CHICAGO — As Illinois lawmakers move toward legalizing marijuana for recreational use, state Treasurer Michael Frerichs is pushing legislation to make it easier for banks to work with weed companies.
Medical marijuana businesses around the country have long faced banking issues. The drug remains illegal at the federal level, and banks hesitate to establish accounts or offer loans to companies for fear that regulators could see that as drug money.
Twin bills introduced in the Illinois Senate and House of Representatives would protect state-chartered banks that do business with cannabis companies.
"There are a lot of banks out there that want to be in this industry, they want to bank, but their board of directors have concerns," Frerichs said. "Each little thing we can do, like passing state legislation, helps allay some of those concerns."
Still, Frerichs acknowledged that some banks won't be comfortable working with marijuana companies until there's a federal law protecting financial institutions that work with them.
The state's medical cannabis program generated sales of $136.5 million last year. If the bill lawmakers are drafting to legalize recreational marijuana passes, the industry could generate sales of $224 million by 2022.
Without access to the banking system, marijuana companies might have to operate solely in cash, unable to write checks, make deposits and obtain loans.
Ascend Illinois, which operates dispensaries in Springfield and Collinsville and a cultivation facility in Barry, went six weeks without a bank last year.
During that time, the company was unable to pay vendors and in order to pay employees, the company spent two days driving cash and money orders around the state, said CEO Chris Stone. Ascend Illinois now works with a state-chartered bank, though Stone declined to name the financial institution.
"If you add recreational onto the deal, you're talking about expanding this industry substantially," he said. "You're still going to be taking in cash, and if you don't have a bank to deal with that, oh boy, I just could see all the horrors and challenges."
It's unclear how much of a difference a state law would make.
The federal law would need to change before Catlin Bank in Catlin, Ill., considered working with marijuana companies, said President Jeff Fauver. Though the bank is state chartered, it still must answer to the Federal Deposit Insurance Corporation, he said.
"It's against federal law, and until state and federal law coincides, I think this debate will continue," he said.
Last year, President Donald Trump's administration reversed an Obama-era policy that discouraged federal prosecution of companies operating in states that had legalized medical marijuana. Bank of Springfield -- the main bank serving Illinois medical marijuana companies at the time -- pulled out of the industry.
The Democratic sponsors of the Illinois bill, state Sen. Toi Hutchinson of Olympia Fields and state Rep. Jehan Gordon-Booth of Peoria, said just as states have led the way in legalizing marijuana, states must take the lead to encourage banking in the industry, until federal laws change.
"We need to make sure marijuana businesses have a way to make deposits so their money is safe," Gordon-Booth said.
The bill would prevent the Illinois Department of Financial and Professional Regulation from going after banks for doing business with the marijuana industry. To date, the state has not taken such action but the law would assure that it would not do so even if there was a change in circumstances or a new administration, the sponsors said.
The sponsors were unaware of any robberies or thefts of marijuana businesses, but said companies are targets for crime because they handle so much cash. The cash business also provides opportunities for cheating on taxes that routine banking would address, Hutchinson said.
Separately, Frerichs also seeks to create a program to deposit state funds into banks that could be used for loans for marijuana businesses. It would be similar to a program that has provided more than $1 billion in reduced-interest loans to Illinois farmers since 1983.
"This is not a question of if, but when," he said. "We have medical cannabis in Illinois. I think that recreational is most likely coming."