Aspiring legal marijuana producers and vendors in Colorado and Washington state have a lot riding on a closed-door meeting today held by an obscure Treasury Department group, which faces some interesting constitutional issues about a "growing" industry.
The meeting in Washington, D.C., involves the Bank Secrecy Act Advisory Group, an advisory panel first set up by then Treasury Secretary Lloyd Bentsen in 1994. The panel, known as BSAAG, evaluates issues related to money laundering.
In August, Attorney General Eric Holder announced that the Justice Department wouldn't criminally prosecute recreational marijuana users and state-approved growers and vendors in Colorado and Washington, after the two states passed legalization referendums in 2012.
However, marijuana is still illegal under the federal Controlled Substances Act. Holder, in his memo, established new guidelines for federal prosecutors in all states to follow for federal marijuana cases.
His decision averted one constitutional issue for now, about states that pass laws that seemingly contradict federal laws. But another one remains unresolved.
BSAAG is involved because approved marijuana cultivators, producers and vendors in Colorado and Washington can't set up legal bank accounts, because banks believe they could be implicated as money launders, since marijuana sales are still illegal nationally. And pot vendors can't process retail credit and debit card transactions, for the same reason.
Legalized pot sales are set to become a reality next month in two states. Since the legally approved growers and vendors are forced to do business on a cash-only basis, some politicians believe criminal elements will enter the states' marijuana business.
"Forcing legitimate businesses to operate on a cash-only basis without bank accounts is an invitation for robbery, tax evasion and organized crime. With 21 states and D.C. now allowing for some form of legal adult marijuana usage, federal law needs to be updated to reflect the reality of the situation in the states," said two Representatives, Denny Heck and Earl Perlmutter, in July, when they introduced banking legislation to protect legal marijuana growers from federal charges.
The Seattle Times says the Thursday meeting is behind closed doors and not subject to the Freedom of Information Act, so some frank talk is expected.
In November, a top federal fraud enforcement official said in a public speech that the state-federal law conflict about marijuana would be discussed at Thursday's meeting.
"We understand that [the banking] industry is calling for additional clarity on how DOJ's policy pertains to the federal regulatory oversight of depository institutions providing banking services to duly operating, state regulated marijuana dispensaries," said Jennifer Shasky Calvery, the director of the federal Financial Crimes Enforcement Network (or FinCEN).
"The issue is a complicated one given that federal law still applies in those states. We have already initiated discussions with our DOJ colleagues," she said.
What happens after Thursday's meeting is a guessing game at this point.
The Seattle Times says the banking industry wants Congress to amend the Controlled Substances Act to make it clear that banks can't be punished for doing business with marijuana producers who are operating under state laws.
But Congress is unlikely to act in the short term, and with the majority of states not allowing legalized marijuana for medicinal or recreational use, it could be some time before the Controlled Substances Act comes up for debate.
Marijuana supporters have pointed out that the President also has the power under the Controlled Substance Act to change the law, and remove pot from the Schedule 1 list of drugs, without consulting Congress.
Under the Federal Code, under Section 811 of Title 21, the U.S. attorney general, after a lengthy petition and consultation process with the Secretary of Health and Human Services, can move a drug to a less-restrictive schedule. It would need to approve a review petition first. But efforts to get the Obama administration to consider a petition have gained little traction in five years.
That puts the ball back in the Treasury Department's court with BSAAG, which could issue favorable guidelines to banks, or possibly work with the Justice Department to issue guidelines in the way Holder approached the problem in August.
FinCEN's Shasky Calvery told Reuters in November that she might ask the Justice Department to clarify how its policies about marijuana and banking would work in the context of Holder's memo about prosecution.
Deputy Attorney General Jim Cole told a Senate committee in September that the Justice Department was working on the issue of banks and marijuana producers.
"Obviously there is a public safety concern when businesses have a lot of cash sitting around," Deputy Attorney General Jim Cole told a Senate subcommittee. "There is a tendency that there are guns associated with that, so it's important to deal with that issue."
But for now, without public assurances from the federal government, industry observers believe bank will remain in a wait-and-see mode.
Scott Bomboy is the editor-in-chief of the National Constitution Center.