Legal Marijuana: The $9 Billion Industry That Most Banks Won’t Touch
Imagine an industry with $9 billion in sales — equivalent to the entire snack market — where only 30% of businesses had a bank account. That’s the situation we face today in the legal marijuana business. Hardworking commercial operators are struggling to find banks that will work with them, forcing these entrepreneurs to conduct most business with cash. Serious security concerns and a lack of funding to scale these businesses are just two of the unfortunate outcomes.
While medical marijuana is legal in most U.S. states, it remains illegal under federal law, and is currently labeled a Schedule 1 drug under the Controlled Substances Act. That puts cannabis, a powerful plant offering significant medical benefits, on par with such harmful narcotics as heroin, at least in the eyes of the federal government.
There are many challenges our growing industry faces because of federal prohibition and the current scheduling of cannabis, but arguably the most daunting is this: Any bank that provides services to a legal marijuana business faces possible criminal prosecution for “aiding and abetting” a federal crime and money laundering.
Banks may choose to service a legal cannabis operator, but the government requires them to file a suspicious activity report for every transaction involving a marijuana business. These rules extend beyond the marijuana operator itself to any company it interacts with, from accountants to cleaners, resulting in mountains of red tape and expense that most banks simply choose to not deal with. Those that do pass on the cost as exorbitant fees to marijuana firms, most of which choose instead to work with cash.
The current banking situation dampens activity in one of the strongest growth areas of the U.S. economy. Cannabis is expected to grow to $50 billion in just a few years, according to the financial services firm Cowen & Co. Job website ZipRecruiter.com says the marijuana industry is the fastest-growing employer in the national economy — employing some 160,000 people, Marijuana Business Daily reports. That’s roughly the number of U.S. kindergarten teachers, or three times as many people who work in the coal industry.
Share on Facebook Tweet about this