Recreational and medical marijuana sales in the United States are on track to hit $12 billion by the end of 2019. Despite being one of the most profitable industries in the country, almost none of that money is being deposited in banks.
Because marijuana is still illegal at the federal level, most federally governed banks and credit unions are unwilling to work with cannabis businesses. They fear potentially facing steep financial penalties, even in states where marijuana is legal.
There are only approximately 300 financial institutions in the country that serve this industry. Most of them are small, state-chartered banks or credits unions that require cannabis businesses to pay thousands of dollars in monthly fees just to have an account. Because of this, many marijuana businesses are operating as cash-only enterprises.
The Dangers Of Cash-Only Businesses
Not only does running a cash-only business pose challenges with record keeping, tax collection and processing payments, but it creates significant public safety issues.
In states that grant licenses to distribute marijuana, these businesses are subject to standard public records disclosure laws. This means the exact location of the business is searchable on a government database, making them more susceptible to robbery and other violent crimes. Many successful all-cash operations are forced to purchase expensive safes or hire 24-hour security.
The American Bankers Association notes that “in Denver, [the roughly 500] cannabis businesses make up less than 1% of all local businesses, but have accounted for 10% of all reported business burglaries from 2012-2016.” Data from the Denver Police Department also shows that “burglaries and theft comprise almost 80% of Denver’s cannabis industry-related crime.”
SAFE Banking Act
A newly proposed bill looks to address this issue and is receiving bipartisan support in Congress. The Secure and Fair Enforcement (SAFE) Banking Act will offer protections that make it easier for cannabis businesses to work with banks. Among them is a provision ensuring that banks and credit unions will not face federal penalties or other consequences for providing these businesses with a safe location for financial transactions.
The bill convincingly cleared the House last month by a majority of 321-103 and now heads to the Senate. The American Bankers Association has also voiced their support for the SAFE Banking Act. Earlier this year, they formally asked the heads of U.S. financial regulatory agencies for clarification on how banks can work with cannabis businesses.
“The states aren’t waiting for us,” said Oregon Rep. Earl Blumenaur, following the vote. “This is an $11 billion industry and growing. And it’s growing because the people and the states are demanding it. We need to step up.”
Want to make your voice heard on this issue? Click here to e-mail your senators and tell them to vote in support of the SAFE Banking Act.