California Celebrates a Win in Banking Reform Services for Pot Market
An agreement in California could open the way for more pot companies to access financial and other banking services.
- Sacramento, CA (1888PressRelease) January 29, 2022 - California Cannabis Industry Association (CCIA) announced that its members will gain access to banking services through the California-based North Bay Credit Union. It has reached an agreement with North Bay Credit Union to provide checking, wire transfers and other banking services for cannabis companies, helping ease what has been an obstacle for many businesses.
Most Americans live in states where cannabis is legally available in some form, and broad legal marijuana sales began in California in 2018. But there’s been a problem when it comes to banks and credit unions: Many don't want anything to do with money from the cannabis industry for fear it could expose them to legal trouble from the federal government, which still considers cannabis illegal.
As a result, many marijuana companies in California’s multibillion-dollar market have been left to do business largely in cash, making them appealing targets for crime.
“Since California legalized cannabis, operators have faced significant struggles with banking and payment services, given the federal government’s continued ban on cannabis products,” the group said in a statement. The agreement is intended “to alleviate the banking obstacles that cannabis operators face, so they can focus on their core business.”
M Maximus Silva, Director of Operations for Roll Cannabis Group, said the agreement represents another encouraging step as more financial institutions open their doors to the growing industry.
Cannabis growers reported paying fees ranging from $200 to $3,000 per month for bank accounts, which they found to be cost prohibitive. These limitations leave most licensed marijuana producers and retailers in the lurch, forcing them to rely on nontraditional financing arrangements – maybe investing in friends’ endeavors – or risk running cash operations.
"What we see is operations using the cash they cannot invest or deposit in the conventional banking system and using that money to double down and invest in themselves. Operations are using their own cash surpluses to reinvest in their own company and as a result: companies get even bigger and have an even bigger problem when revenues increase, it's systemic." Silva went on to say, "It’s clear we need policies making cannabis banking and finance more equitable, it's also clear that smaller local mom and pop enterprises need to associate together in formal organizations so they can achieve economies of scale and harness their political power to endure the transition to legal.”
Despite the stigma attached to marijuana, even when legal, its status as California’s most valuable crop – estimated to be worth more than almonds and dairy combined – attracts outsiders who are better-equipped to come up with funding to get their operations started and compete with legacy growers who have lived and worked in California for generations.
The House in September passed a bill to allow businesses legitimately operating under state laws to access loans, lines of credit and other banking services, while sheltering financial institutions from prosecution for handling marijuana-linked money, but it didn't clear the Senate.
The industry is hoping for regulatory gains in Washington with the arrival of the new administration and Democratic control of the Senate.
President-elect Joe Biden was once known as an anti-drug warrior but has softened his tone over time. He has said he would decriminalize — but not legalize — the use of marijuana, while expunging all prior cannabis use convictions and ending jail time for drug use alone. However, legalization advocates recall with bitterness that he was a leading Senate supporter of a 1994 crime bill that sent droves of minor drug offenders to prison.
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