Why Most Legal Pot Businesses Still Don't Have a Bank Account

When Congress passed the omnibus spending bill Friday, it included several marijuana and drug policy reform provisions. The bill bars the Justice Department from spending funds to interfere in medical marijuana states or with industrial hemp cultivation pilot projects, and it ends a GOP-imposed ban on states and localities using federal funds for needle exchange programs.


But Congress's embrace of drug reform was half-hearted. It failed to adopt an amendment that would allow Veteran Administration doctors to recommend medical marijuana to their patients, it continued to block Washington, DC, from taxing and regulating legal marijuana, and it failed to adopt a Senate-approved amendment that would have allowed banks to provide financial services to marijuana businesses.

That last item has huge business and public safety implications. According to industry-watching Arcview Market Research, the industry generated more than $1.5 billion in revenues in 2013. That's a lot of cash being forced outside the formal financial sector.

And that means marijuana businesses risk robberies and have to pay for security personnel to keep that cash from being stolen. It also means those businesses are unable to use normal financial sector tools, such as processing credit card payments, or getting financing for equipment or real estate purchases. And it probably means lost tax revenues. Cash has a funny way of not making it into financial statements and tax forms.

Not all pot businesses are operating—out of necessity—in the financial shadows, but according to a new report from Marijuana Business Daily, more than half of them are. In a poll that surveyed industry professionals from around the country, the industry journal found that roughly 60% of companies in the pot business don't have bank accounts. When it comes to companies that actually handle the plant, that figure rises to 70%.

Among those plant-handling companies, 81% of wholesale cultivators have no bank accounts, nor do 68% of edibles makers, nor 54% of dispensaries and pot shop operators.

And it's not just a problem for people with pot resins on their fingers. Even among ancillary businesses, such as consultants, software firms, and other firms that provide products or services to the industry or to consumers, nearly half (49%) don't have a bank account.

Knowing the score, some pot businesses don't even bother trying to get bank accounts. But nearly 30% of those without one said they were actively seeking one, and another 13% said they weren't looking now, but had tried in the past.

And those pot businesses that do have bank accounts can face problems, too. Nearly a third (29%) of those who do have accounts reported having previously had other accounts closed by a bank.

Marijuana Business Daily talked to one pot business owner who does have a bank account, and he reported that dealing with the financial sector was a bigger headache than dealing with state regulators.

“Over the past six years I have had 14 accounts closed for the business,” said Tim Cullen, CEO of Colorado Harvest Company, which operates several cannabis retail shops and grows and currently has a business checking account.

And it's not just business accounts: “Just this past month a bank….closed my personal accounts after a 10-year banking relationship,” Cullen said. “They even closed my three-year-old son’s college savings account.”

And that's after he jumped through hoops to get those accounts: “[Anything] and everything that the business has done in a financial sense as well as detailed personal history of the owners and their spouses” was required to get a bank account, he said.

Congress had a chance to rectify this situation in the omnibus budget bill, but failed to act. It may take the full repeal of federal marijuana prohibition to resolve the problem, but there is no reason Congress can't try to fix access to financial services again next year. The legal marijuana market and the giant piles of cash are only getting bigger. 

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