Region: Eastern Cannabis Business Conference
Banking on the Cannabis Industry
By Kaisha-Dyan McMillan
December 17, 2019

Banking on the Cannabis Industry

One of the biggest challenges facing the legal cannabis industry has always been access to banking. Despite more than half of U.S. states passing some form of cannabis legalization, its status as a Schedule I drug means banks and credit card providers risk violating federal money laundering laws should they choose to work with cannabis business owners. 

The absence of sensible banking policies has resulted in the state-led, multi-billion dollar industry to rely upon cash for everything – from consumer transactions to payroll to tax payments, and more. A significant reason why 2019 was such a historic year for the industry was thanks largely to House approval of the Secure And Fair Enforcement (SAFE) Banking Act, a beacon of hope for an industry long encumbered by having to be cash-only, not having access to funding through loans, or being able to write off common expenses like any other legal business. As legalization expands into the Northeast market, we explore the progress made – and what still needs to happen – when it comes to banking for the cannabis industry.

Banking on SAFE

If passed by the Senate, the SAFE Banking Act would essentially allow federally insured financial institutions to work with legal cannabis businesses without the prospect of being punished under federal law. As it’s currently written, the legislation would prevent federal legislators from limiting or removing access to insurance, loans and other financial services, or to take punitive action against banks that choose to serve compliantly-operating, legal cannabis businesses. Under the law, banks and other institutions would not be “liable or subject to forfeiture” for offering any financial services, including loans, to cannabis companies or ancillary businesses. 

Even if the Senate greenlights the SAFE Banking Act however, that doesn’t mean all of the industry’s monetary problems are solved. A recent decision by the U.S. tax court upholds that tax code 280E, which prevents businesses that participate in the trafficking of a Schedule I or II controlled substance from receiving tax deductions, is constitutional. That means, for now, cannabis companies will continue to be prevented from deducting the same operating expenses that businesses in traditional sectors can, adding to what is already an undue financial burden for business owners in this burgeoning industry. If nothing else, these complications go a long way to illustrate the importance of making cannabis Federally legal or at minimum, removing it from the list of controlled substances.

Join the conversation during the educational session, “Moving Money, Banking Money, and Cannabis Cash,”at the National Cannabis Industry Association’s Northeast Cannabis Business Conference. Formerly Seed to Sale Show, #NECannaBizCon allows you to broaden your East Coast network, explore business opportunities, and learn from the latest regional insights at the biggest cannabis tradeshow to focus on the emerging Northeast market. Meet with NCIA members, policymakers, industry leaders, entrepreneurs, and service providers on 40,000 square feet of expo floor. It’s all happening February 19-20, 2020 at Boston’s Hynes Convention Center – Registration is now open!

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