While 10 states and the District of Columbia have legalized it, the federal government hasn't. And that can throw a big financial wrench into the workings of any cannabiz. Without access to FDIC-insured banking services -- like small business loans, cashless transactions, and even checking accounts -- even legal marijuana businesses can struggle to comply with local, state, and federal laws.
Last week, Federal Reserve Chairman Jerome Powell acknowledged conflicting federal and state laws on marijuana legalization put bank supervisors in a "very difficult place," hopefully acknowledging that current federal regulations that deter banks from working with legal growers and dispensaries must be amended.
New Jersey is just the latest state to consider legalizing recreational marijuana use, and Senator Robert Menendez asked Powell about the Fed's stance on cannabis banking. "I think it would be great to have clarity," Powell said while appearing before the Senate. "It puts financial institutions in a very difficult place and puts the supervisors in a difficult place, too. It would be nice to have clarity on that supervisory relationship."
Not only would further guidance be helpful for bank regulators, but for cannabiz entrepreneurs as well. The hodgepodge of local, state, and federal marijuana laws -- hemp cultivation and cannabidiol oils are now OK, but the FDA still prohibits companies from adding active drug ingredients that in food and drinks -- is hard enough to navigate. But managing a business's money, which almost exclusively must be cash because of federal bank bans, is another regulatory headache altogether. The hope is that Powell's words become federal action -- perhaps relaxing requirements that banks and other financial firms file "suspicious activity reports" regarding cannabiz clients.
Room to Grow
Until that federal action happens, however, marijuana-related business must be careful. Some states, like Colorado, have begun authorizing exclusively intra-state credit unions to handle pot enterprise accounts. Before placing your company's funds anywhere, or starting your own marijuana banking enterprise, check with a local commercial attorney.