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Without a legal banking option, marijuana businesses face safety risks and other challenges

The lack of legal banking options for companies selling legal marijuana products is creating safety and regulatory issues for the expanding industry.

Sales of recreational marijuana in Michigan have been booming. In the first six weeks after licensed dispensaries began selling the product in December, sales topped $10 million, generating around $1.7 million in tax revenue. But none of that money can legally be deposited in a bank. 

Cannabis is one of those industries that traditional business banks won't touch. Their profits may be legal in this state, but their federal status as an illegal drug makes handling the money very tricky. While some small community banks and credit unions have quietly been working with cannabis businesses, most of the major banks have declined to do so. 

The lack of legal banking options for recreational cannabis companies is creating safety and regulatory issues for the expanding industry. Congress is taking steps to address the problem. The U.S. House of Representatives passed the Secure And Fair Enforcement (SAFE) Banking Act last September. It aims to protect banking organizations who want to work with legitimate cannabis businesses in states where marijuana is legal. The bill is currently being considered in the U.S. Senate. 

Lisa Conine is the Community Outreach Coordinator for Om of Medicine, a recreational dispensary in Ann Arbor. She said the SAFE Banking Act would solve an easy obstacle in the cannabis industry, and would give legislators time to look into other issues like “descheduling, more research for cannabis, social equity, things like that.”

Without access to banks, many dispensaries operate entirely in cash. Brian Calley, former Lieutenant Governor of Michigan and president of the Small Business Association of Michigan, said this creates a serious security risk for those businesses. 

“If you look at the way that cash money moves across the landscapes, particularly large amounts of it, you’ll see that it moves in armored vehicles,” Calley said. 

That puts employees at risk, he said, and makes it harder to attract talent. It could also limit the opportunity for businesses to expand. 

Patricia Herndon is Executive Vice President of Government Affairs for the Michigan Bankers Association (MBA). She said that banks have to obey federal law, and providing banking services to cannabis businesses can create compliance issues with regulations on money laundering. Herndon said banks are looking to the federal government to help come up with a solution so that they can serve legitimate marijuana businesses.

“We believe that it makes the economy and commerce system much more robust and transparent,” said Herndon.

The Chair of the Senate Banking Committee, Republican Senator Mike Crapo of Idaho, has voiced reservations about the SAFE Banking Act. Calley said the holdup seems to come from the tendency to debate the ins-and-outs of marijuana legalization itself, rather than just addressing banking regulations. 

“Regardless of what you think of this industry, if you like it or you hate it or whatever, it would be better for the purposes of taxation, and transparency, and accountability, and in controlling crime, and security of employees—all of these things point toward legalization of the banking around the industry, at least in the states where the voters have decided to legalize it. ” Calley said.

Lisa Conine said that it's common within the cannabis business community to debate what kinds of legislation should be prioritized. In her eyes, pushing for bank reform will help progress other priorities like social equity. If the SAFE Banking Act were passed, Conine explained, the individuals most impacted by the government's war on drugs could more easily enter into the cannabis industry.

“If they don’t have access to normal business loans, then there’s no chance of opening a business. And when you can’t bank normally, then you don’t have that access to capital, you need something like a capital investor or someone to bring in money to start your business. And not a lot of people have access to that.”

This post was written by Stateside production assistant Catherine Nouhan.

CORRECTION: An earlier version of this post incorrectly stated that it has been six weeks since dispensaries started selling recreational marijuana. The first sales began on December 1, 2019. The post above has been corrected.

Stateside is produced daily by a dedicated group of producers and production assistants. Listen daily, on-air, at 3 and 8 p.m., or subscribe to the daily podcast wherever you like to listen.
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