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10th Circuit Tosses Marijuana Banking Suit

By William Vogeler, Esq. | Last updated on

They are growing more than marijuana in Colorado; they are growing pot law.

Adding to a growing body of marijuana decisions, the U.S.Tenth Circuit Court of Appeals said a Colorado credit union could not force the U.S. banking system to give it a master account to serve the state's marijuana industry. In The Fourth Corner Credit Union v. Federal Reserve Bank of Kansas City, the appeals court threw out the credit union's complaint without prejudice.

It is the second decision from the appeals court this month involving the marijuana industry, and one of many pot laws on the books in Colorado.

The Controlled Substance Problem

The Fourth Corner Credit Union applied for a master account from the Federal Reserve Bank of Kansas City. The Reserve Bank denied the application, effectively crippling the Credit Union's business of processing electronic transactions for the marijuana industry.

The Credit Union sued and sought an injunction requiring the Reserve Bank to issue it a master account. The judge dismissed the action, however, ruling that the Credit Union's marijuana-related businesses would violate the Controlled Substances Act (CSA), 21 U.S.C. §§ 801-904.

In the trial court, the credit union argued that its customers were complying with Colorado law. On appeal, they abandoned that argument.

"Conduct prohibited by federal law is illegal, regardless of what Colorado law may permit," the appeals court said in a divided opinion.

"We Will Comply, Your Honors"

Changing its tack, the credit union lawyers said the company would comply with the law and suggested it would not serve marijuana businesses. But the appeals court was not convinced, based on the pleadings.

In another case earlier in the month, the Tenth Circuit allowed a lawsuit to proceed against pot growers under the Racketeering Influenced Corrupt Organizations Act.

The plaintiffs there, neighboring landowners, sued the growers on various grounds, including nuisance due to "noxious ordors." They claimed the grow was a criminal enterprise.

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