If you’ve been paying attention, you’d know that many companies in the cannabis industry, from growers to dispensaries, have a huge money issue. Due to the federal ban on marijuana, most banks won’t touch businesses dealing in the stuff, even if it’s legal in their state. This has resulted in many of these companies having to exist in a dangerous cash-only state, since they can’t run credit cards. Some businesses have reportedly been burying money to save for taxes, and carrying duffel bags full of hundreds of thousands of dollars to their town’s finance building to pay those taxes.
Nearing the recreational legalization that will go into effect in California in 2018, Los Angeles is hoping to change that.
The proposed public bank would be willing to work with cannabis-run businesses in the city, hopefully alleviating the financial headache of operating cash only: it’s also difficult for the local government to collect taxes in cash. The goal of the new bank would be to make things easier on marijuana industry folks while also benefitting the larger community. As planned, profits from the bank would go towards investments in small businesses and developers of affordable housing in LA.
Council President Herb Wesson proposed the measure during a speech at City Hall, and is expected to submit a motion to the Budget and Finance Committee to discuss feasibility.
This isn’t the first time banks have tried to find ways to work with the lucrative cannabis industry.368 credit unions, banks, and other insutitutions work with businesses in the industry on a limited basis, and one bank, Partner Colorado Credit Union, operates what they call a “safe harbor private banking program.” Over 80% of their clients are in the cannabis industry.
Public banks aren’t common; the only model LA may have to look to is the Bank of North Dakota, which was set up in 1919, which was created when farmers felt that the other banking options were investing in out-of-state industries. This report also comes as Oakland is considering options for making banking more feasible for marijuana-based companies. It’s tricky, but necessary until such a day as federal re-scheduling of cannabis becomes a reality.