Cannabis Businesses Find Themselves Cut Off From Banking System

More than half of all Americans live in a state that has legalized marijuana.

All the same, legitimate cannabis businesses still find themselves dealing with the same problem as drug dealers operating outside the law: what to do with all their cash.

As the Wall Street Journal (WSJ) reported Monday (April 1), that’s because while most states have legalized some form of marijuana — either for recreational or medical use — banks won’t work with cannabis sellers, as the drug is still illegal under federal law.

The same goes for credit card companies. Last year, Mastercard ordered payment processors and banks to stop accepting cannabis transactions on its debit cards.

“Our rules require our customers to conduct lawful activity where they are licensed to use our brands,” the company told Bloomberg News at the time. “The federal government considers cannabis sales illegal, so these purchases are not allowed on our systems.”

This has all led to a situation in which it’s nearly impossible for these businesses to accept payments in anything other than cash.

And while some smaller banks have begun offering their services, cannabis sellers say they aren’t reliable, the report added, leaving them spending an outsized chunk of their time — and funds — moving money.

“For companies that are generating that much money, this is a caveman approach to finance,” Clayton Taylor, who runs a company that moves cash for legal cannabis companies, told WSJ.

The report described a situation in which one of Taylor’s clients had their bank account frozen — and later closed — leaving Taylor to transport cash the business had tucked away so it could pay its workers.

The WSJ notes the situation could change: the U.S. House has passed a bipartisan bill that would make it easier for cannabis companies to find banking services. While the Senate has never voted on its version, that could come this year.

In the meantime, cannabis firms are taking legal action, last year hiring an attorney who successfully litigated an antitrust case against Microsoft to sue the federal government over its restrictions on their product.

Also last year, the U.S. Department of Health and Human Services wrote to the Drug Enforcement Agency (DEA) recommending that the agency ease restrictions on cannabis and reclassify it as a Schedule III drug.

Federal law currently considers marijuana a Schedule 1 substance, implying a high risk of abuse with no accepted medical use.  As a Schedule III drug, cannabis would be seen as less dangerous and could be obtained legally with a prescription.