The Benefits of Cannabis Banking for Local Communities and Economies
Even though 21 states have legalized the recreational use of marijuana, and 37 allow medical usage, cannabis remains illegal under U.S. federal law. While it’s heartening to see progress toward the legalization of cannabis, businesses in the industry still face a challenge in finding banking solutions.
Since most financial institutions refuse to work with cannabis companies, the majority of cannabis businesses must conduct operations entirely in cash — which poses numerous inefficiencies and safety issues in an industry that saw $30 billion in sales in 2022, a number that is expected to grow significantly in the coming years.
Yet offering banking services to cannabis businesses can bring societal benefits, from greater economic growth to job creation. As the industry expands, business owners and legislators are working to make the legal environment safer and more attractive to banks.
Challenges of Cannabis Banking
One of the main obstacles preventing banks from working with cannabis companies is federal regulation. There is no specific law against them doing so, but a complex landscape of anti-money-laundering laws and regulations makes it confusing and burdensome.
For the companies, a lack of banking options means they cannot take advantage of financial services like direct deposit payments, company checks, and payroll systems as well as investment capital. The current situation also prevents cannabis businesses from providing benefits such as retirement plans to employees, potentially making the industry less attractive as a career choice.
Finally, an all-cash business has significant safety and security implications for owners, employees, and customers, as they can and have become targets for theft and violence.
How Can Cannabis Help the Economy?
There are already indications that cannabis provides substantial tangible benefits for the economy and local communities. As one example, Illinois reported a record-breaking $445 million in total tax reporting for cannabis sales for the 2022 fiscal year. One report found that for every $10 spent at a retail cannabis business, almost twice as much was added to the economy, much of it at the local level.
Legal cannabis sales can also help reduce the crime rate by providing jobs and supporting greater investment in disadvantaged areas. Under Illinois’ cannabis laws, a quarter of cannabis sales tax revenue goes to communities that have been significantly affected by drug criminalization.
The Current State of Cannabis Banking in the U.S.
Only a relatively small number of banks and credit unions do business with cannabis companies, but that could change with the passing of the Secure and Fair Enforcement (SAFE) Banking Act. This legislation would open up banking services to state-licensed cannabis businesses, such as access to loans and credit cards. The act would also support greater transparency in the industry, ensuring businesses are operating safely and legally.
In the meantime, cannabis companies can work with legislators and grassroots organizations to promote the SAFE Act as well as the benefits of marijuana legalization for the entire country.
How Can Paybotic Financial Help?
Paybotic Financial provides licensed cannabis-related businesses with banking services including payment processing, FDIC-insured checking accounts, and corporate debit cards, through our partnership with Regent Bank, Member FDIC, to support and streamline your operations. Our experts have extensive experience with cannabis businesses and a comprehensive understanding of applicable laws and regulations to ensure compliance.
Get banking help for your cannabis-related business and start making a difference in your community today.
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