The business of legal weed poses banking challenges

Businesses that grow or sell cannabis still face a challenge when it comes to what to do with the money they make.

At the Higher Path dispensary in Sherman Oaks, customers can choose from dozens of products. From cannabis chocolate to cannabis pet treats. But when it comes to paying for it all- the choices are much more limited. Most customers pay in cash.

Dispensary owner Jerred Kiloh says this is pretty much the norm for cannabis businesses. “There’s very few retailers that take credit cards. And if you go down to the rest of the industry, which are manufacturers, cultivators and all the other aspects of the industry, they all take cash or deal in cash.”

That’s because those businesses can’t open bank accounts. Banking is federally regulated and most banks are unwilling to serve an industry that is still illegal in the eyes of the federal government. Even when a business opens an account, it doesn’t always stay open. Kiloh says he’s had nine accounts shut down in fifteen years

Without access to bank accounts cannabis businesses often end up paying for everything from wages to taxes in 10, 20 or 100 dollar bills.

Spokesperson for the California Bankers Association, Beth Mills, says this is concerning. “It’s a public safety issue you’re going to have a multibillion dollar industry primarily operating in cash.”

The marijuana industry is still viewed as an illegal enterprise at the federal level, meaning banks can’t touch it. According to Mills, the biggest challenge has been the lack of clarity from the federal government about what banks can and can’t do.

“We feel very strongly needs to be resolved one way or another,” says Mills.

California State Treasurer John Chiang wants California and other states to lobby the federal government to make it easier for banks to take money from cannabis businesses. He’s also looking at alternative solutions, including starting a state-run bank.

But there are limits to what a state or locally run bank could do. The federal government could still make it impossible to transfer money to any other financial institution.

Meantime, businesses like Kiloh’s are looking for workarounds. At the Higher Path dispensary they’ve even found a way for customers to use their credit and debit cards in the form of a Linx card, one of several third party services that have sprung up to fill the gap left by banks. It essentially allows the customer to add cash to a gift card.

As the industry in California grows the government may feel the pressure to make it easier for cannabis businesses to open bank accounts. “Sooner or later they’re going to see a $7 billion a year industry in California and be like why aren’t we part of it?” says Kiloh.

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(Photo: Saul Gonzalez)