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What's Next for Cannabis Banking?

The California Legislature passed Senate Bill 51 last week, allowing California state-chartered banks and credit unions to provide banking services for the states’ cannabis businesses. This legislation covers 40.02 million California residents, but will it be a powerful enough move to help sway the Senate Banking Committee and Chairman Michael Crapo to move forward on the SAFE Banking Act? The Federal level SAFE banking Act was endorsed in a letter last week by all 50 State Banking Associations and the American Bankers Association. The act is expected to appear in a house vote in June.


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What’s the next step for California licensed cannabis business? There will be a wait while banks apply for a limited-purpose state charter allowing them to provide depository services to state licensed cannabis businesses. Bill 51 passed only ten days after the swearing in of Manuel P. Alverez as Commissioner of the California Department of Business Oversight. The Commissioner of Business Oversight and the Department of Business Oversight will administrate the new Cannabis Limited Charter Banking and Credit Union Law.

The banking struggle is not limited to California. State licensed cannabis businesses across the nation currently accept cash only, forcing them into a vulnerable position concerning employee safety by making cannabis businesses and employees a target for violent criminals. The businesses are also forced to pay their bills, including rent and taxes using cash, making even normal business logistics a time consuming and burdensome process.

In California, the cash only process also makes it easier for black market cannabis businesses posing as legitimate business to take a large share of the market. The multitude of illegal cannabis operations avoid taxes and legal operating costs. This has left California cannabis enforcement overwhelmed and with far less income for taxed cannabis sales than anticipated. Legitimate cannabis business owners are struggling to compete with the states’ booming black market. The ability to process credit cards may help these businesses compete. California has also passed Assembly bill 286 to address this issue, cutting the excise taxes and suspending the cultivation tax for 2022 to help the legitimate market compete. Colorado has nearly the same number of legitimate cannabis stores while only having one-eighth of the population.

To see the progress of the federal SAFE Banking Act at, click here.

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