Opening Banking Services to the Pot Industry

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Jan. 24 (Bloomberg) -- Bloomberg View Columnist Barry Ritholtz discusses banking and financial services for legalized marijuana on Bloomberg Television's "Street Smart." (Source: Bloomberg)

A major step for the medical marijuana industry today.

Attorney general eric holder said treasury and law enforcement agencies will issue regulations opening banking services to state sanctioned marijuana businesses.

This is a big deal.

Previously, retailers had to operate on a cash only basis.

I spent a lot of time reporting in washington and colorado talking to a lot of the people that own these dispensaries.

Their biggest frustration was they had no way to transact.

All caps, no credit cards.

You paid with cash.

They had to deal with the cash.

They had to pay their employees in cash.

It is not easy to keep track of.

There is theft and shrinkage.

Who wants to walk to the bank hearing $20,000? there is the stigma it is like scarface.

Assuming you can even open a bank account.

This is an interesting tidbit.

That money cannot smell, literally it cannot stink.

One man was using febreeze to get the smell off of the money.

If it does, it is over.

You will lose your account.

We talked about this issue.

Let me play an excerpt from that interview.

There are a lot of people operating on a 100% cash basis.

Unaware people who have been through over 20 banks in four years.

-- i am aware of people who have been through over 20 banks in four years.

How many have you been through?

Two.

For four years, we had no problem with our bank.

In may of this year, they sent us a letter saying because of recent federal pronouncements, we're giving you 30 days and shutting down your account.

Is it wrong i expected that to be in a smoke filled room?

Do you think i would do that?

After the cameras.

I think that is still the stigma associated with legal marijuana, that even juvenile idiots like me are still waiting for that smoke-filled room.

It is changing because it has become so prevalent in colorado.

It is increasingly normal.

How can you have a business when you cannot even open a bank account?

That has been holding the industry back.

You mentioned banking.

What is in this for the u.s. banking system?

A lot of money.

It takes something that was a multibillion-dollar segment of the cash and commodity business out of the but market -- out of the black market into the sunlight.

You know what that means?

Taxes.

Look at how many people are in prison today and the expense of maintaining people for nonviolent marijuana-related crime.

That is where attorney general eric holder was going in his speech yesterday.

Maybe the effort needs to be geared more toward violent offenders as opposed to this.

Instead of being a cost, it is revenue positive because it is being taxed.

I can say this will make a big difference to a lot of these entrepreneurs trying to get their business off the ground.

There is an estimated 500 dispensaries in colorado.

Taxes on recreational marijuana are significant, in the range of 25%. the state stands to gain from this.

If you are in an all cash business, i am not saying they are not willing to pay the tax, but one can imagine a situation in which maybe not all of that money is reported.

Today the governor of colorado put out a statement.

He's obviously in favor of this.

It brings this out of the darkness into the light.

These folks, as the gentleman you just interviewed, they will find some place to park their money.

There are so many more issues.

There are safety issues with that much money on your property.

You move to checks, legitimate accounting and bank accounts.

This text has been automatically generated. It may not be 100% accurate.

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