Cannabis Businesses Facing Financial Exclusion in the US


Imagine running a completely legal business, but not being able to open a simple checking account at a national bank. This is the unfortunate reality for cannabis businesses in the US, despite the industry’s significant growth and legalization in many states. However, there may be hope on the horizon. The US Senate is currently considering a bill that would allow banks to conduct business with cannabis companies, providing them with much-needed financial services and stability. While there are still hurdles to overcome, there is a strong bipartisan support for the bill, offering optimism for the future of cannabis firms in the US.

Cannabis businesses face financial exclusion in the US

Cannabis Firms Facing Financial Exclusion in the US
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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.

Limited advertising and marketing options for cannabis firms

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.

Challenges in obtaining insurance services for cannabis firms

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.

Legal and regulatory obstacles faced by cannabis businesses

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.

Limited banking options for cannabis firms

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.

Cannabis Firms Facing Financial Exclusion in the US
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Optimism regarding the eventual passage of the Safer Banking Act

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.

Uncertainty about the timeline for progress

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. Ongoing struggles and restrictions faced by cannabis businesses in the meantime

Ongoing struggles and restrictions faced by cannabis businesses in the meantime

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.

Photo by Elsa Olofsson on Unsplash

The cannabis industry in the US faces significant financial exclusion, which hampers its growth and profitability. Limited advertising and marketing options, challenges in obtaining insurance services, legal and regulatory obstacles, and limited banking options are some of the key issues faced by cannabis businesses.

Due to federal restrictions and the classification of cannabis as an illegal controlled substance, businesses in the cannabis industry are unable to operate like normal businesses. They face restrictions on advertising and marketing strategies, including the inability to conduct campaigns outside of their state. Moreover, limited access to major financial institutions restricts their banking options, forcing them to rely on independent and community banks that may lack the capabilities of larger institutions.

Obtaining insurance services is also a challenge for cannabis firms. Many insurance carriers are reluctant to serve the industry, and businesses are excluded from typical insurance coverage and benefits. They also face legal and regulatory obstacles, such as the inability to deduct expenses and write-offs like other businesses, expanded licensing requirements, ineligibility for federal bankruptcy protection, and the inability to trademark their products.

However, there is optimism regarding the eventual passage of the Safer Banking Act, which would allow banks to conduct business with cannabis companies. The bill has received strong bipartisan support in both the Senate and House, but significant hurdles still exist. Some representatives oppose the bill, citing concerns about compromising the integrity of the banking system and facilitating money laundering for drug cartels. The timeline for progress remains uncertain.

In the meantime, cannabis businesses continue to face ongoing struggles and restrictions. They must wait and fight for changes that will provide them with the financial inclusion and opportunities enjoyed by other industries. Running a business is challenging enough, but for those in the cannabis industry, it’s a whole new level of difficulty.



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