Due to lockdowns and stay-at-home orders, as well as legalization adoption, the US cannabis industry hit a record $17.5 billion in sales last year, a 46% increase from 2019. For this year, sales are expected to jump more than 20%, but businesses have a different problem ...
They’re bursting at the seams with cash they’ve got nowhere to put as they remain shut out of the banking system.
Cannabis is legal in most states but remains illegal at the federal level, which means that most federally regulated banks won’t service the industry, fearing various federal civil and criminal problems.
Many banks and financial institutions won’t even touch it, so cannabis businesses have been forced to operate in cash or use smaller financial institutions such as credit unions.
Given their limited options, some 70% of cannabis businesses resort to cash-run operations.
According to a report from research firms Headset.io and New Frontier Research, US cannabis companies have some $10 billion in cash to deal with, and moving it and using it requires them to get rather creative. Cash creativity, however, isn’t something the IRS appreciates, so everyone’ls at risk here.
Burying profits in cash in the backyard or transporting them in the trunk to pay suppliers might end soon, though.
In the last few months, the US authorities have started taking steps towards removing barriers to the development of a national industry for cannabis.
Last month, the U.S. House of Representatives passed SAFE Banking Act legislation that would allow banks to provide services to cannabis companies in states where it is legal.
The SAFE Banking Act of 2021 will now be entering the US Senate, where Senate Majority Leader Chuck Schumer has previously indicated his support for the cannabis banking bill, along with various other cannabis policy reforms.
The SAFE Banking Act was previously introduced in 2019 but died in the Senate after passing in the House.
In February, three top Senate Democrats, Schumer included, announced a push to pass sweeping legislation this year that would end the federal prohibition on marijuana on a Federal level.
Schumer, Senator Cory Booker of New Jersey and Ron Wyden of Oregon said they would release a draft on “how best to legalize and regulate cannabis and cannabis commerce in a post-prohibition America”.
The Senators stressed that passing the legislation would be a priority for the Senate. Senate leader Schumer reiterated said he hopes to see an end to the drug’s prohibition by next April.
Fifteen states and Washington, D.C., have now legalized marijuana for recreational use for adults over 21. Thirty-six states currently allow medical marijuana use, while 15 states do not have any laws that allow marijuana.
A few other states were also preparing the legalization for last year; however, the pandemic consumed bureaucratic attention and social distancing has hindered any ballot drives.
In its new study, New Frontier Data projects that cannabis sales in the U.S. will reach $35 billion by 2025.
By Charles Benavidez for Safehaven.com