By Rachelle Lynn Gordon, NCIA Editorial

The fledgling legal cannabis industry has faced numerous challenges since California voters made the state the first to approve the plant for medical use in 1996. Since then, an additional 29 states and the District of Columbia have legalized cannabis for either medical and/or adult-use purposes yet it still remains a Schedule I controlled substance in the eyes of the federal government. This has caused immense headaches for cannabis business owners in a multitude of ways – especially when it comes to balancing the books. The majority of traditional banking institutions refuse to work with clients that touch the cannabis plant, leaving many businesses to operate as cash-only while at the same time missing out on the traditional financial and lending opportunities given to other businesses.

“Being forced to hire an armored truck just to pay taxes or provide payroll isn’t only a hassle – it’s also extremely dangerous,” says Harry Resin, who longs for the day when he can open a business checking account for his cannabis company, URB Delivery. “People’s livelihoods – and frankly their lives – are constantly at risk when you’re dealing with large amounts of currency.”

Lack of security isn’t the only detriment to cannabis business owners unable to find banks who will work with them. Business loans, savings accounts, 401Ks, and credit lines are all out of reach for those wishing to develop their operations and plan for the future.

“I would love to be able to expand my operations but because I don’t have the option to take out a small business loan, I either have to get loans from friends and families or potentially give up equity to private investors,” Resin adds. “It makes things difficult.”

While many believe that it is illegal for banks to do business with those in the marijuana space, it turns out the opposite is true.

“We actually have regulations on how to bank the cannabis industry, but most banks don’t want to go through the expense and hassle of opening new departments,” explains Jim Marty, CEO of Bridge West CPA. “They’re already making tons of money, so they don’t feel the need to enter a new space. It’s going to take Congressional action on legalization before the big players enter in.”

While it’s not clear how exactly cannabis reform will play out, Marty cautions that while moving cannabis to Schedule II status could be positive for advocates of legalization, it may also negatively affect the entrepreneurial activity the emerging cannabis industry has shown.

“Right now, we have a lot of start-ups and small businesses that are getting funding from angel investors or private equity funds. If cannabis becomes Schedule II, there’s a chance that Big Pharma, Big Tobacco, and Big Alcohol will come in and there will be two or three major producers. So something that could fix a lot of the problems may do more harm than good.”

Marty notes that the introduction of bills such as The SAFE (Secure and Fair Enforcement) Banking Act (S. 1152, H.R. 2215), which would offer protections for state-legal financial institutions working with marijuana businesses, are steps in the right direction for the cannabis industry but that it is going to take hard work and perseverance by all in the community before real change is made.

Help us grow even more support for the SAFE Banking Act in Congress. Contact your members of Congress and urge them to support federal protections for financial institutions that work with the regulated cannabis industry.

Learn more in this report by NCIA’s Legal and Banking Committee:
Investigating the Role of Financial Institutions in the Legal Cannabis Industry
NCIA’s Legal and Banking Committee, comprised of NCIA members within that sector, produced this white paper following a meeting with California State Treasurer John Chiang and other cannabis industry leaders in mid 2017. The paper provides discussion and evaluation of challenges faced by businesses operating within the legal cannabis industry, while highlighting some of the benefits the industry brings to financial institutions and the communities they serve. (February 2018)