As rumors of the Trump administration potentially rescheduling cannabis swirl around Washington, the Senate Banking Subcommittee on Financial Institutions and Consumer Protection is once again talking about cannabis banking reform. I am not holding my breath. Despite cannabis businesses wanting federal reform so badly they can taste it, we have been down this road before.
Congress has been trying to get banking reform done for years. Just about every legislative session sees a bill sail through the House only to stall in the Senate. Members of both parties have tried various tactics to get a bill everyone could agree on. But so far, they have not succeeded. Meanwhile, cannabis business owners suffer with lawmakers’ inability to get something done.
Do you know why cannabis businesses so desperately want banking reform? It is because current banking regulations directly affect their bottom lines. And the impact isn’t good. In fact, it is detrimental.
Banks Won’t Touch Them
The biggest problem cannabis businesses have with banking services is that they cannot get them. While there are a few niche financial institutions that can provide banking services by limiting themselves to activities that are not federally regulated, there are not enough of them to make any real impact.
Meanwhile, nearly every bank and credit union in the country simply will not touch cannabis businesses out of fear of federal reprisals. Remember that cannabis is still illegal under federal law. And under federal banking regulations, financial institutions are not allowed to aid or promote cannabis businesses in any way.
Where does that leave a company like Beehive Farmacy, a Utah company that operates medical cannabis pharmacies in Salt Lake City and Brigham City? It leaves them without access to:
- Business checking accounts
- Small business loans
- Payment processing services
Cannabis businesses need to operate largely on a cash-and-carry basis. It would not be so bad if the rest of the world were cash-and-carry too, but it is not. Traditional businesses pay their invoices with checks and digital transfers. Cannabis businesses must pay in cash. Traditional businesses can deposit cash receipts at a bank. Cannabis businesses cannot.
It Impacts the Customer, Too
A lack of banking services isn’t just detrimental to the cannabis business. It harms customers, too. Let us refer back to the medical cannabis pharmacy. If you are a patient and planning to make a purchase, don’t plan to use your credit or debit card. You must take cash with you to the pharmacy.
Most people don’t carry large amounts of cash with them. If that sounds like you, plan to make a trip to the ATM before you head over to the dispensary. And if your state allows home delivery, great. You still cannot pay online. You need to have the cash in hand when the delivery driver arrives at your door.
Having to pay in cash is inconvenient for the customer. But it’s also more expensive. Operating on a cash-only basis adds to the business owner’s expenses. Those expenses are passed on to the customer by way of higher prices. So all the way down the line, a lack of traditional banking services hurts everyone.
And So We Wait…
The recent rumors of marijuana rescheduling are just the latest and a long train of rumors. Washington has been talking about rescheduling and banking reform since medical cannabis took off more than 20 years ago. We will patiently wait to see what happens in the coming months. But if I were placing bets, they would be against anything meaningful being done. The cannabis industry seems destined to be forever stuck in the status quo.