Why Do Cannabis Operations In Legal States Need Different Banking Solutions?

One of the most frustrating parts of establishing a cannabis-centric business is finding out that significant portions of the banking system are off-limits to your enterprise. This can seem especially perplexing after watching your state's politicians celebrate the progress they've made by legalizing marijuana, edibles, oils, and other products. Worse, this puts a legal business in the dangerous position of being an all-cash operation.

Fortunately, cannabis banking solutions are available in most states. Let's look at why this weird situation exists and how your company may have to navigate it.

Seriously, How Is This Even a Problem?

The problem with setting up a bank account for a cannabis dispensary starts with a lingering conflict between state and federal laws. Cannabis may be legal in your state, but it's not legal at the federal level outside of a complex licensing regime only available to a handful of medical research institutions.

On balance, the federal government largely ignores these activities as long as they stay within the borders of each state. However, the problem appears when even a penny of the money moves into federal jurisdiction. National banking activities fall under federal jurisdiction, and banks will never risk their federal licenses to facilitate what the feds might interpret as drug business activity across state lines.

Cannabis Banking Solutions

A notable solution to this problem is to keep every penny within the legal jurisdiction of your state's banking laws. Unfortunately, that requires dealing with a bank that doesn't have a federal charter. Most banks like having federal recognition because it allows them to provide services across state lines. If you've ever used your ATM card in a different state, you've taken advantage of this feature of the banking system.

The problem is that a bank can't risk letting a penny of cannabis money move into the federal jurisdiction. If you want a bank account for a cannabis dispensary, you're going to need a bank that only operates within your state. Foremost, you need to be upfront about your company's cannabis operations whenever you talk with bankers. Many state-only banks now offer services aimed at cannabis businesses so the key is to look for ones that advertise their willingness to do business with your company.

Containment

Even once you have the right type of bank account, you need to strictly contain your company's activities within the state. Avoid making purchases or payments across state lines. If you have non-cannabis operations, form them as separate entities with separate accounts to prevent any bleeding over of cannabis money.