Cannabis Industry Thoughts On Finances And Reactions To The SAFE Banking Act

The weed world money woes continue, but perhaps not for too much longer.

A lack of access to banks and traditional financial service providers is the legal cannabis industry’s most pressing issue. At KINDLAND, we’ve written at length about the weed world’s money problems. Still, the point of contention is a constant within the mainstream internet news cycle and remains a hot topic at most cannabis-focused events.

To give you some context, the finance sector is apprehensive about the legal marijuana business because banks, credit unions, and even payment processors such as Square, BitPay, Stripe, Venmo, and PayPal risk paying exorbitant fines, or might find their organization on the receiving end of federal money laundering charges per the Banking Secrecy Act should they do business with any weed or cannabis-ancillary enterprises.

Lamine Zarrad, who founded digital payment solution provider Tokken, which does business with marijuana-related clients, previously told KINDLAND:

"In essence, banks view dispensary owners, or the industry at large, as possibly having connections to the black market. For example, say there is a grower that has been in the industry for 20 years in an illegal capacity. Now they’re legal, but they’ve made those nefarious connections––the bank is going to turn them away, because it simply cannot know the risk that this person represents.”

Nearly every member of the legal weed industry with whom I’ve spoken has touched on this issue in one way or another. There are work-around solutions, sure, but by and large, the marijuana industry’s currency woes will continue, and its all-cash tax payments will reek of pot until the finance sector sees federal reform. 

Though such a policy shift is more than likely a few years off, it isn’t entirely out of the question.

Just recently, Colorado Congressman Ed Perlmutter (D) introduced the Federal Secure and Fair Enforcement Banking Act (SAFE Banking Act), which would protect financial institutions from federal charges that take on compliant cannabis industry clientele. 

According to the Denver Post's Cannabist, the SAFE Banking Act is a measure of public safety, and on the proposed legislation, “Perlmutter said that the most significant hurdles facing the SAFE Banking Act are committee leaders who haven’t been favorable to marijuana legislation.”

But the Colorado lawmaker would do well not to dwell in pessimism. And Perlmutter isn't the only government employee fighting for legal weed's right to put their money in the bank. Last year, Massachusetts senator Elizabeth Warren lead nine other senators in drafting a letter seeking increased access to financial services for weed businesses to the Financial Crimes Enforcement Network.

Warren's fight on behalf of the legal cannabis industry rages on. 

Just last week, Congress agreed on a comprehensive spending bill that includes a provision that prevents the federal funding of a Justice Department-led weed world takedown. It essentially allotted Attorney General Jeff Sessions zero funds to spend on the enforcement of federal laws in regard to weed businesses in compliance with their respective state marijuana laws.

So, perhaps the seemingly distant future of free and open access to financial services for the weed world is at least not as distant as it once was. 

"Banks are missing out on hundreds of millions of dollars that could flow through their institutions." - Doran

In anticipation of such a prospect, KINDLAND reached out to various members of the legal marijuana space in order to gauge reactions to the proposed legislation, and get some more thoughts on money from the folks with skin in the weed game.

*Some of the below quotes were previously gathered for earlier published KINDLAND stories.

KINDLAND: How will the SAFE Banking Act affect the buying and selling process for cannabis growers, manufacturers, and retailers?

Geoff Doran, Co-Founder of Tradiv; an online marketplace where cannabis producers and retailers can efficiently and compliantly conduct transitions:

“If it passes, this will be a game changer on many levels for our industry. Sales revenues will continue to grow to levels that most could not predict. The industry has an inefficient and unsafe system in place, at the moment, and it is paramount that we work to remove cash from the equation as soon as possible. Once this is done, we will see efficiencies in transportation and safety, since the couriers won’t have to haul major amounts of cash around the state. Removing this component will make the couriers much more affordable, efficient and safer for our cultivators and retailers.”

“On the cultivator and retail side, these businesses will be able pay for simple things like payroll, taxes and capital improvements to their buildings. They will be able to do this a lot faster through a banking institution. This will significantly help our industry grow.”

Image via H.Lee/Grassland

KINDLAND: How would the passing of this bill affect a state’s marijuana sales revenue?

Geoff Doran, Co-Founder of Tradiv: "Allowing tightly regulated cannabis businesses the ability to have access to the banking system will also allow them accept credit cards. This will most definitely grow revenues and, in turn, these businesses will then be able to deposit those revenues in a bank instead of a vault in a basement somewhere. This isn’t a groundbreaking concept. Years from now we will look back on why this dysfunctional state was allowed to occur for so long."

"This isn’t rocket science. The fact of the matter is, we have proven that we’re a true industry that is here to stay." - Doran

"As we all know, deposits in a bank will help with loans and other financial services that will ultimately help the community. Our banks are missing out on hundreds of millions of dollars that could flow through their institutions. Small things like being able to cut a check to a cultivator will be a massive improvement for revenues in our legal states. Our businesses will be able pay taxes more expeditiously, pay for business improvements a lot faster, and, thus, our industry will be able to provide safer and reliable product to our customers."

"This isn’t rocket science. The fact of the matter is, we have proven that we’re a true industry that is here to stay. It appalls me that we’re just now taking this seriously and it must change now. Luckily, we have voices in D.C., such as Congressman Ed Perlmutter, who has been bringing this serious situation to our country’s leaders for some time now. There is no longer time to waste. We must pass the SAFE Act immediately."

Michael Sinnwell, Chief Operating Officer at Hypur; an electronic payment system that enables U.S. banks and credit unions to serve high-risk, cash-intensive businesses:

"The industry needs to work honestly with financial institutions. But even if the retail and recreational use of cannabis were to become legal at the federal level, or if marijuana were rescheduled by the DEA, the cannabis industry would remain a high risk business space." 

Image via VSCO

KINDLAND: Without banking, what hardships do business owners face when trying to pay their employees?

Cy Scott, Co-Founder of Headset; an industry intelligence and data analytics firm Headset:

"In other industries, things like payments are just taken for granted. In cannabis, you have to get creative, and it unnecessarily slows down very basic tasks. With Leafly, we lost a number of banks and payment processors. Headset is in Washington, where the state has taken in more than $114M in excise tax for 2015; yet these businesses struggle to keep their bank accounts."

Eric Fraser, Chief Operating Officer at Wurk; an employee management software provider that helps cannabis companies proactively manage 280e, manage payroll, and stay compliant with local, state and federal governments: "Without banking, the process of paying employees becomes 50 percent to 100 percent more difficult and expensive for the employer, and 1000 percent riskier for the employer, the employees, and the communities that the business operates in, due to the presence of large amounts of physical cash being transported, stored and exchanged."

"Financial institutions are not serving their purpose if they can't serve all businesses." - Hupp

Geoff Doran, Co-Founder of Tradiv: "An absence of banking also makes paying employer taxes much harder and more dangerous––employers could be forced to bring huge amounts of physical cash to their local IRS office, or city and state revenue offices. There are newer technologies that seek to reduce effort, cost and risk for unbanked cannabis employers, but even those technologies ultimately rely on the presence of a bank or NBFI behind the scenes."

Jazmin Hupp, Co-Founder of Women Grow; a group advocating for women to hold executive positions within the legal weed industry:

"Banking is a right, not a privilege. . . Beyond the business issues of conducting millions of dollars in sales in cash (as is for most dispensaries) we're creating a huge safety issue. Financial institutions are not serving their purpose if they can't serve all businesses."