Just weeks after Californians voted to legalize recreational use of marijuana, State Treasurer John Chiang on Friday appointed a working group to figure out how to address problems caused by the unwillingness of federally regulated banks to handle money from pot businesses.
Chiang also sent a letter to President-elect Donald Trump and members of California’s congressional delegation seeking guidance in finding a solution.
Marijuana remains an illegal drug under federal law, and banks regulated by the U.S. government have refused to provide financial services to cannabis-related firms.
“This conflict between federal and state rules creates a number of problems for the states that have legalized cannabis use, including difficulties collecting tax revenue, increased risk of serious crime, and the inability of a newly legal industry under state law to effectively engage in banking and commerce,” Chiang wrote to Trump and those he asked to serve on the working group.
The working group is made up of representatives from law enforcement, the marijuana industry, banks, taxing authorities and local government agencies, said Chiang, who is a candidate for governor.
On Nov. 8, California voters approved Proposition 64, which allowed the state to join Colorado, Oregon, Washington, Massachusetts, Nevada, Alaska, Maine, and the District of Columbia in legalizing recreational use of cannabis.
Chiang noted that marijuana sales are expected to reach $7 billion annually in California and pot firms will have to pay about $1 billion in taxes to state and local governments.
“The standoff between states and the federal government means a lot of businesses will be hauling around a lot of cash with no place to deposit their money and putting themselves at the risk of robbery,” Chiang told reporters in a conference call.
Chiang downplayed the likelihood of creating a state bank, saying it would be a complex process that would involve thorny issues including collateralization.