Cannabis is currently legal for adult recreational use in 11 states and the District of Columbia and for medical use in 33 states. As more states legalize cannabis for medical and/or recreational use, it is critically important that cannabis-related businesses have access to services provided by the traditional banking system.
Cannabis is currently legal for adult recreational use in 11 states and the District of Columbia and for medical use in 33 states. As more states legalize cannabis for medical and/or recreational use, it is critically important that cannabis-related businesses (CRBs) have access to services provided by the traditional banking system.
At the federal level, cannabis remains illegal under the Controlled Substances Act. As more states legalize cannabis and this segment of the business community continues to mature, the conflict between state and federal law creates increasingly significant legal and compliance concerns for state and federally chartered banks that wish to service CRBs or continue to serve existing customers that may also do business with CRBs.
Due to legal and regulatory uncertainty, CRBs lack access to the traditional banking system forcing them to operate mostly in cash. Cash-only businesses, especially those with a high volume of revenue, pose a significant risk to public safety.
Given the disparity between federal and state law, community banks should not be placed at a competitive disadvantage with the establishment of a public bank or credit union to service CRBs. Traditional banks, with the protection of a safe harbor, are fully capable of serving the banking needs of CRBs.
Moreover, history clearly indicates that other financial service providers founded for narrow, specialized purposes inevitably expand beyond their original scope. Tax-subsidized credit unions and the Farm Credit System have expanded well beyond their original limitations and now compete directly with community banks. Once established, a state or public bank would advocate relentlessly for additional powers to assure its longevity and survival, to the detriment of private-sector competitors.
Staff Contacts: Aaron Stetter, Steve Keen, and Lilly Thomas
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