Msnmarijuanasup Federal Bank Article
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Why Won’t Federal Banks Accept Cannabis Business?
Nearly half of the adult population in the U.S. have at least tried marijuana in some form. Considering that the same statistic was around 4% a little over 50 years ago, it is surprising that the recent explosion of stage legally operated dispensaries and medical exemptions has not been enough for the federal government to jump onboard.
What is evident to the public is, for one reason or another, completely alienating federal banks from some lucrative business opportunities. U.S. cannabis sales hit a record $17.5 billion just last year. That is a massive piece of the pie that most banking institutions would want to get a hold of for future growth. So what is going on here? Why aren’t more federal banks embracing a social movement that is only projected to get stronger?
A Little History
From 1970 to 1971, the conservatives in the U.S. began to wage war against marijuana and other drugs substances viewed as abusive. Both sides of the political spectrum pumped out studies supporting their assertions in order to drum up fear in their party. By the end, President Nixon signed the Controlled Substances Act, which regulated cannabis to a Schedule 1 Substance.
This new law meant that any bank wishing to continue receiving FDEIC (Federal Deposit Insurance Corporation) protection needed to immediately stop doing business with any entity or individual making money from the sale or distribution of cannabis.
It wasn’t until 2017 that a new law was introduced known as the SAFE Act (Secure and Fair Enforcement). This is a law meant to make financial institutions, including federal banks, capable of doing business with the growing dispensary and farming trend sweeping the nation. Since its introduction, different government bodies have passed and shot down the law repeatedly. It currently still sits in committee from a 2021 revision that many are hoping will pass.
What Does this Mean for Banks?
The end result is that cannabis remains an essentially cash-run business. Instead of the federal banking system benefiting from the high profits and hundreds of thousands of owners, employees, farmers, and other associated complementary industries ready to deposit their earnings, they must take a backseat to the whims of political ideology sitting in aging chairs on Capitol Hill.
This industry is worth billions in state revenue. Colorado alone had a 2020 marijuana tax revenue of over $387 million. While it is true this may not be the highest infusion of cash into the state budget, it can certainly go a long way to building some new schools, improving some roads, and providing relief to families struggling to get by on a teacher’s annual salary.
It seems wildly counterproductive to shut off a revenue stream the majority of the general public wants to voluntarily participate in. If we funneled even a tiny portion of the total tax revenue from making marijuana legal in all 50 states, we could fund both energy and scientific research sections of our national budget.
What Happens Next?
The reality is we probably will not see a change in federal marijuana laws given the current strict political divide in the country. With so much infighting around even something as straightforward as infrastructure, odds are both the far right and far left that make the most noise will not come together to find common ground.
In the meantime, federal banks are left with their hands tied, unable to help local businesses as they grow and contribute to their state budgets. All we can say for sure is that any Governor benefiting from legal trade in marijuana projects better take advantage of the income while they can. Who knows what will happen in the next election!
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