Alcohol and gambling both were outlaw industries. Today, both are significant contributors to the financial infrastructure of many states, including Nevada. Is the cannabis industry next?
Cannabis has become a multi-billion dollar industry. Though, despite its legalization in states like Nevada, it continues to be federally classified as a Schedule 1 drug, on par with drugs like heroin.
That means cannabis businesses have not been able to bank like other business; it’s been primarily a cash industry because cannabis remains illegal on a federal level and banks are governed by federal laws.
"Despite the fact that at a state level, cannabis is legal, the federal laws that govern banking kind of overstep that legality on a state level," said Zara Ehasz, a CPA and the director of finance at the Cannavative Group.
He said Cannavative, a Nevada-based business, got their first account in 2019 with a bank in Colorado.
"We had to hire all kinds of intermediaries to transport our cash from Nevada to Colorado, which was a bank that did accept cannabis money without having to lie about who we were. There’s no money laundering; they know exactly what we do and they accept our money."
In addition to a million dollar fee for a cannabis business license, bank fees for these businesses are substantial.
"Typically, we’re used to seeing about $5,000 of bank fees a month for sending out wires, monthly banking fees, just to hold the account for each checking account, and .75% maxed out at $4,000 per month. For a normal business, you’re paying a hundred at the most.”
And there’s courier fees.
"What we’re paying just to move cash around, just to have a bank account, is close to $7,000, $8,000," Ehasz said.
“We worked with our regulators on the national and state level," said Michael Thomas, the senior vice president of communications at Greater Nevada Credit Union, based in Reno.
The credit union launched a pilot program for cannabis banking in 2020 and is now offering banking services to cannabis businesses.
"The folks that live and work in the state of Nevada, that are supporting this industry, they deserve to have access to service, and we found a way to do it, not waiting for the federal regulations to pass," Thomas said.
He said larger banks could do the same but are waiting for legal changes.
The S.A.F.E. Banking Act, which stands for "secure and fair enforcement," has been introduced in Congress. It would essentially limit the risk for banks, which technically could be charged with aiding and abetting, a federal crime. The act is meant to harmonize federal and state statutes.
While the S.A.F.E. Banking Act has received bipartisan support during the past decade, it remains under consideration. Proponents are hoping re-classifying cannabis from a Schedule 1 drug to a Schedule 3 drug could lead to quicker changes in the cannabis industry.
