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The Florida Bar

Florida Legalization of Marijuana and the Uncertainty of Financial Service Industry

It’s clear that Florida is throwing a hat into the multibillion-dollar marijuana industry by rapidly gearing up for the almost certain legalization of medical marijuana.

With federal laws still on the books, the question is:

Where are legal marijuana businesses going to bank?

Florida’s Direction Not Just Medical

According to local criminal defense lawyers, few jurisdictions in South Florida have all but decriminalized possession of user amounts of cannabis, that being 20 grams or less.

Palm Beach and Miami-Dade County have given officers discretion to issue a ticket rather than make an arrest and charge those found to have been in possession of the substance.

One of the first and continuing issues that have plagued a state enacting laws to legalize marijuana has been that the federal government has not been any way decriminalized the sale of marijuana for either recreational or medical use.

Some fears been alleviated by claims that the feds are exercising discretion not to prosecute under United States law that would preempt any state law, however, this is still posing some interesting challenges when it comes to banking.

On both the recreational and medical arena when it comes to the cultivation and sale of cannabis, banking institutions are flat-out refusing services to those engaged in the business of marijuana.

Regardless of What Any State Law Says, the Federal Government Still Considers Marijuana to Be an Illegal Narcotic

Now forget the fear that the fact used to instill on people seeking to profit from state legalization, that’s all but gone. No longer an issue for entrepreneurs but not the banks.

Most of the financial institutions in the United States refused to accept proceeds from marijuana sales or cultivation for banking purposes.

There refusing to take money even when the state law has not only legalized the activity which is now prospering business but also where the would be banker is in compliance with all rules and regulations as outlined by the applicable state.

This means no basic checking, credit card services or even depositing of funds for state legal growers and/or dispensers.

Taylor West who happens to be the deputy director of the national cannabis industry Association states that the biggest problem faced by legalized marijuana entrepreneurs is that there is no bank to put the proceeds of their otherwise legal business into.

This creates a host of problems for the business owners when it comes to paying employees into the government when it comes to taxation and income auditing.

This Is a Difficult One to Get around as Long as Federal Criminal Statutes Remain in Place

And absent a challenge to those laws by Congress, it is unlikely that the federal rules, which preempt any state law are going to be lessened or eliminated.

Keep in mind that it was Congress the past the controlled substances act in 1970 which made it expressly illegal to manufacture, distribute or possess marijuana.

As far as the banking industry is concerned, it is the fact that financial institutions that depend on the Federal Reserve systems money transfer system to accept any proceed from marijuana sales.

Banks aren’t the only financial service provider to be cautious. Certified Public Accountants are as well.

In a brief prepared by the AICPA a recommendation was made that all CPAs and CPA firms interested in providing services to marijuana businesses review the full guidance offered by the U.S. Department of Justice.

The dichotomy between federal and state laws and regulations will continue to be a growing problem as more states adopt policies supporting the medicinal and recreational use of marijuana.

While the state and federal landscape appears to be moving toward more lenient penalties for the activities of marijuana-related businesses and their consumers, marijuana itself remains a Schedule 1 drug according to the federal government, and most state boards have not issued official positions on the issue. As such, CPAs and CPA firms need to consider several factors before deciding to provide services to marijuana-related businesses.

CPAs should first determine how their state board of accountancy defines and applies the “good moral character” requirement.

Additionally, it is theoretically possible that a CPA who has provided services to a marijuana business in a state where such business is legal could face licensing difficulties if he or she seeks a reciprocal license in a state where marijuana is illegal.

CPAs who are contemplating providing services to marijuana-related businesses should consider whether a state board would consider it to be an act discreditable under that state’s accountancy statute when a CPA provides services to businesses that violate federal drug laws, even in a state that allows those businesses to operate legally.

The U.S. Securities and Exchange Commission (SEC) is also closely examining investments in marijuana-related businesses.


Section 280E of the Internal Revenue Code states that taxpayers cannot deduct expenses related to income they obtain through an illegal enterprise. Thus, on federal returns, a marijuana client must report all income, but they cannot deduct expenses related to the cultivation, marketing, or distribution of his or her product.

What Is Being Done?

Sentencing reform is gaining momentum, and the U.S. is shifting towards treating drug use as a health issue instead of a criminal justice issue.

Some legislators in Congress are attempting to make changes. In Congress, Rep. Jared Polis’s (D-Colo.) H.R. 1013, introduced Feb. 20, proposes removing marijuana from the Controlled Substance Act (CSA) schedules. The legislation would also require federal permits for importing, manufacturing and selling cannabis for interstate or foreign commerce. Jurisdiction over marijuana enforcement would transfer from the Drug Enforcement Administration to the Bureau of Alcohol, Tobacco, Firearms and Explosives.

Effective measures aimed at a final and complete removal posed by the looming Federal criminal marijuana statutes.

Finally we are seeing some progress in effectively removing the ever present threat of United States criminal laws that have plagued the legalization of marijuana by our individual states. The crippling of financial service providers as a whole now seem to directly conflict with issues of direct interest to United States, specifically, taxation. While the ultimate outcome remains to be seen, never before has legalized marijuana had such great momentum on both the state and federal level.

Questions or comments about this podcast should be directed to criminal defense attorney William R Moore in Broward County Florida.

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