California is arguing internally over whether it should put a state-run bank in place that would accept deposits from cannabis related businesses. Most banks are afraid to accept deposits from state legalized marijuana dispensaries and other businesses related to marijuana. There are concerns because the national government still considers marijuana to be illegal despite 30 states having legalized cannabis for medical use. California is unsure if the special bank that they are considering would be reasonable from a cost perspective or whether it would even be able to keep funds secure. What do you think the banking solution is for cannabis related businesses?
California government, financial and marijuana business leaders met last week in a far-from-resolved debate over whether a state-run bank could be the solution to the cannabis industry’s banking problem.
Supporters argued during a Los Angeles gathering of California’s Cannabis Banking Working Group that a public bank would give the state autonomy, serve communities that struggle with bank access and send a message that could shift the nation’s financial paradigm away from Wall Street.
Critics insisted a public bank would be too pricey, too risky and do little to overcome banking problems triggered by the conflict between state and federal marijuana laws.
Though eight states have legalized recreational marijuana and 30 permit medical cannabis, the federal government still classifies cannabis as a Schedule I narcotic on par with heroin. That means major banks and credit card companies won’t do business with growers, manufacturers and dispensaries out of fear they’ll be penalized for money laundering.
While some smaller banks and credit unions are filling that gap, surveys show a majority of marijuana businesses are still forced to operate in cash. That makes them targets for crime, with tales of dispensaries being robbed and workers harmed. That also makes it tough for business owners to get loans and pay their taxes, which are expected to total around $1 billion each year after recreational marijuana sales start Jan. 2.
With that date in mind, State Treasurer John Chiang in December formed a working group to explore options and come up with recommendations for addressing the banking issue.
The 17-member group includes representatives from state agencies such as the Bureau of Cannabis Control, financial groups such as the California Bankers Association and industry groups like the California Growers Association. They’ve been meeting throughout the state, with Thursday’s session in Los Angeles the last before they turn their attention to preparing a report on their findings and suggestions.
“We all agree the best and most effective step would be for the federal government to remove cannabis from the list of Schedule I drugs,” Chiang said.
But given Attorney General Jeff Sessions’ staunch opposition to cannabis and threats of a crackdown on state marijuana programs, he acknowledged that change doesn’t seem likely anytime soon.
The working group briefly discussed allowing marijuana businesses to pay taxes using a digital currency similar to Bitcoin, lobbying for federal changes and encouraging small banks to expand service to the industry. But the majority of Thursday’s meeting focused on the idea of creating a state-run bank.