US Senate is eyeing a bill that would allow banks to do business with cannabis companies – now, if only they would vote on it
(This column originally appeared in The Guardian)
Imagine that you run a perfectly legal business but are unable to open a simple checking account at a national bank. Believe it or not, that’s the case right now for anyone licensed to sell cannabis in the US. Given the size of the cannabis industry, it’s pretty shocking. But it may be about to change.
In the US, 38 states have legalized marijuana for medical use and 23 of them have legalized it for recreational purposes, including three territories and the District of Columbia. An additional eight states have decriminalized its use. Both red and blue states with legalized marijuana laws have collected $15bn in tax revenue between 2014 and 2022, with $3.77bn in tax revenue attributed to 2022 alone.
Meanwhile, if you run a cannabis business – one that sells, distributes, manufactures or in some cases serves the industry, you’re not allowed to be a normal business.
Meta, Facebook’s parent, only allows “limited” CBD and hemp advertising. Cannabis companies can’t run TV or radio commercials for their products. They are not allowed to conduct any campaigns outside their state as interstate commerce is forbidden. In Ohio – like other states – they can’t run a billboard campaign without prior approval of the state’s board of pharmacy. Many localities have zoning laws that prohibit them from operating. Many insurance carriers are reluctant to serve the industry as do a number of the country’s largest payroll service providers.
Cannabis businesses are not allowed to deduct rent, payroll or other expenses that other businesses can write off. They regularly face expanded business licensing requirements. They can’t take advantage of the federal bankruptcy rules. They can’t trademark their products.
And then there’s banking. Cannabis businesses can only choose from about 200 independent and community banks. I don’t mean to throw shade on these organizations, because many of them are excellent. But they oftentimes don’t offer online banking, international access, wire transfer, investment options, financial stability and other capabilities of a larger institution. When it comes to the cannabis industry, federally chartered banks like Wells Fargo, PNC Bank, JP Morgan Chase, TD Bank and Key Bank are not playing ball. Because of this, many cannabis businesses receive fewer financial services and have been forced to retain an uncomfortable level of cash, making themselves exposed to theft and crime. The banking industry realizes this but resists.
Why is this? Because cannabis is still considered to be an illegal controlled substance, subject to very strict federal laws and, because it’s illegal at the federal level, many large corporations, such as banks, insurance companies and payroll services, remain spooked.
It’s no surprise that, despite all the growth, many in the cannabis industry are struggling to make profits. But there’s potentially good news on the horizon. Finally, the federal government may allow banks with federal charters to do business with those in the cannabis industry.
At the end of last month the Senate committee on banking, housing and urban affairs moved forward with the Secure and Fair Enforcement Regulation (Safer) Banking Act, which allows banks to conduct business with cannabis companies. The House already passed a similar act, so the Senate committee’s approval is a big deal.
“This legislation will help make our communities and small businesses safer by giving legal cannabis businesses access to traditional financial institutions, including bank accounts and small business loans,” the bill’s sponsors said in a joint statement. “It also prevents federal bank regulators from ordering a bank or credit union to close an account based on reputational risk.”
Still, significant hurdles exist. There remain a number of representatives in both the House and Senate who oppose the bill.
“This legislation also compromises the integrity of the United States banking system by giving banks government approval to participate in illegal activity, setting a dangerous new precedent,” some Republican senators said recently in a joint statement. “Allowing banking access to a Schedule I drug sets a dangerous legal precedent and will help facilitate money laundering for drug cartels.” This opposition, combined with a leadership void in the House, could derail progress of the bill for the foreseeable future.
But I’m more optimistic. The bill is not going so far as to legalize marijuana, so that should appease some of its opponents. And given the strong bipartisan support received in both the Senate and House for the Safer Banking Act, I don’t believe it’s an overreach to expect passage … eventually. When? Who knows.
In the meantime, those in the industry must wait. And fight. And deal with restrictions that few other legitimate companies have to face. It’s tough enough running any business. But for those in this game, it’s a whole new level altogether.