• 99 days Could Crypto Overtake Traditional Investment?
  • 104 days Americans Still Quitting Jobs At Record Pace
  • 106 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 109 days Is The Dollar Too Strong?
  • 109 days Big Tech Disappoints Investors on Earnings Calls
  • 110 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 112 days China Is Quietly Trying To Distance Itself From Russia
  • 112 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 116 days Crypto Investors Won Big In 2021
  • 116 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 117 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 119 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 120 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 123 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 124 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 124 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 126 days Are NFTs About To Take Over Gaming?
  • 127 days Europe’s Economy Is On The Brink As Putin’s War Escalates
  • 130 days What’s Causing Inflation In The United States?
  • 131 days Intel Joins Russian Exodus as Chip Shortage Digs In
Defensive Stocks Are Your Best Bet Against Inflation

Defensive Stocks Are Your Best Bet Against Inflation

Stretched asset valuations, ultra-high inflation,…

Charles Benavidez

Charles Benavidez

Staff Writer, Safehaven.com

Charles Benavidez is a writer and editor for Safehaven.com. Charles is located in New York City and has over 5 years of experiencing covering financial…

Contact Author

  1. Home
  2. Investing
  3. Stocks

Cannabis Has A Major Cash Problem

Cannabis Has A Major Cash Problem

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. 

Some 68% of Americans currently favor legalizing marijuana, which is a record high, while the legal cannabis industry market topped $13.5 billion in 2019 and reached $19.7 billion last year.

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

Back to homepage

Leave a comment

Leave a comment