Financial institutions looking for direction in how they can service the marijuana industry got some guidance —indirectly — from the 10th Circuit Court of Appeals.
In Fourth Corner Credit Union v. Federal Reserve Bank of Kansas City, the Colorado-chartered credit union brought a claim against the bank for denying its application for a master account in July 2015. Fourth Corner was formed to provide banking services to licensed marijuana-related businesses, which, out of necessity, often operate solely in cash.
The Reserve Bank moved to dismiss the suit on three grounds: that it has discretion to deny applications for master accounts, that Fourth Corner’s activities would violate the Controlled Substances Act and the district court can’t use its equitable power to facilitate illegal activity, and that the Supremacy Clause preempts Fourth Corner’s state charter in a conflict with the CSA.
Fourth Corner amended its complaint in response to the illegality argument, saying it would not serve marijuana-related businesses until legal under federal law. The district court dismissed the credit union’s amended complaint with prejudice, saying it could not use its power to facilitate illegal activity.