The California Senate has approved legislation for state-run banks specifically serving cannabis-based businesses. The Senate’s affirming vote of 35 to 1 will send the legislation moving onto the desk of Governor Gavin Newsom for final approval.
This is great news for businesses in the marijuana industry. Dispensaries and other cannabis companies have been forced to operate mostly on a cash basis. The federal illegality of cannabis makes banking difficult, even in fully recreational states like California. Anti-cannabis laws restrict federally chartered banks from doing business with cannabis companies.
“It’s hard to imagine an industry that at this point is as large as, like, craft beer that does not have banking as we have come to know it,” said Steve Hawkins, executive director of the Marijuana Policy Project.
The cannabis market is predicted to boom to as much as $32 billion by 2022 in California alone. The need for baking in the cannabis industry can’t be ignored. The creation of state-chartered cannabis banks would help people in the industry gain access to important services like payroll and business loans.
Cash Based Canna-business
The potential passage of SB 51 isn’t the only push for banks to embrace the cannabis industry. The National Association of State Treasurers adopted a resolution calling for “common-sense federal laws and regulations” for banking in states that have legalized cannabis.
“Cash-based systems are inefficient, expensive and opaque, making illicit activity more difficult to track and posing a significant risk to public safety by increasing the likelihood of violent crime,” the association said in its resolution.
Violent crime against cannabis companies has been a major issue. According to Ryan Donovan, chief advocacy officer for the Credit Union National Association (CUNA), one out of every two cannabis businesses has been robbed. “We wouldn’t tolerate that in any other industry, and we shouldn’t tolerate it here,” he asserted.
Some cannabis companies have innovated to find workarounds for this cash based problem. Many dispensaries use point of sale systems like POSaBIT. POSaBIT allows merchants to accept credit card payments by converting the transaction into cryptocurrency like Bitcoin (BTC) or Litecoin (LTC). Another cash alternative sometimes used at dispensaries is gift cards. Customers purchase and load gift cards, which they then immediately spend on the cannabis products.
Upcoming Banking Bills
Along with individual state-level legislation, politicians have proposed a series of bipartisan bills to confront the issue.
The Secure and Fair Enforcement (SAFE) Banking Act would provide protection to banks working with cannabis companies from federal prosecution. This bill has the support of politicians like Colorado Democratic Rep. Ed Perlmutter, Washington Democratic Rep. Denny Heck, and two Ohio Republicans, Steve Stivers and Warren Davidson. The SAFE Banking Act is supported by figures within the banking sector including the National Association of Attorneys General and Treasury Secretary Steven Mnuchin.
The Strengthening the Tenth Amendment Through Entrusting States (STATES) Act, supported by 2020 Democratic presidential candidate Elizabeth Warren, would give each state the right to determine their own approach to cannabis legislation.
In the end, it’s a huge deal that banks are finally getting on board with the cannabis industry. The market for marijuana is booming, and the need for banking services is clear. Keep on eye on these upcoming bills and other important legislation that could improve the cannabis community.