Shut out of the traditional banking system by federal laws, the U.S’s largest legal marijuana market could benefit if California approves a measure creating a special class of banks to handle the cannabis industry’s money.
The state Senate voted 35-1 on May 21, 2019, to pass SB 51, which would allow people to start banks and credit unions that could accept cash deposits from marijuana retailers.
Those banks could issue special checks to the retailers that could only be used to pay taxes, rent, or vendors based in California.
State lawmakers also say such banks would make it easier for licensed marijuana retailers to pay their taxes, which fell far short of expectations in the first year after legalization.
“This is as close as we can get until the federal government changes its policy,” said Democratic state Sen. Bob Hertzberg, the author of the bill that now goes to the Assembly.
— Bob Hertzberg (@SenateHertzberg) May 21, 2019
Marijuana has been legal in California since Jan. 1, 2018, but it’s still illegal under federal law.
U.S. statutes also prohibit banks from handling money that comes from criminal activity. Banks that knowingly accept money from licensed marijuana businesses haven’t been able to get federal deposit insurance. In Congress, a bill to allow marijuana businesses in states that have legalized cannabis has bipartisan support.
Meanwhile, marijuana businesses can’t get debit or credit cards or use checks, according to a report by legislative staffers.
The result, according to Hertzberg, is “millions of dollars buried in barrels.” He called it a public safety issue, putting retailers at risk of robbery.
Marijuana tax collections were $100 million short of expectations in August 2018. In May 2019, marijuana revenue projections by the state through June 2020 were cut by $223 million.
Republican state Sen. Jeff Stone said the state is losing “probably hundreds of millions” of dollars in taxes each year because marijuana retailers can’t write a check to the state.
“They’ve got to come in with wheelbarrows to carry in all the cash,” he said.
Retailers have also blamed low tax collections on sluggish sales due to a still-flourishing unlicensed market. Also, the state invested $60 million into a seed-to-sale platform, what it calls “track-and-trace,” and has just nine retailers out of 627 licensed shops using it.
In mid-May 2019, lawmakers rejected a bill that would have temporarily lowered taxes on growers in an effort to help licensed retailers compete with the unlicensed sellers.
— Adam Beam