Imagine you run a perfectly legitimate business, but you can't open a simple checking account with a national bank. Believe it or not, anyone currently licensed to sell cannabis in the United States does. This is pretty shocking considering the size of the cannabis industry. But that may be about to change.
In the United States, 38 states have legalized marijuana for medical purposes, and 23 states, including three territories and the District of Columbia, have legalized marijuana for recreational purposes. Eight additional states have decriminalized its use. Red and blue states with legal marijuana laws collected $15 billion in tax revenue from 2014 to 2022, with $3.77 billion in 2022 alone.
On the other hand, if you run a cannabis business (a business that sells, distributes, manufactures, or in some cases services the industry), you are not allowed to be a regular business.
Meta, Facebook's parent company, only allows “limited” CBD and hemp advertising. Cannabis companies cannot run TV or radio commercials for their products. Campaigning outside the state is not allowed because interstate commerce is prohibited. In Ohio, as in other states, you cannot conduct a billboard campaign without prior approval from the State Board of Pharmacy. Many areas have zoning laws that prohibit business operations. Many insurance companies, like many of the nation's largest payroll service providers, are reluctant to serve the industry.
Cannabis businesses are not allowed to deduct rent, payroll, or other expenses that other businesses can deduct. They regularly face expanded business license requirements. They cannot take advantage of federal bankruptcy rules. They cannot trademark their products.
Then there's banking. Cannabis businesses only have about 200 independent and community banks to choose from. I'm not going to cast any shade on these organizations because many of them are good. However, they often do not offer online banking, international access, wire transfers, investment options, financial stability, or other features of larger institutions. When it comes to the cannabis industry, federally chartered banks like Wells Fargo, PNC Bank, JPMorgan Chase, TD Bank, and KeyBank are not active. This leaves many cannabis businesses with reduced access to financial services, forced to hold uncomfortable levels of cash, and exposed to theft and crime. The banking industry knows this, but is resisting it.
Why is this? Because cannabis is still considered an illegal controlled substance, subject to very strict federal laws, and illegal at the federal level, many large companies such as banks, insurance companies, and payroll services Companies remain cautious.
Despite all this growth, it's no surprise that much of the cannabis industry is struggling to turn a profit. But good news may be on the way. Finally, the federal government could allow federally chartered banks to do business with banks in the cannabis industry.
Late last month, the Senate Committee on Banking, Housing, and Urban Affairs advanced the Secure and Fair Enforcement Regulation (Safer) Banking Act, which would allow banks to do business with cannabis companies. The Senate committee's approval is important because the House has already passed a similar bill.
“This bill will help make our communities and small businesses safer by giving legal cannabis businesses access to traditional financial institutions such as bank accounts and small business loans.” the proponents said in a joint statement. “It would also prevent federal banking regulators from ordering banks and credit unions to close accounts based on reputational risk.”
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Still, major hurdles exist. There are still many members of both houses of Congress who oppose the bill.
“This bill also undermines the integrity of the U.S. banking system by giving the government permission for banks to participate in illegal activities and sets a dangerous new precedent,” some Republican senators said. said in a recent joint statement. “Allowing banks to access Schedule I drugs would create a dangerous legal precedent and facilitate money laundering for drug cartels.” This opposition, coupled with a lack of leadership in the House, , which could impede progress on the bill for the foreseeable future.
But I'm more optimistic. The bill would appease some opponents because it stops short of legalizing marijuana. And given that the Safer Banking Act has strong bipartisan support in the House and Senate, I don't think it's too much to expect it to eventually pass. when? who knows.
In the meantime, industry players will have to wait. And fight. It also addresses the limitations that most other legitimate businesses have to face. Running any business is hard. But for players of this game, it's a whole new level.
