As of the last election, 19 states total have legalized recreational marijuana. Even more have implemented robust medical programs complete with full-service dispensaries. But why is it that even in the states where cannabis can be legally purchased, the vast majority of dispensaries operate as cash-only businesses? If weed really is legal in the state, shouldn’t you be able to just swipe your card at the register?
Unfortunately, the cannabis industry has a serious banking problem. It’s not only affecting consumers but also current business owners, employees, and would-be entrepreneurs.
Cannabis’ Banking Problem
Despite the newfangled widespread legal cannabis markets popping up across the country, most banking institutions don’t want anything to do with the industry.
For those of us living in places like Washington State or Colorado, it can start to feel like prohibition ended, and cannabis isn’t all that different from any other regulated product. However, there are still large swaths of the country where the plant is illegal, and most importantly, it’s still considered a controlled substance by the federal government.
Because of this, the majority of banks and credit unions don’t want to extend their services to the legal cannabis industry for fear of federal repercussions. Most of the few banks that will work with the industry at all charge hefty fees and high interest rates to make their risk worth it.
Without access to basic services like business checking accounts, dispensaries are forced to operate as cash only. Not only does it inconvenience the customers, but it also puts employees in danger. Dispensaries have targets on their back with all that cash on hand, and it’s the budtenders and staff who are the first line of defense against armed robberies.
These banking restrictions also prevent people from entering the cannabis industry themselves. Since potential small business owners can’t get a conventional business loan to fund their venture, only those with access to huge amounts of startup capital can enter the industry.
The SAFE Banking Act
For years, leaders in the cannabis industry have petitioned lawmakers to do something about this colossal issue, and it may be close to being resolved.
The Secure and Fair Enforcement (SAFE) Act would protect banks from any potential federal repercussions they could face for working with the cannabis industry. However, legislators have had trouble getting the bill enacted into law.
The SAFE Banking Act was first introduced in 2019, where it passed the house with broad partisan support only to get frozen in the Senate Banking Committee.
The next year, House Democrats attempted to pass the bill as part of their covid relief package the Heroes Act. Unfortunately, SAFE banking didn’t make it into the final version of congress’ bill.
Earlier this year, the House reintroduced the SAFE Banking Act for a second time as a stand-alone bill. Again, the legislation got massive bipartisan support and quickly passed onto the senate. That was six months ago, and once again, it seems the bill has stalled in the Senate.
Cannabis Business Banking In California
The future of the SAFE Banking ACT is uncertain, but if you’re in California and want a bank account for your cannabis business, there are some options.
The State is working on its own piece of cannabis banking legislation, AB-1525, which seeks to protect banks that deal with cannabis clients. However, it’s unclear if the bill will pass or if state-level legislation will be enough to assuage banks’ fear of federal penalties.
In the meantime, the North Bay Credit Union is attempting to bridge this gap for the industry. The credit union has a long history of working with cannabis businesses and extends its services to the industry. However, North Bay’s been inundated with requests for services since making this announcement in 2019, and the credit union will not accept every applicant.
Hopefully, we’ll see some serious change at the federal level soon.