industry must seem like the latest gold rush and like thugs they are demanding not only a share of the business, they want to determine how growers can do business. The new rules read like a manual on how to drive small to moderate sized growers into the ground by making them responsible for doing the work the banks normally do for most of their commercial customers. Self-policing make sense and so does a certain amount of time consuming record keeping, but making the banks the cops of the biggest cash crop in America is a recipe for looting another manmade endeavor and reducing it to the lowest common denominator: a monopoly.

    I am a cannabis activist and one of only a handful of people in the world who have had the good fortune to become a Garden Columnist for cannabis industry. It's given me a wonderful opportunity to meet growers, dispensary owners and a lot of old fashioned traditional, non cartel, outlaw growers. Everyone of them work harder than anyone with a straight job. Everyone I met agreed we me that growing good weed is an act of farming and that's a commitment in time, money and passion that most working folks never get the chance to experience. After reading the new rules I fear for all of those hearty entrepreneurs who risked life, limb and everything they loved and owned, so they could farm weed or grow it indoors.

    If, growers don't form unions and syndicates like Sunkist or the Almond Board of California they will watch three generations of sweat equity vanish right before their eyes. This new law allows growers to behave like small to moderate sized beer beer makers. Breweries use most of same ingredients, but since there is no one way to brew beer or grow pot, the outcome will vary from brew to brew or grower to grower. They need to foster that pioneer spirit and still make room for companies like Coors or Busch to grow cartel quality smoke. Large agricultural concerns cannot match the quality of a committed craftsperson and they cannot grow the kind, which is exactly what the customer really wants to buy.

    Lastly, the industry needs to make sure the genetics of cannabis cannot be copy written or owned. Too many of people put their hearts and souls into cross breeding massively different genomes to breed some amazing hybrids. Those new strains are the intellectual property of every person who ever risked jail time so they could grow, distribute or sell Mary Jane. Legally, the nomenclature can and should have copy right portection. Product branding is as American as apple pie and hemp rope . . .

  • Report this Comment On February 18, 2014, at 7:44 PM, cassy4 wrote:

    I can't believe half of what I am reading in these posts. "dope America so government will have more control" "medical purposes" "taxes" "our kids will be exposed" WAKE UP AMERICA!!! America is already doped due to prescription drugs (how many are in your cabinet that your kid can get to? or maybe you just take him to the "doctor" so he can get his own. really? I guess all of the hours of tv and video games you let them watch has no affect at all. hmmm?

    Medical purposes I agree but it shouldn't overshadow the fact that this plant has so many purposes from pesticides to paper. It has the ability to totally revamp our economy. Getting high from it is just a bonus. Taxes? YES!! The government is broke and the I believe the Federal Reserve pulled rank on this also. Taxes across the board, however, the government has to find a way to harness this BEFORE they legalize it. It will not just roam free and unharnessed once they legalize it. Cigarettes and e-cigs are getting crushed and on their way to extinction. They will have to fill the tax gap one way or another.

    NEWS FLASH!! The government already has control over your life because the population is already complacent and has been since they put fluoride into your drinking water and gave prescriptions like candy. sorry, but dumb is normal now. most will complain, almost all will DO NOTHING. The pot "Heads" will be the innovators that could help get this country out of debt, but that isn't likely to happen because NO ONE does anything about the shadow government that pulls the strings of our "elected officials". After all we did elect for change, right?"

    The cost to fight this "drug" is becoming unjustifiable and unsustainable. Legalization is the best benefit to our country. Medical, oils, fuels, income, taxes, our legal entity's,healthcare etc. Where's the negative exactly, unless you are just resisting the "programed" ideas placed into you from when you were a kid. And yes, American's are PROGRAMED. So our kids & grandkids will think nothing of pot once the school system gets done with them. WAKE UP!

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2841001, ~/Articles/ArticleHandler.aspx, 8/29/2015 11:59:42 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

John Maxfield

John is The Motley Fool's senior banking specialist. If you're interested in banking and/or finance, you should follow him on Twitter.

Today's Market

updated 1 day ago Sponsored by:
DOW 16,643.01 -11.76 -0.07%
S&P 500 1,988.87 1.21 0.06%
NASD 4,828.33 15.62 0.32%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

8/28/2015 4:02 PM
BAC $16.36 Down -0.08 -0.49%
Bank of America CAPS Rating: ****
WFC $53.54 Down -0.49 -0.91%
Wells Fargo CAPS Rating: *****