CHICAGO (AP) — The state of Illinois is having trouble finding a bank or financial services company to process the large amounts of cash it anticipates receiving for taxes and fees from the new medical marijuana industry.
The state treasurer’s office received no response to an official solicitation published last fall, so Illinois State Treasurer Michael Frerichs has started a formal process to find out why.
Potential bidders may not have known about the opportunity or may be concerned about legal questions, industry experts said. Such caution may stem from uncertainties specific to Illinois — including the marijuana pilot program’s 2017 expiration date and so-far low patient numbers, said Michael Mayes, CEO of Quantum 9, a Chicago-based marijuana industry consultant.
“It may not be a good investment,” Mayes said.
Marijuana is regulated and legal in about half the states, at least for medical purposes. The industry tends to operate with cash only. Banks are wary because the federal government considers marijuana an illegal drug.
The U.S. Treasury Department has issued guidance intended to clarify that financial institutions can offer services to businesses that sell marijuana, but industry advocates say most banks are still reluctant to do so for fear of prosecution.
The Illinois treasurer is asking the financial industry for feedback on a new draft of its request for proposals by June 29.
An armored car services requirement already has been deleted because it was “believed to be a deterrent to proposals,” according to documents posted on the treasurer’s website. The treasurer wants to know whether armored car services should be provided by a different vendor, instead of under the cash processing contract, the documents say.
“We’re dealing with an industry we are not familiar with. It’s new and it involves a lot of cash,” said Greg Rivara, a spokesman for the treasurer’s office. The request for information “allows us to get guidance from the banking industry on what possibilities are out there.” The process allows potential vendors to comment without eliminating them as bidders, Rivara said.
Several state agencies will be receiving cash payments from marijuana growers and dispensaries. The payments will include a 7 percent tax on commercial growers, ordinary payroll and income taxes, annual fees and filing fees.
Colorado, which has approved recreational and medical marijuana, uses Chase Bank for all tax revenue collections, according to a spokesman for the state’s Department of Revenue. The money is then sent to the state treasurer’s office.
Some experts believe banks eventually will step forward in Illinois.
“I admire what Illinois is trying to do. It sounds like they’ll revise (the solicitation) to meet the needs of the financial industry,” said Troy Dayton, CEO of ArcView Market Research, a California consulting company, that has predicted the Illinois cannabis market could eventually expand to $36 million when it gets off the ground in 2016.
Far fewer patients have signed up than projected; only 2,500 have been approved at last count. The pilot program was originally set to expire at the end of 2017, and dispensaries could begin selling marijuana later this year.
The Legislature has sent Gov. Bruce Rauner a bill to extend the program, but the governor hasn’t said whether he will sign it. The legislation would extend the program to four years after dispensary sales begin.
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