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Appeals Court Decision Breathes New Life Into Cannabis Credit Union Plan

A decision last week by the 10th U.S. Circuit Court of Appeals may allow plans for the world’s first banking institution dedicated to legal cannabis to move forward, according to a Cannabist report.

The Fourth Corner Credit Union was first announced in 2014 as a solution to the cannabis industry’s status quo as an all-cash industry. The plan was well-received by cannabis operators and was even greenlit by Colorado officials, though the credit union’s application for a master account with the Federal Reserve was denied by the bank’s Kansas City branch in 2015. Though Fourth Corner appealed that decision, a district court ruling in January 2016 upheld the application’s denial and dismissed the case with prejudice, meaning the credit union itself could not push the issue further.

However, a three-judge panel for the 10th U.S. Circuit Court of Appeals vacated that decision last week, granting the hopeful credit union renewed hope and the ability to resubmit its application for a master account with the Federal Reserve.

Back in 2016, district court judges had dismissed Fourth Corner’s original application due to an assumption that the credit union would be violating federal drug laws by providing banking services to cannabis companies.

“This ruling was erroneous,” wrote U.S. Circuit Judge Robert E. Bacharach in one of three judge opinions on the issue released last week. “The district court should have presumed that Fourth Corner would follow the court’s determination that servicing marijuana-related businesses is illegal. And in the amended complaint, Fourth Corner essentially promised to obey the law that would be set out in the eventual declaratory judgment.”

However, if Fourth Corner resubmits its application — and CEO Deirdra O’Gorman has indicated the credit union intends to do just that — it may need to re-think its desired role in the cannabis industry.

With cannabis still considered an illegal substance under federal law, it is highly unlikely the Federal Reserve would permit the institution to so blatantly serve cannabis companies. If approved, the Fourth Corner Credit Union would instead be allowed to serve cannabis supporters and/or non-profit organizations, but not the “touch-the-plant” industry itself — at least not until serious reforms are made on the federal level.

Nonetheless, “I think that this ruling is an example of the normalization of [cannabis] — that this is about banking, not about the federal-state conflict about marijuana,”  Tom Downey, a Denver-based attorney, told the Cannabist.

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