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Marijuana Industry Challenges with Banks & Financial Services

Marijuana banking challengesAs of mid-2016, 25 states and Washington D.C. have voted to allow the use of marijuana for medicinal purposes. Several other states, including Florida, have ballot measures or pending legislation and are very close to implementing medical marijuana programs too.

Marijuana has proven to be less dangerous than once claimed by federal officials and effective in treating certain illnesses, including cancer. In recent years there has been much progress for the industry and many states have moved to decriminalize possession of marijuana.

Yet there are still hurdles for recreational and medical marijuana businesses. Businesses in the marijuana industry face challenges with banks and financial services every day. Obtaining business loans and getting set up to take credit cards is very difficult, but what’s worse is that these legal businesses are stripped of an essential component in operating their businesses effectively and safely. Namely, setting up business bank accounts and cash management solutions.

Recreational and medical marijuana dispensaries are required to adhere to very strict guidelines and are under the microscope of both state and federal governments. And, these marijuana dispensaries have high tax provisions that have benefitted on local, state and federal levels.

But it’s somewhat ironic that these marijuana businesses are regularly denied business banking and checking accounts and pay taxes in cash because they are forced to operate as cash only; a practice more common of businesses involved in illegal activity.

Although the Obama administration gave the green light for the banking industry to work with legal marijuana industries in early 2014, banking and cash management for marijuana dispensaries and other industry businesses is still extremely limited.

The marijuana industry challenges with banks & financial services stems from the fact that marijuana or cannabis in any form is still classified as a schedule 1 drug of the Controlled Substances Act. Federally insured banks in the United States are supported by the federal government, and understandably choose to follow the federal law.

Despite individual state legalization or the President’s opinions or words encouraging financial institutions to do business with legal marijuana businesses, until the law is changed, marijuana is still considered illegal in all 50 of the United States.

There has been a lot of speculation that sometime in 2016 marijuana will be reclassified as a schedule II drug by the DEA. Schedule II drugs are substances that have been accepted by the federal government as medically approved substances, but retain severe restrictions.

Reclassifying marijuana as a schedule II substance will make it legal for medical use in all 50 states. If this happens, a major obstacle will have been procured for the industry and marijuana dispensary business banking. Banking restrictions for legal dispensaries and marijuana related businesses would most certainly be eased.

If and when a reclassification will take place remains unknown. According to an April article from The Cannabist, the DEA said, “it plans to release a decision on rescheduling marijuana in the first half of 2016.”

There have been many articles posted in recent months speculating that sometime in July or August, marijuana would be reclassified by the DEA. An article in The Daily Chronic explains that there is no credible source or information that DEA is close to a decision, or what that decision will be.

Of course it would be fantastic news to hear that the DEA has come to a decision in favor of reclassification sometime soon. Marijuana industry challenges with banks & financial services would then be a thing of the past. Unfortunately the hype in the news about it may, in fact, just be hype. At least for the time being, marijuana dispensary business banking will remain restricted.

The slow progress on the part of the federal government hurts these tax paying businesses and forces them to incur additional risk and danger. The government is well aware that cash management and banking solutions simply helps businesses in this industry to operate is more safely. But the law is the law, and changing laws in this country can be a battle.

What most dispensaries don’t realize, however, is that marijuana dispensary business banking solutions do exist. These businesses just have to find banking relationships or operate a business under the umbrella or shell of another company they own.

Credit unions are not insured by the federal government, and therefore have a slightly different position than federally insured banks. In recent years credit unions in Colorado and other states have welcomed marijuana businesses in their respective states with open arms.

For businesses without a credit union relationship, there is an option to open a business bank account for a parent company and operate other businesses using a “doing business as” (DBA) alias.

If you have questions about marijuana industry or dispensary business bank and financial services, give us a call at The Transaction Group.

Since 2011, we’ve been assisting marijuana industry businesses with business financial services and other needs. We’ll gladly provide some advice and help however we can with marijuana dispensary business banking solutions for your business.

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