Cannabis companies are primarily all-cash ventures. According to a Marijuana Business Daily survey, 60% of all firms operating in the cannabis industry don’t have business banking accounts. That number is 81% for companies that touch the plant and 49% for non-plant touching, ancillary firms.
The root cause of this problem is the disharmony between federal and state laws governing cannabis. Despite the growing list of states decriminalizing the sale of marijuana, the federal government maintains its classification of marijuana as a Schedule 1 drug, alongside heroin and methamphetamines. Accordingly, federal law aims to thwart criminal money laundering activities by barring financial institutions from maintaining bank accounts with Schedule 1 drug-related businesses.
At the same time, the federal government has recognized the incongruence between federal law and the unmistakable trend toward universal state-by-state decriminalization of the drug; therefore, in an effort to provide industry participants with some measure of legal protection, Congress passed the Rohrabacher-Farr Amendment. This legislation prohibits the Justice Department from using federal funds to interfere with the implementation of state medicinal cannabis laws—in effect, shielding the majority of the cannabis industry from federal interference.
Even so, the majority of banks are still unwilling to take the added risk—perceived or otherwise—of banking this booming industry. Without bank accounts, cannabis companies are unable to secure bank loans, accept debit or credit card payments from customers, or electronically remit payment to suppliers or employees. The unmet demand for small business lending within the cannabis industry represents a billion dollar opportunity. This is only set to increase as the industry is projected to grow to $70.6 billion by 2028.