The legal weed market is overflowing with green — bags and bags of dollar bills. Since marijuana is a federal controlled substance, and most banks won’t touch businesses involved with the drug, dispensaries and growers are drowning in cash. It's putting their businesses at risk and complicating efforts by local and state officials to reap the billion dollars in tax revenue the industry is projected to earn California each year, state officials say. But California’s head banker wants to change all that.
California state treasurer John Chiang, who is currently running for governor, is expected to announce a study Tuesday that would focus on setting up America's first public bank for weed businesses in California, according to a spokesperson. The plan is one of the recommendations Chiang’s working group on cannabis banking made in November.
“It’s a threat to public safety and the safety of people in the industry,” Marc Lifsher, a spokesperson for Chiang’s office, told VICE News about the current cash-heavy environment in the industry. “They have to lug around huge amounts of cash to pay their bills, pay their taxes. It makes them sitting ducks for organized crime.”
The current system also saddles local and state officials with the costs of counting thousands of dollars in cash, Lifsher said.
The state treasurer’s office says it will wait until the study is complete to declare a position on a public weed bank, but industry advocates are encouraged by the move.
“We are strongly supportive of efforts to explore and establish a public bank in California,” said Hezekiah Allen of the California Growers Association, a marijuana industry group, in an email to VICE News. “I suspect many of our members would bank with such an institution if one were established.”
Until the industry has access to mainstream financial services, Allen says, they’re stuck in a sort of cat-and-mouse game, moving their assets safely without outside interference.
“Our members move and store money the same way they have for decades — very carefully,” he said. “Avoiding both criminals and law enforcement are important goals of cash transport.”
Jeff Brothers, CEO of VetGrow, a California cannabis cultivator and extractor, said he supports bringing more banking access to the state’s weed businesses. But he’s not sure the state can solve the problem fast enough, since setting up a public weed banking entity could take years.
“California is eight times the size of Colorado, and it will become a really, really big problem for a legal industry to try to operate with the existing rules,” he said. “Short of Congress either rescheduling cannabis or passing some law that specifically mandates that the Federal Reserve system accommodates cannabis, it’s going to be untenable.”
And federal action on weed doesn’t look like it’s going to benefit cannabis banking any time soon.
At the beginning of January, Attorney General Jeff Sessions rolled back Obama-era guidelines shielding most marijuana businesses and states from federal prosecution, a move that reportedly blindsided regulators in the federal Treasury Department, who are reviewing whether they will roll back similar protections for banks involved in the state marijuana industry.
The Treasury Department did not respond to a request for comment.
In the meantime, Brothers said businesses in California are using ATM cards and small-time payment processors as go-betweens, incurring high fees in the process, or taking the risk of doing business with “open secret” local credit unions in the state that accept cannabis cash, which can easily be shut down by federal regulators at any time.
Elsewhere in the U.S., states have gotten creative : Credit unions and banks in Colorado offer marijuana businesses checking accounts (but not loans) to avoid federal seizure, and Hawai’i’s medical marijuana industry went entirely cashless for payments in 2017.
Lifsher, the California treasury spokesperson, said California’s study could begin in March and could finish as soon as this summer.