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Banking Activity Increases In States That Legalize Marijuana

March 3, 2022

According to a recent study, despite the risks associated with marijuana, banks do more business in places where it is legal.

On the other hand, the study’s findings indicate that there may be a link between state-level marijuana reform and increased activity, though the reasons for this association remain unknown. This, on the other hand, does not show that the two parties have a relationship.

For this study, the researchers examined regulatory filings from the Federal Deposit Insurance Corporation (FDIC) from 2011 to 2016 to see how they changed over time. According to the Federal Reserve, states that have legalized marijuana have seen a significant increase in banking activity. (Federal Reserve image courtesy of the Federal Reserve.) Loans and deposits are both types of deposits (deposits and loans).

Corporations that distribute federally controlled materials continue to do business with banks and credit unions, despite the possibility of fines.

According to the report “THC and the Federal Deposit Insurance Corporation: Implications of Cannabis Legalization for the Banking System,” the opposite is true. Some argue that uncertainty causes people and businesses to be more cautious, rather than the other way around.

Data for the bank quarter were collected from 6,932 different banks in 46 different states, totaling 150,566 observations over the bank quarter. More deposits were made due to the change in the law, and more bank loans were extended as a result of the change in the law.

According to our data, bank deposits and loans increased dramatically shortly after recreational marijuana was legalized in the United States.

It is only natural for the banking industry to succeed and expand once a new market has been established. Even though only a few financial institutions in legal jurisdictions have chosen to work directly with cannabis companies, the banking industry is expected to expand in the coming years. Aside from dispensaries and grow operations, the new marijuana industry relies on a variety of other marijuana-related businesses.

According to the most recent available data, 706 financial institutions were still willing to do business with marijuana consumers at the end of June. Six hundred eighty-nine people were employed in the third quarter of this year, and 747 people were employed in the fourth quarter of this year. That represents a drop in the bucket. Consider the following situation as an example:

Can you tell me how eager financial institutions are to go above and beyond when engaging with marijuana users?

Researchers discovered that banks were not less likely to accept deposits or make loans due to the risk associated with regulatory uncertainty. However, whether or not this is true could be determined by various factors.

According to some analysts, this could indicate that banks were either unconcerned about the risk of accepting cannabis-related deposits or were confident that regulations would change to meet the demands of states that have legalized marijuana.

As a result of this guidance, the Obama administration’s Financial Crimes Enforcement Network (FinCEN) issued the first instructions to banking institutions in the organization’s nearly two-decade history on reporting cannabis-related enterprises.

At this point, federal reform appears to be a real possibility. For example, the Secure and Fair Enforcement (SAFE) Banking Act was introduced jointly by Democrats and Republicans in Congress and was passed unanimously by both chambers. As a result, there has been a significant increase in financial institutions reporting customers involved in the marijuana industry.

It has been passed by the House of Representatives five times since then, but the Senate has made no statement on the subject. According to the most recent available data, there has been no significant increase or decrease in the number of banks that have reported having marijuana accounts since the beginning of 2019.

According to the study’s findings, there appear to have been no prosecutions, withdrawals, or suspensions of federally insured status against any institutions. According to this scenario, if these negative consequences did not occur frequently enough, “banks would not react to legislative uncertainty.”

Financial institutions are more confident that The government will change regulations in their favor due to increased state involvement in assisting financial institutions.

Following the recent failure of a comprehensive plan to protect banks that do business with state-legal marijuana businesses from being sued by people who use the substance, some legislators have expressed skepticism about the prospects for marijuana reform.

Despite having a majority in the House and the President’s support, Democratic leaders in Congress have been unable to move marijuana banking reform legislation forward.

Allowing banks to work with state-legal marijuana businesses would also “without a doubt” help the Internal Revenue Service collect tax revenue from the marijuana industry.

A bipartisan coalition of twenty governors from both parties worked together in the United States Congress to pass cannabis banking reform as part of a major military package. This was made possible by a bipartisan coalition of twenty governors from both parties who collaborated to effect change.

There has been much discussion in the marijuana industry about whether minor changes in banking regulations could help to make the world an equal place overall.

Rodney Hood, a member of the National Credit Union Administration’s board of directors, argued in an opinion piece for Marijuana Moment that legalizing marijuana is an unavoidable step toward a more prosperous society.