Other than the fact that cannabis remains federally illegal, the single largest issue that cannabis companies run into is cash management – most banks are unwilling to accept cannabis cash, and as such, businesses are often forced to keep large amounts of cash on hand to cover the costs of doing business, including paying bills, taxes, and employees.

One of the biggest causes for concern regarding the legalization of cannabis is the fact that oversight and regulation are made more difficult since the businesses are forced to do all of their transactions in cash. Cannabis businesses are required to be very transparent with their finances, for the purposes of regulation, and find that it is in their best interests to do so.

Cannabis businesses want to be able to legitimately bank their money, and are happy to comply with the intricate regulations and restrictions that may be placed upon them, if only to show that they are operating within the guidelines set forth in the Cole Memo and following other laws, both state and local, in the hopes that the federal government will begin to look more favorably on them and their businesses.

Federal regulators have issued certain guidelines about how banks can do business with cannabis businesses without running afoul of the law, but many banks still refuse to handle money that’s come from the sale of medical or recreational cannabis due to fears about the current administration’s stance on cannabis or the complexity of the requirements for complying with the guidelines.

However, that is not to say that there are not feasible options for banking for cannabis businesses. The number of banks and credit unions that allow cannabis businesses to bank with them is only increasing, causing celebration among business owners who are tired of the security issues that come with only doing business in cash. As of June 2017, the number was 368 institutions offering services to marijuana-related businesses (MRBs).

Ultimately, the decision lies with the banks that offer banking services to cannabis clients. There’s often strict admission requirements, and the application process involves divulging significant financial information and other details to the bank before the business is even allowed to open an account. Adherence to the Cole Memo comes up in relation to cannabis banking, as any banking institution is interested in ensuring that they are not doing business with anyone who is in violation of the Cole Memo. Often, the admissions process for cannabis banking includes a description of the company’s ongoing compliance with the Cole Memo, and steps that the company takes to ensure that they will not run afoul of those guidelines.

Obtaining bank accounts for a cannabis business can be incredibly difficult, and often there are waiting lists to even be considered as potentially being eligible to join, but the rewards are significant. Managing cash flow securely and through a bank allows for a wider range of options for ease of payroll, financial reporting, tax payments, security, financial stability, and increased ease of valuation for mergers and acquisitions. Cash alone is no longer an option for doing business efficiently, as many cannabis business owners have come to learn. Often, it can be beneficial to have a lawyer assist with the procurement of such a bank account, to ensure that the proper information is divulged and that all requirements are met. The Rodman Law Group has worked to ensure that our cannabis clients are able to successfully bank, to their great benefit. We have seen the value in such banks, and have cultivated relationships with those banks in order to better serve our clients.

It remains to be seen where banking for the cannabis industry will go, and if it will ultimately become a ubiquitous offering, but the available data indicates that the trend is towards the expansion of allowance of banking for cannabis customers, and it is expected that the number of cannabis banks or banks or credit unions that allow cannabis business customers will only increase in the coming years. There are many ideas being floated around, from a cashless system, to one that allows for a central correspondent to handle and oversee transactions, to cryptocurrency and other forms of payment to manage the revenue. Regardless of the fact that no single outcome has been agreed upon, it is cleat that with California set to begin recreational sales on January 1, 2018, the need for banking will only increase. With various solutions being offered and attempted, it’s imperative that the banks, the businesses, and the government sat down to create a viable solution to the needs of the growing industry that will also be transparent and in line with federal government guidelines.

Update: Cannabis banking may have reached its watershed moment.

The SAFE Banking Act finally passed the House today, September 26, 2019 (with significant GOP support!) setting the stage for the normalization of cannabis banking, the establishment of cannabis credit markets, and bringing us one step closer to legalization. Cannabis is still a Schedule I Drug and consumable CBD is illegal in the eyes of the government, but at least maybe now cannabis companies can spread the economic boom of the green rush to other parts of our economy… we are probably going to need it


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