LAS VEGAS -- Despite being legal in a handful of states, including Nevada, many cannabis companies struggle to find banks and financial institutions that are willing to take a gamble on an industry reliant on a product that remains on the federal government's blacklist.
“We have tried to go to a couple of different banks and pretty much no one will touch us,” said Jillian Nelson, vice president of operations at Evergreen Organix, a marijuana company in Las Vegas. “As soon as they find out that we are a marijuana company, they want nothing to do with us.”
While 33 states have legalized marijuana in some form, it is still illegal at the federal level – making banks and financial institutions, like credit unions, wary of doing business with cannabis companies.
“You’re not going to get the larger banks -- the Chase [s], the Bank of America [s] -- typically to work with those businesses because of the fear of the regulators coming in and clamping down against this process,” IRC Wealth CEO David Ragland told Fox News, adding that smaller banks, however, will still work with these businesses.
Currently, there are 438 banks and 113 credit unions that actively work with marijuana-related businesses in the United States, according to the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN).
A bill was introduced in Nevada on Monday that hopes to create a process to license banks and credit unions serving marijuana dispensaries in order to offer dispensaries a safe way to invest in the economy. Under the proposed bill, the licensed banks and credit unions would not be required to be insured by the Federal Deposit Insurance Corporation, according to The Associated Press.
Legislation introduced in Washington D.C. earlier this month by Democrats Ed Perlmutter of Colorado and Denny Heck of Washington aims to offer banks, including ancillary businesses, protections against sanctions when associating with marijuana companies. The bill would also adjust tribal language and change the definition of cannabis business.
Under the current law, financial institutions could face criminal prosecution for working with marijuana companies as it is still viewed as a Schedule I drug at the federal level.
“Once you decide you're going to have these licensed businesses they should have access to banking services,” Jonathan Caulkins, a professor at Carnegie Mellon University and adjunct researcher with RAND’s Drug Policy Research Center said. “There is an argument be made for not allowing a for-profit industry, there's an argument that only nonprofits should be allowed to supply cannabis or just government. But, once you allow industry to occupy this space, they should have access to banking services.”
Without access to banks, marijuana companies are forced to operate mainly in cash -- making the businesses prime targets for crime.
“We do have to retain the services of armed guards for cash pickups transports and distributions because transporting that sort of money and large sums isn't safe for really anybody nowadays,” Nelson told Fox News, adding that the bill could be “life-changing for everybody in the cannabis industry.”
The whole Nevada delegation has backed the bill, with Republican Rep. Mark Amodei being the last to signal his support. While he believes there still needs to be additional oversight, like granting local and federal government access to the financial records, he acknowledged, “they shouldn’t be dealing with a whole bunch of cash floating around, like they are now,” according to the Nevada Independent.
But Caulkins believes “legalizing banking services is a sensible intermediary” during a “chaotic” situation as states continue to adopt pro-cannabis policies that contradict federal law.
“It really does not make sense to have state legal, illegal federally,” he said. “But this is a good band-aid to help the bridge or transition time be less chaotic.”
The SAFE Banking Act, which has more than 130 bipartisan co-sponsors, has been pushed since 2013 – but with a Democrat-controlled House of Representatives, Perlmutter believes the odds of passing legislation is much higher than in the past.
“We’ve got a lot better chances than we’ve ever had before, in part, because Democrats took the House and I think the fact that we are at 47 states that have some level of marijuana use,” Perlmutter told the Nevada Independent earlier this month. “Prohibition is over. We need to get the cash off the streets.”
If the bill does eventually become law, the already thriving industry could see even more dramatic growth similar to how the legalization gambling changed Las Vegas and the end of prohibition catalyzed the alcohol industry, Ragland said.
The first markup hearing for the bill in the House Financial Services Committee is on March 26.