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Cannabis

Considered too hot to handle, for more than 20 years, the cannabis industry has been largely ignored by banks. Although California led the way in legalizing medicinal cannabis in 1996 and Colorado and Washington were the first to give the green light to its recreational use in 2012, the federally insured banking system has been slow to catch up. As time marches on and more states legalize cannabis or some derivative of it, like CBD, the banking industry would be wise to remedy this rift. By the end of 2019, the legalized cannabis industry was worth 12 billion dollars; and growth projections forecast it will top 70 billion by 2025. Traditionally, a cash-only industry, fraught with safety and legal issues, increased acceptance has inspired electronic payments, signaling progress within the industry, and opportunity for banks.

Three promising trends offer hope to these business owners:

  1. Measured Awareness

Two developments have inspired awareness about the banking industry/cannabis debacle, motivating baby steps towards a solution.

First, as the amount of states legalizing cannabis has grown, industry stalwarts are starting to recognize the issue in running an all-cash business. The American Bar Association is eager for change.  Processing large amounts of cash is not safe for dispensary owners and can lead to more crime or financial mismanagement. One way to alleviate this is through transparent payment options, such as Square, and these programs have recently begun offering transactions to dispensaries.

COVID-19 has made clear that handling cash poses a health risk; moreover, many businesses have been struggling with the actual availability of money during this crisis. The HEROES Act, legislation to mitigate the adverse effects of COVID-19, has piggy-backed the cannabis legislation. Banking groups, health professionals, and lawyers are all working to swing the federal reserve in the right direction.

  1. Grassroots Efforts States that were quick to legalize cannabis are fighting for the industry’s banking rights. Colorado, a proponent of the industry, is making great strides under the direction of Governor Jared Polis. He has renewed the state’s commitment to beef up the regulatory landscape so that cannabis dispensaries can get the banking they deserve for economic growth and safety, while also protecting the banks from the grey area of state vs. federal laws. Vermont embraced the SAFE ACT to bridge the gap; some banks and credit unions are already on board. For example, The Vermont State Employees Credit Union has a half dozen dispensaries on its client list, and similar efforts are taking root across the country.
  2. Federal Legislation Moving in the Right Direction.

Although on par with an iceberg, the federal government is making moves to support the cannabis industry and the banks that will serve dispensaries. In 2018, President Trump legalized hemp –an auspicious stepping stone.

Marijuana is still considered illegal on a national scale and therefore is a roadblock to free banking. However, in the fall of 2019, the Democrats in the House of Representatives passed the SAFE Act, allowing banks and other financial institutions to serve cannabis businesses without fear of retribution from the FDIC. Lawmakers were able to push the envelope further due to the COVID-19 crisis.

The US House of Representatives unanimously passed the HEROES Act in May 2020, which included regulations to protect banks serving the cannabis industry. The Senate has yet to pass this bill, but lawmakers and bankers are working to gain requisite support; passing the bill inside the COVID-19 package should help facilitate its passage. There is hope that lending institutions will catch up with the cannabis industry and supply a safe, clean, worry-free way for these business owners to stabilize their earnings. Leveraging our 20 years of experience working with banks, we are excited to provide market research to the cannabis industry and collaborate with them towards achieving their goals.

ath Power Consulting is an all-in-one resource for multi-modality survey and mystery shop research, competitive intelligence, compliance auditing, market analyses, employee training, and strategic consulting. Since 1997, we have helped our clients improve customer retention, build brand loyalty and advocacy, deepen employee engagement, measure compliance, maximize performance, and increase profitability – distinguishing them from their competition and giving them a commanding edge in the marketplace.