As of last week, the California State Senate passed SB 930, a bill that would legalize cannabis dispensary banking. This new bill would create chartered banks and credit unions that would service licensed marijuana businesses across the State of California. The bill now moves on to the State Assembly where it will likely pass.
The Banking Problem
Cannabis retailers have long been plagued with the problem of having large sums of cash with nowhere to put it. The lack of financial institutions willing to work with marijuana businesses has presented a significant risk to those who transport and deposit currency. Paying taxes, employees, rent / utilities, and expenses in cash has been the only way for dispensaries to make transactions.
It is expected that legal medical and recreational marijuana sales will generate $600 million in taxes for California in the first year alone. Without cannabis dispensary banking institutions, all of these taxes would need to be paid in cash. California Treasurer John Chiang has been seeking to solve the potential banking problems facing the cannabis industry.
SB 930 Proposal
Chiang recently stated that, “the public bank is one of the pathways that we want to further explore, to see what can be offered to address the holes that need to be filled in regard to making sure that cannabis businesses get to operate above board and out of the shadows.”
The proposed SB 930 bill would establish state banking institutions that would be more limited than traditional banks but would make it possible for licensed marijuana retailers to make deposits and pay bill with checks rather than cash. Additionally, dispensary owners could write check to purchase products from California based vendors.
Federal Financial Reform
California Senator Bob Hertzberg, one of the co-sponsors of SB 930, notes that, “The status quo for our growing legal cannabis industry is unsustainable. It’s not only impractical from an accounting perspective, but it also presents a tremendous public safety problem. This bill takes a limited approach to provide all parties with a safe and reliable way to move forward on this urgent issue.”
There have been several pushes from states with legal cannabis to reform the federal policy on cannabis dispensary banking. They have also attempted to pass legislation to protect financial institutions that offer account services to licensed marijuana businesses but none have been successful to date.
If SB 930 were to be passed by the California State Assembly, any financial institutions authorized by the bill will be regulated by the Department of Business Oversight. Hopefully this will prove to be a groundbreaking move by the State of California and encourage other states sponsor similar legislation to give the rapidly expanding cannabis industry the