The Banking Dilemma for Cannabis Businesses

Cannabis is illegal under federal law, but the legalization of recreational cannabis in some states has created a banking dilemma for cannabis businesses.


Consumers can purchase legal marijuana in 36 U.S. states and the District of Columbia (DC), but federal prohibition means most banks will refuse to service them due to the FDIC and money laundering laws.


Since the recent widespread legalization of cannabis, its use – and sale – has exploded. With more and more people using cannabis for medical and recreational purposes, it’s important to understand why cannabis businesses relying on cash transactions is terrible for everyone.


A history of cannabis banking

Before legalization, banks were hesitant to do business with cannabis companies because it was considered too risky and difficult to track cannabis money moving in and out of the industry.


This makes it difficult for regulators and law enforcement to detect illegal activity. Additionally, banks are reluctant to provide services to the cannabis industry because of its criminal associations.


But now a legal product in many states, the dangers of relying on cash transactions for sales still exist.


Cash is easy to steal: Cannabis businesses that operate on a cash basis are at high risk for theft.


Cash is difficult to track: It can be difficult to track cash transactions, which makes it difficult to enforce tax laws and regulations.


Cash creates opportunities for crime: Crime syndicates can take advantage of cannabis businesses that operate on a cash basis.


Cash can lead to black market sales: If cannabis businesses are not able to bank their profits, they may be forced to sell their product on the black market.


Large cannabis companies can afford higher security, armed guards and unmarked armored vehicles to manage cash transportation, but smaller operators have to rely on themselves.


Cannabis banking solutions

After the legalization of cannabis, banks and credit unions began to consider offering specific services to cannabis businesses. Despite a new resolve for cannabis banking solutions, there are still many challenges that banks and credit unions face when working with cannabis companies.


Dig deeper: Cannabis Safety and Compliance Mistakes You Could be Making


The SAFE Banking Act could offer banks and credit unions better protection from penalties due to providing banking services to licensed cannabis companies. This bill has passed the House a total of six times in recent years but consistently fails in the Senate.


This bill would legalize the banking and financial institutions of the cannabis industry, creating opportunities for growth and innovation in this burgeoning sector. The act would also create a regulatory framework for the safe and responsible production, distribution, and consumption of cannabis products. Finally, it would provide financial assistance to entrepreneurs who are looking to enter or expand their businesses in the cannabis space.


A shortened path ahead

The history (and future) of cannabis banking is fraught with challenges, but legal marijuana banking reform would give the legal cannabis industry better access to customary banking benefits, including making business deposit accounts and taking out credit cards or loans.


The SAFE banking act is significant for cannabis companies. These new laws could protect banks and businesses from financial risks associated with the legal marijuana industry.


House and Senate members are still working out a compromise on the SAFE Act that both chambers can agree on, but the passage of this bill would create a new financial arm dedicated to serving the cannabis industry and ensure that banks are equipped to handle the unique needs of the industry.


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