Vermont credit union puts pause on cannabis banking

Published: Aug. 25, 2022 at 5:32 PM EDT
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MONTPELIER, Vt. (WCAX) - Vermont’s retail cannabis market is moving closer to becoming fully operational later this fall. The industry is expected to pump millions into the local economy, but this week one of the key financial institutions making the marijuana market possible is hitting the brakes.

The Vermont State Employees Credit Union, or VSECU, has been in the cannabis market for years, banking on the medical side of the industry. It’s also one of the major players in the new retail space. But this week the credit union announced it’s no longer taking on new cannabis businesses due to what they call a “sudden spike in cannabis accounts.”

“Banking is kind of a critical aspect to our compliance,” said James Pepper, chair of the state’s Cannabis Control Board. He says banks and credit unions help provide a paper trail for the product and the cash, which is a crucial step in legalizing the illicit market. He says the VSECU news was not surprising. “I think their exact quote from last July was, ‘if we are talking about 50 to 75, that is doable. If we are talking about 200 to 300, that might be tough for one financial institution to take on that risk.’”

Cannabis is still illegal at the federal level. The state has currently issued about 160 grow licenses. State officials are working to determine how many of those are already banking through VSECU and how many other credit union applications will potentially be turned down. VSECU officials did not respond to a call for comments Thursday.

Pepper says there are other options for budding businesses, including the Vermont Federal Credit Union, which has now opened its cannabis banking. “The New England Federal Credit Union has capacity. There are also out-of-state options, and frankly, we are working with our partners over at {The Vermont Department of} Financial Regulation and with the financial institutions themselves to get them more comfortable with the idea of banking cannabis money,” Pepper said.

Meanwhile, retail license applications are now able to be submitted to the Control Board. The state can begin issuing those licenses on October 1. Once a retail license is issued, cannabis will be available for sale in the Green Mountain State.

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