DENVER - Medical marijuana is legal in 17 states, but the industry has a decidedly black-market aspect -- it's mostly cash-only.
Banks won't touch pot money. The drug is illegal under federal law, and processing transactions or investments with pot money puts federally insured banks at risk of drug-racketeering charges.
In Colorado, state lawmakers are attempting an end-run around the federal ban with a bill that would create the nation's first state cooperative financial institution for dispensaries and growers to allow them to store and borrow money.
The proposal, if enacted, would be a direct challenge to the U.S. Justice Department, which warns that all financial transactions involving pot money are illegal.
But for Colorado's 600 or so medical marijuana dispensaries, and hundreds more growers and associated industry workers, the problem of not being able to bank marijuana money is big enough to make the challenge worthwhile.
"I've been kicked out of three banks," said Matthew Huron, owner of two dispensaries and an edible marijuana company in Denver. One of his shops, Good Chemistry, greets patients with a sign on the register, "Cash only."
Huron pays his bills with money orders. Huron's current bank, which he won't name, doesn't know the true source of his company's deposits. But without a checking account, Huron said he wouldn't be able to pay the required payroll tax for his 15 employees.
Small business loans are also out of the question, Huron said. In order to build a warehouse to grow the marijuana he sells -- a requirement under Colorado law -- Huron had to grow pot during construction and sell the pot to make cash payments to finish the warehouse.
"It's very cumbersome, the banking aspect," Huron said.
Cumbersome and dangerous. Dispensary robberies are rare, but the Denver-based Medical Marijuana Industry Group, which supports the legislation, reports that its members complain of being followed home with some saying they have been victims of robberies they haven't reported..
Marijuana businesses have large amounts of cash on their premises, a fact as widely known as the price of the product they sell.
"It freaks everybody out," said James Laws, general manager at the Good Chemistry pot shop in Denver. "It's off-putting when people come in and we have to say, 'Sorry, our ATM's down so you need to go down the street and get cash or we can't help you.'"
The bill up for debate in the state Senate Finance Committee Tuesday would set up a financial institution somewhat like a credit union.
Only licensed members of Colorado's medical marijuana industry, or their patients, could join. Initially, the Medical Marijuana Financial Cooperative would simply function as a vault of sorts for pot money. Members could deposit money and take money out.
Eventually, the cooperative could decide whether to issue loans or provide other banking services.
Several Democrats in Congress, including Colorado Rep. Jared Polis, have proposed federal legislation opening financial services for medical marijuana businesses in states where they're legal. However, prospects are remote.
"The truth is, this is just not something that's going to be addressed in this Congress," said Steve Fox, director of public affairs for the Washington-based National Cannabis Association.
Without federal action, Colorado's proposal may be a big waste of time. The same reason banks won't touch pot money -- the risk of federal drug-laundering charges -- would confront a state cooperative, as well.
"This bill attempts to address this big problem for the industry, the lack of financial services. But what it cannot do is get around the federal money-laundering piece of this," said Sam Kamin, a law professor at the University of Denver who follows marijuana regulations.
Threat of federal intervention appears to be growing. American Express announced last May it would no longer handle medical marijuana-related transactions because of fear of federal prosecution.
A month later, U.S. Deputy Attorney General James Cole gave banks an explicit directive about pot.
Cole's memo spooked the few small banks still doing business with marijuana growers and sellers.
"You'd have one bank at a time saying, 'We're going to pull out of this.' Then everybody would go to the next bank, and the next bank, until all the banks pretty much shut down," Fox said.
The sponsors of Colorado's bill concede that a state cooperative is unlikely to solve the problem.
But in a state with the nation's most regulated pot industry, where the government oversees nearly every aspect of how the drug is grown and sold, they say a banking proposal is the logical next step. Medical marijuana in Colorado produces about $20 million a year in state and local taxes, and employs from 5,000 to 10,000 people, according to the industry group.
"It's really hard to try to figure out how to create a workable local solution here," said Democratic Sen. Pat Steadman of Denver, one of the sponsors of Colorado's bill. "We have zero confidence that Congress is going to do something. But no matter how creative you try to get, there's only so much you can do at the state level."
So why bother? Steadman has several dispensaries in his district and says he worries about their safety if something isn't done to help them bank.
"They've got bags of pot, bags of cash. It's a bad combination," Steadman said.