With New York state expected to pass legislation that would legalize or decriminalize recreational marijuana, financial institutions still have plenty of obstacles to clear when it comes to serving the industry.

Gov. Andrew Cuomo might include language in his state budget proposal in early January that would address the marijuana issue.

If, as expected, the Legislature and Cuomo agree on the legislation, there will still be a long road before the state is able to implement a fully functioning program.

The move is likely to usher in a wave of new businesses that are looking to serve the industry, but because cannabis federally remains a Schedule 1 drug—the most tightly controlled group of drugs—those businesses are expected to struggle to find banking services. And while some pot businesses in other states have found financial partners, the industry still operates on a largely cash basis, creating security, legal and regulatory challenges for all organizations involved.

As previously reported in The Point, in a move spearheaded by the New York Credit Union Association, the state Department of Financial Services earlier this year released guidance for state-chartered credit unions seeking to serve the marijuana and hemp industries. However, due to a federal ban on the drug—and Bank Secrecy Act and Anti-Money Laundering considerations—the Association still believes a legislative solution is needed at the federal level.

According to a recent article in American Banker, despite a divided House and Senate, there is an avenue for Congress to address the issue. One measure would focus on financial institutions with members and customers in the legal marijuana business. “While success is certainly not guaranteed, a narrow safe harbor for financial institutions in states where cannabis is now permitted is beginning to draw wide support from industry officials as well as from lawmakers on both sides,” the American Banker article explained.

The article also pointed out that prominent policymakers are considering the issue:

Interest in the topic is beginning to tick up as more states legalize marijuana in some form. Rep. Maxine Waters, D-Calif., who is expected to take over as chairman of the Financial Services Committee next year, told The Wall Street Journal last week that political discussions on this issue are “inevitable.” Federal Reserve Chair Jerome Powell and Comptroller of the Currency Joseph Otting have also raised concerns about the problems facing financial institutions in recent months. The resignation of Attorney General Jeff Sessions — who previously revoked Obama-era guidance that offered some protections to businesses operating legally in the marijuana industry — may also bode well for continued discussions.

The Association and CUNA have conveyed their support for legislation that would authorize financial institutions to provide banking services to marijuana-related businesses in states where marijuana has been legalized. Without taking a position on the underlying issue of whether marijuana should be legalized or not, the Association has long emphasized the importance of creating a pathway for credit unions to provide financial services to New York’s medical marijuana-related businesses, which are operating legally under state law.

While legalization remains highly controversial in Congress, legislation relating to banking the marijuana industry seems potentially within reach by 2019. The Association will continue to advocate for passage of common-sense legislation to allow New York’s credit unions to serve the state’s budding marijuana industry, which looks poised to grow into a multi-billion dollar industry in the years ahead.

Henry Meier, Association general counsel, recently attended a panel discussion that focused on marijuana banking and discussed the potential effects that the legalization of recreational marijuana would have on credit unions.

“There’s no question that one of the issues the Legislature will look at this session, is ‘should New York have a more liberalized approach to marijuana?’” said Meier. “The more liberalized you make it, the more it’s going to implicate banking practices, even if you choose not to engage in marijuana banking directly. For example, some credit unions may find themselves dealing with a business that rents space to a marijuana business. Will that impact your BSA? What about employees that use marijuana recreationally? These are all serious issues the industry will have to consider.”