Last week, Obama finally gave approval to banks to work with cannabis businesses in a legitimate capacity. This is something that has been a major concern in the past, as businesses have been operating on a cash-only basis and therefore struggling to establish legitimacy and maintain open and honest policies.
This new support means that businesses will finally be able to take out loans on their investments in cannabis, thus furthering their industry and entrepreneurship. Many of these businesses were operating on an entirely cash only basis, meaning they didn’t even have checking and savings accounts for their businesses, and all this will be a huge help for these startups.
Up until this point, the administration's policy was mostly to stay out of the world of cannabis legalization as much as possible. Obama agreed to let states legalize and not federally persecute, but when banks and other federal institutions started closing their doors to the new industry, nothing was done about it, and the president simply looked the other way. However, now he is outlining a plan to help banks get involved with the industry in a way that will keep them safe from any persecution, a move that will certainly inspire banks to join forces with the cannabis industry more eagerly.
These rules were issued and outlined by the Treasury Department, and the Department of Justice has advised that no legal action be taken against dispensaries that work with banks and vice versa, as long as all guidelines are being adhered to and everything is above board. Apparently, if the bank is working with a cannabis seller they feel is legitimate, they file a “marijuana limited” report which means that everything is OK, and if they suspect illegal activity, they can file a “marijuana priority” report and stop working with the seller.
“This is very good news,” Steve Horwitz, who owns Ganja Gourmet in Denver, told the Washington Post. Horwitz tried to bank with Wells Fargo when he first started his business, but once they found out what he sold, they closed his account.
“The opposition and difficulties to being in this industry are just unimaginable. Every time you think you’re going forward, you go back 100 yards,” he stated. He hopes that he will now be able to bank with Wells Fargo again, and while they would not make a comment about his situation specifically, they did say they are reviewing this new ruling.
Despite the fact that this is good news for all of the dispensaries who will now have an easier time and the advocates who were supporting them, not everyone is happy about this new legislation. “Marijuana trafficking is illegal under federal law, and it’s illegal for banks to deal with marijuana sale proceeds under federal law. Only Congress can change these laws. The administration can’t change the law with a memo,” stated Sen. Chuck Grassley (R-Iowa), ranking member of the Senate Judiciary Committee, in an official statement.
Additionally, some bankers are not yet on board with this, due to the fact that cannabis is still classified as a Schedule 1 substance and therefore is federally illegal. “This guidance doesn’t alter the underlying challenge for banks,” Frank Keating, who serves as president and chief executive of the American Bankers Association, told the Washington Post. “Possession or distribution of marijuana violates federal law, and banks that provide support for those activities face the risk of prosecution and assorted sanctions.” Some banks are also worried because the guidelines for working with dispensaries are so strict. One small mistake could result in legal action being taken against the financial institution, and for some the risk is just not worth it.
Regardless of these drawbacks, this new legislation is very exciting and a huge step forward for the legal cannabis industry. Within a few months, we should be seeing major positive changes as businesses move away from the all-cash model, and become more diversified.