It’s Time To Let Marijuana Companies Into The Banking System
Whatever the harms of marijuana use, America’s debate over legalization seems to have ended. Consider the facts: Some form of pot is now legal in 33 states and the District of Columbia, while 10 have legalized recreational use. This year, more states, including New York, are likely to follow. Somewhere around $9 billion in sales and well over 165,000 legitimate, on-the-books jobs (10 times those provided by the two dominant tobacco companies) rely on pot growing, distribution and sale. In 2018, the global market grew nearly 40 percent.
In view of such data, even if federal politicians wanted to return to all-out marijuana prohibition, it would be impossible. For this reason, even people who oppose legalization and will work to fight it should simply accept reality and open the financial and banking system to cannabis-based businesses. Doing so makes sense and ought to be acceptable even to those who think marijuana should remain illegal for recreational use.
In any case, the current situation is untenable in the long-term. Although they are legal under state law in most places, employ thousands and pay taxes, businesses that deal with the growing and sale of marijuana have a very difficult time accessing the financial system. Only about 30 percent of marijuana-based businesses have a bank account, most can’t accept credit cards and many must operate almost entirely in cash.
While there’s no specific law that directly bars financial institutions from accepting marijuana-related deposits, under current federal law, banks and most credit unions read existing regulations as requiring every transaction to be treated as “suspicious.” This is partly because there’s no specific guidance from federal bank regulators. As a result, large national banks consider it too risky even to consider entering the business. As such, even under strict state regulation there’s almost certainly more leakage of tax revenues, less monitoring of transactions and more opportunities for nefarious elements to infiltrate the industry.
Accordingly, bringing marijuana into the mainstream banking system simply makes good sense. The fact that something is harmful—and marijuana certainly can be—isn’t a good reason to deny it access to the banking system. Nor is the fact that it’s nominally illegal under federal law. Many advocates for the cannabis industry have used alcohol as an analogy and, indeed, it’s a good one for making the case that banking access isn’t the same thing as outright legalization.
Even though federal prohibition ended in 1933, individual states remained dry until Mississippi legalized alcohol in 1966. Even today, counties in nine states and a number of cities elsewhere continue to outlaw all sales of alcohol. Nevertheless, alcohol-related businesses have been able to access banks without restriction.
Since alcohol is legal in some form in every state, however, those who oppose marijuana legalization may want to look at gambling as another example for how things might work. While 30 states now have casinos, that’s a recent development, as up until the late 1990s, they existed in only six places. Nevertheless, they too could still use the banking system, even though many people — perhaps rightly — believe that gambling is wrong or immoral. The same goes for any number of other potentially objectionable businesses including pornography and Nevada’s legal brothels.
In light of all this, there’s simply no reason why bringing marijuana into the banking system means that we have to overturn all state laws against marijuana. Indeed, several proposals in Congress, in various ways, move toward allowing banking access to pot businesses without changing the legal status of marijuana under federal law (although one proposal would stay some prosecutions).
But it’s not necessary to amend federal control of marijuana in the short term or even officially condone its transport across state lines. It’s perfectly consistent to believe that marijuana should remain entirely illegal for recreational use but also to realize that it’s simply a matter of common sense to let marijuana-related businesses use the banking system on the same terms as plenty of other controversial enterprises.
Image by PRO Stock Professional