Across 30 states and the District of Columbia, marijuana consumption is legal in some form, but there are few banking institutions involved in processing these sales because of the perceived risk of violating federal anti-marijuana laws.
However, there are legal sales of marijuana-based products happening across the country and we believe banks are in a stronger position than most think to really seize this opportunity and help propel these businesses forward.
Point of sale terminals across the country sell cannabis-related products ranging from CBD oil to clothing made of hemp fibers, with most of these transactions handled in cash. Growers, buyers and sellers pay bills and employees in cash.
Walking around with stacks of money is a way of life for cannabis entrepreneurs because banks aren’t willing to let them open a checking account. Even though a number of states have legalized marijuana, banks are uncomfortable with the risks involved in processing marijuana-related transactions, and many don’t understand the laws well enough to enter the space. Why not?
It’s a Catch-22. State laws making it legal to buy and sell marijuana for medical and recreational purposes are in conflict with federal law. Take California for example.
This year, anyone 21 and older may legally buy and consume an ounce of marijuana in California, whether you’re a resident of the state or not. However, on the federal level, agents can still prosecute anyone purchasing marijuana in a recreational store. Owners, distributors and growers could be federally prosecuted, essentially being treated as drug dealers.
Banks handling cash from these transactions could be prosecuted under organized-crime laws. Plus, handling proceeds of a marijuana transaction is considered money laundering in some areas. There aren’t many banks stepping up to those risks yet.
The Arcview Group, a Cannabis investment and market research company, estimates that legal marijuana sales in the U.S., nearly $9 billion in 2017, will more than double to roughly $21 billion by 2021. Shouldn’t federal laws start catching up? We believe this issue must be addressed, sooner rather than later, at the federal level, by Congress, defining what is legal and establishing regulations.
If you dig deep you can find a few regional or state credit unions willing to take on the risk. A few other banks are also taking risks because it is not totally impossible to legally buy cannabis online depending on where you live. Most payment processors are not willing to stick their necks out and are waiting until there is more definition and regulation of the market. If and when lawmakers do act, there is no doubt that medical dispensaries will come online in the U.S. and many other countries. Once this legal channel opens there is a big opportunity for payment processors. Laws need to be put in place to control where the money goes, and credibility needs to be developed in the marketplace.
There are positive signs that things are already changing. Despite moves by the attorney general to reverse Obama-era policies that de-emphasized federal enforcement of marijuana laws, President Trump has spoken out in favor of protecting state laws. And former House Speaker John Boehner has joined the advisory board of a large marijuana dispensary, an encouraging sign that the industry will have an influential advocate on its side.
The timing is right for Congress to act sooner rather than later, defining what is legal and establishing regulations. Already people are looking at using alternative currency to handle this issue, but there are legal, highly regulated channels already in place. Why go in an unregulated direction?