Since cannabis first became legal – for either medicinal or recreational purposes – in various states across the country, there has been one thing that continues to make it feel like an illegal business, which is the cash-only nature of the industry. Unfortunately, with the ongoing conflict between federal and state laws regarding cannabis, there are many things that marijuana businesses must handle differently than any other business – from paying what they owe in taxes to simply not having access to traditional banking services, like checking accounts and credit lines.
There have been a number of attempts in the last six years to change this and give banks the security they need to know they will not see repercussions for working with cannabis businesses. However, until now all attempts have fallen flat – primarily due to lack of support as some lawmakers who are still against legalization believe it would be a first step toward federal decriminalization.
“The American Bankers Association does not take a position on the legalization of cannabis, but the conflict between state and federal law is challenging for banks in communities that are encouraging them to bank cannabis-related businesses because of the public safety concerns that arise when they don’t have access to the banking system,” Ian McKendry, spokesman for the ABA, told The Hill. “The SAFE Banking Act would provide some clarity for banks operating in the 33 states that have legalized some form of cannabis.”
The problem is that it’s not a matter of whether people support legalization or not, it’s an issue that moving hundreds of thousands of dollars in cash makes this industry extremely dangerous for those working in it. Aside from the fact that it creates a dangerous situation for those holding and transporting cannabis industry revenue, it also leaves these businesses with few ways to gain the capital needed to keep growing, forcing them to rely solely on investors and crowdfunding.
“Banks don’t like uncertainties, they like clear-cut, bright-line tests easily and correctly applied. I think we need to recognize the fact that, like it or not, this is now turning into an agriculture industry and we need to be treating it like that,” Joseph Lynyak, a partner at Dorsey & Whitney, told The Hill.
The main reason that banks choose not to work with cannabis industry businesses is to avoid any possible issues with the federal government. A few companies have tried to come up with ways to solve this problem – creating PayPal or Stripe type businesses specifically for the cannabis industry – but the truth is that safe access to banking is still necessary. With 143 co-sponsors, there is hope that the SAFE Banking Act will finally give banks the peace of mind needed to work with the legal cannabis industry.