Current Challenges for Legal Cannabis Banking
Imagine operating a completely legal enterprise but being unable to access fundamental banking services. This is the current reality for cannabis Banking businesses in the United States. Despite the industry’s substantial size and contribution to state revenues, these companies remain on the fringes of the financial system. But there’s a potential shift on the way that could change the game.
Legalization’s Financial Impact
In the U.S., the wave of marijuana legalization has swept across the majority of states, with medical use legalized in 38 states and recreational use in 23, alongside three territories and the District of Columbia. An additional eight states have decriminalized its use. The economic impact is significant, with a reported $15 billion in tax revenue collected between 2014 and 2022.
The Banking Paradox
Cannabis businesses, spanning from retail to manufacturing, find themselves in an unusual position: they are barred from operating like a typical business. Major platforms like Meta limit advertising for cannabis-related products, and federal laws restrict marketing across state lines. Local zoning laws, insurance, and payroll service hesitancies further complicate their operations. Moreover, the industry cannot utilize common business deductions, trademark protections, or federal bankruptcy rules.
The Banking Dilemma
Limited to roughly 200 smaller financial institutions, cannabis companies miss out on the services larger banks provide. The federal status of cannabis as an illegal substance instills a sense of caution in large corporations, including banks, insurance companies, and payroll providers, leading to this financial segregation.
The Silver Lining: Potential Financial Inclusion
Despite the obstacles, there’s promising news for cannabis businesses. The Senate committee on banking, housing, and urban affairs has progressed the Secure and Fair Enforcement (SAFE) Banking Act. This legislation, already passed in the House, would permit banks with federal charters to service the cannabis industry, marking a substantial development.
Advocating for Safer Banking
Advocates for the SAFE Banking Act argue that it will enhance safety for communities and businesses by allowing legal cannabis businesses access to traditional banking facilities, including small business loans. It would also safeguard financial institutions from regulatory action based solely on the perceived reputational risks of serving the cannabis industry.