A federal appeals court has breathed life into a plan hatched in Colorado to open a credit union for the marijuana industry.
A three-judge panel for the 10th U.S. Circuit Court of Appeals on Tuesday vacated a district court ruling that nixed Denver-based Fourth Corner Credit Union’s bid to receive a master account with the Federal Reserve Bank of Kansas City.
Fourth Corner Credit Union first formed in late 2014 with the goal of serving licensed marijuana-related businesses, which have had trouble accessing financial services from traditional banking institutions. Any credit union or bank needs a Federal Reserve master account to operate.
The judges remanded the case to the district court with instructions to dismiss the amended complaint without prejudice.
“The district court dismissed the amended complaint, reasoning that Fourth Corner would use the master account to violate federal drug laws. This ruling was erroneous,” U.S. Circuit Judge Robert E. Bacharach wrote in one of three opinions published Tuesday. “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.
“In these circumstances, the district court had little reason to jettison the standard on a motion to dismiss and rely instead on suspicions about what Fourth Corner would do.”
Officials for Fourth Corner and the legal counsel for the Federal Reserve could not be immediately reached late Wednesday for comment.
It’s unclear whether the Federal Reserve would want to appeal and whether the Supreme Court would take the case, said Tom Downey, a Denver-based attorney who specializes in cannabis regulations and law with Ireland Stapleton Pryor & Pascoe P.C.
Next steps aside, the 10th Circuit’s decision is telling about the progression of the marijuana industry, Downey said.
While “core issues” like states’ rights and federal drug scheduling dominate, he said the battles are being fought on the margins: zoning, civil RICO lawsuits, banking, employment law and intellectual property.
“I think that this ruling is an example of the normalization of this issue — that this is about banking, not about the federal-state conflict about marijuana,” Downey said.
Fourth Corner received a state credit union charter in November 2014, which allowed it to acquire a bank routing number and apply to the Federal Reserve Bank of Kansas City. The regional bank for the Federal Reserve System denied the application, prompting Fourth Corner’s lawsuit.
This story is developing and will be updated.
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