The United States cannabis market was handed another loss last Wednesday when the House Appropriations Committee rejected a measure that would allow financial institutions to offer accounts to marijuana businesses without legal ramifications according to a report in Forbes. The proposed legislation would have protected banks who allow growers, producers, retailers and ancillary service providers who utilize their services. As it stands, the United States Treasury can penalize financial institutions who chose to work with marijuana businesses which have left many in the industry working in a cash-only capacity.
With the bill facing significant pushback, supporters of the legislation offered to extend the new banking bill only to the medical market. Ultimately, the committee voted on the original bill that included recreational businesses.
Stringent banking regulations continue to put cannabis businesses and their consumers in a tight bind as they continue to work in a mostly all-cash industry. The industry continually worries about safety, while more profound questions about taxes have come to light. In fact, Representative David Joyce (R-Ohio), one of the chief sponsors of the bill, cited safety as one of the primary reasons to change the banking laws for cannabis businesses in states that have legalized marijuana. In Colorado, the first state to legalize cannabis, dispensaries have been targeted by armed robbers because there is more profit in robbing a dispensary than knocking off a convenience store.
Letter to @USRepRodney & @NitaLowey advising them of our strong opposition to any amendment that would allow the marijuana industry full access to the American banking system. Drug cartels will be given the opportunity to launder money under the guise of marijuana normalization pic.twitter.com/y5a0gHPIUi
— National FOP (@GLFOP) June 12, 2018
Mitch Morrissey, the District Attorney for Denver, explained that criminals are going after businesses with more cash on hand. He told CNBC the thinking is, “You hit a 7-Eleven, you'll get 20 bucks. You hit a dispensary; you'll get $300,000 on a good day."
While there has been a general fear by legalization opponents that overall crime will increase, these examples do little to prove their case. In fact, Denver has seen a dip in crimes since legalizing marijuana. MSNBC reports that in Denver “violent crime (including homicide, sexual assault, robbery, and aggravated assault) fell by 6.9 percent in the first quarter of 2014, compared with the same period in 2013. Property crime (including burglary, larceny, auto theft, theft from motor vehicle and arson) dropped by 11.1 percent.”
Meanwhile, another issue created by the banking laws for legal cannabis businesses is how they pay taxes. Without access to traditional bank accounts, cannabis businesses are forced to pay their federal taxes in cash. Many are hand delivering cash to their local IRS offices to pay their taxes.
As CNBC reported, “[t]he volume of cash payments coming into the IRS from the legal cannabis industry this year has prompted the IRS to increase its cash-counting capacity at offices in Denver and Seattle.” As more states legalize cannabis and the federal government continues to prohibit banking, this could become a more significant problem for the IRS.