Gaming Industry Seeks Guidance on Handling Money from Cannabis Industry

Gaming Industry Seeks Guidance on Handling Money from Cannabis Industry

As marijuana legalization initiatives sweep the country, the gaming industry wants to know how it should treat money associated with the legal cannabis industry. The issue is a growing concern for Las Vegas casinos given that Nevada is one of the latest states to greenlight recreational marijuana sales.

Under the Nevada law, anyone 21 and older with a valid ID can buy up to an ounce of marijuana. Given that the state is a tourist mecca, marijuana sales are expected to outpace every other state in the country. In fact, tourists are projected to account for almost two of every three recreational marijuana purchases in Nevada.

Not surprisingly, the casino industry wants to know how to handle the influx of funds connected to legalized marijuana. Given the existing tension between state and federal laws, there is a lot of gray area when it comes to compliance.

“The current legal situation of marijuana-related businesses that are licensed in an increasing number of states yet are still illegal under federal law continues to present complexities and challenges for many types of financial institutions, including casinos,” the American Gaming Association wrote in its letter to the Treasury Department.

Casinos are considered “financial institutions” under the Bank Secrecy Act (BSA) and subject to its anti-money laundering (AML) regulations. In 2014, the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) provided guidance regarding how financial institutions should report transactions involving funds known or suspect to be connected to cannabis businesses. Specifically, FinCEN advised that banks must conduct adequate customer due diligence and proper suspicious activity report (SAR) reporting.

However, it is unclear how the FinCEN guidance relates to the gaming industry. As the American Gaming Association highlighted in its letter, “the guidance appears designed primarily for banks and other financial institutions that have corporate entity customers. Casino patrons, on the other hand, are individuals.”

“Accordingly, we seek clarification of the industry’s obligation in preparing [suspicious activity reports] for individuals who own or are employed by such state-licensed marijuana-related business,” Geoff Freeman, president and CEO of the American Gaming Association, wrote. “Specifically, we need to know whether and how casinos should use the 2014 marijuana guidance for filing [suspicious activity reports] on patrons whose gaming funds appear or are known to be from marijuana-related businesses.”

Given that the letter was submitted in response to a broad request for comments regarding how it can streamline and otherwise improve federal regulations, it is unclear when any further guidance will be provided. Nonetheless, it is an issue worth watching. Atlantic City casinos would benefit from any additional guidance that FinCEN provides, especially if New Jersey moves forward with legalizing recreational marijuana.

This article is a part of a series pertaining to cannabis legalization in New Jersey and the United States at large. Prior articles in this series are below:

• Will New Conditions Be Added to the New Jersey Medicinal Marijuana Program?
• Plaintiffs Challenging Constitutionality of the Controlled Substances Act In Federal Court
• Cannabis Industry Banking Updates in New Jersey

If you have any questions or if you would like to discuss the matter further, please contact me, Dan McKillop, at 201-806-3364.