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Cannabis Businesses Have a Cash Problem: Too Much of It on Hand

S.J. Steinhardt
Published Date:
Apr 1, 2024


Though cannabis is now legal in most U.S. states, many banks and credit card companies won’t do business with cannabis companies because the drug remains illegal at the federal level, leaving these legal business with a big cash problem—too much of it, The Wall Street Journal reported.

Smaller banks and those not chartered at the federal level have started to offer services to such companies, but customers say they can be unreliable, the Journal reported. Yet the situation may change soon, as Congress works its way toward passing a law that would make it easier to bank cannabis clients. The Secure and Fair Enforcement (SAFE) Banking Act has passed the U.S. House of Representatives five times since it was introduced in 2013, most recently in 2021. The bill passes the U.S. Senate Committee on Finance in September and its author, Sen. Jeff Merkley (D- Ore.), hopes that a comparable version could pass the House.

“This bill will put an end to the legal ‘gray area’ that banks have to put themselves in to do business with weed companies,” Merkley said in an interview with the Journal.

If signed into law, such a law would protect federal chartered financial institutions from incurring penalties for servicing legitimate cannabis businesses. (For more on this topic, see “With NYS dispensaries set to open soon, CPAs see opportunities and hurdles” in The Trusted Professional’s November/December 2022 issue, page 1).  

Owners of legal cannabis businesses have long argued the current system empowers illegal dealers, who still sell most of the cannabis in the country, the Journal reported.

“There’s no banking capital for the regulated cannabis industry, and there’s not much actual banking either,” said Tahir Johnson, a former financial adviser in New Jersey who is preparing to open a cannabis dispensary in May, in an interview with the Journal. That leaves cannabis companies spending inordinate amounts of time and money moving around cash.

As cannabis is still classified as a Schedule 1 controlled substance, banks avoid working with state-licensed cannabis companies for fear of being accused of money laundering or violating bank-secrecy laws.

The status of cannabis under federal regulation may change, too: In September, the U.S. Department of Health and Human Services (HHS) recommended reclassifying cannabis as a lower-risk drug.

In 2014, the U.S. Treasury Department clarified that banks can work with cannabis companies as long as they verify their state licenses and file suspicious activity reports for every transaction they make. That proved to be too onerous for many financial institutions, though a few credit unions and smaller banks began offering services. A little more than 10 percent of all banks in the U.S. reported working with marijuana-related businesses last year, U.S. Treasury department data show.

Johnson won a license in 2022 to start a cannabis dispensary in his home state and opened a business account at Bank of America, where he planned to raise about $3.5 million to be able to buy property and build a dispensary outside of Trenton.

After a few months, the bank shut down both his corporate account and his personal account. The notification letter said that he had 30 days to remove his money and didn’t give a reason for the action, he said, suspecting it was because the bank learned he was building a cannabis business. 

He has since found small bank in Arkansas that does business with him remotely. When he needs to deposit cash, the bank sends an armored truck for it. He has to pay for that. 

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