It seems like a strange irony that a 7 billion dollar industry is unable to gain access to the banking system in the United States. Especially when the businesses trying to open a checking account are perfectly legal within their state. This is the reality of the legal cannabis industry, where business is conducted in cash while heaps of it are sent to the IRS every year. If that seems like a strange set of circumstances, that’s because it is and Senator Elizabeth Warren of Massachusetts thinks so too.
Warren’s home state voted to legalize recreational use in November becoming one of 28 states that have legalized either medical or recreational use. But the federal government continues to classify marijuana as a Schedule 1 drug under the Controlled Substances Act. As a result, federal regulations which govern banking have made financial institutions wary of the money that their regulators still consider dirty.
This legal grey area has left those in the cannabis industry on a virtual banking blacklist, unable to do business without the use of cash or private vetting services like Hypur, a background checking service which acts as a middleman between businesses and banks.
As a member of the Senate’s Banking Committee, Warren and nine other senators sent a letter to the Financial Crimes Enforcement Network in December of 2016.
The letter points out that it’s more than just growers and dispensaries that are affected. Chemists, security guards, and even lawyers have been denied bank account and credit card applications because of their association with the industry.
The letter goes on to say that preventing these legitimate businesses from accessing the country’s banking system, “serves no one’s interest” pointing out that such a policy invites more criminal activity rather than preventing it.
Considering that many of these businesses are forced to hold massive amounts of cash, they are exposed to robberies while also being expected to report their income to tax collectors that consider them an illegal industry.
“It’s just a plain old safety issue.” Warren has said, “You don’t want people walking in with guns and masks and saying, ‘Give me all your cash.’”
As the result of changes made by the Treasury Department under former President Barrack Obama, the number of banks that have opened their doors to the cannabis industry rose from 51 to 301 in just two years. However, the current administration with it’s tough on drugs policy seems unlikely to help Warren and her colleagues to increase that number.
In addition to the opposition, she may face from the White House and Attorney General Jeff Sessions, a long-time opponent of legalization; Warren also faces debate in the Senate. Among those opponents is Senator John Cornyn (R-TX) who tweeted in criticism of Warren’s letter claiming it was the reason Democrats have lost recent elections.