Cannabis Has A Banking Problem, But A Solution May Be On The Horizon

By: Spencer Israel

This will go down as the decade where cannabis went from the frontier to the mainstream.

It was only in 2012 that Colorado and Washington became the first two states to legalize recreational marijuana. By 2014, so had Alaska, Oregon, and Washington D.C. By 2016, five more states had done so.

Today, 46 states have some form of cannabis legalization, whether it’s for medicinal or recreational use, and another 8 states are expected to take the issue up this year.

On the federal level however, things remain murky. While there is growing support for the U.S. to join Canada and Uruguay in fully decriminalizing cannabis, a change to the federal law is not imminent. And until that happens, there remains a key issue that is standing in the way of the industry’s growth: banking.

Naturally, as the cannabis market has bloomed over the past few years, so has investor interest. But aside from the legalization question, banking, or lack of it, remains the biggest outstanding issue for the industry right now.

As it stands, most U.S. financial institutions are unwilling to work with cannabis-based businesses due to the federal prohibition. Banks have consistently made this known.

These lack of financial services—and institutional capital that comes with it—has essentially tied the industry down, and forced license producers, operators, and retailers to turn to alternatives like banking in other countries or only accepting cash.

But there is hope.

The 2018 Farm Bill that decriminalized hemp was a major stepping stone for the industry, and there are two key pieces of legislation on the table that could change the game even further.

One, the Strengthening the Tenth Amendment Through Entrusting States Act (or STATES Act), introduced last year in both the House and Senate, would protect businesses operating in states with legal cannabis from federal enforcement. The bill has some bipartisan support, including from Attorney General William Barr, but it’s unclear when it would come up for a vote.

And then there’s the Secure and Fair Enforcement Banking Act, or SAFE Banking Act which would protect financial institutions who work with state-approved cannabis businesses from federal penalties. The House Financial Services Committee voted with bipartisan support on March 28 to approve the bill for a full-body vote, which is likely to take place in the coming weeks. This marks the furthest a cannabis banking bill has ever made it through Congress. A corresponding bill was also introduced in the Senate last week.

Of course, momentum is one thing. Laws are another. More and more companies may be lobbying Congress to make it easier for banks to enter the marijuana market, but whether any legislation can actually get through Washington’s pipes is a whole other issue.

For now, the industry will have to settle for small victories, like Fed Chair Jerome Powell saying he wants more clarity, and Treasury Secretary Steve Mnuchin saying he supports a change.

Active Trading with Lightspeed

Lightspeed provides active traders with all the tools required to help them find success in stock trading, and we have been developing and honing our active trader platform to offer the best possible user experience in the marketplace. With the intuitive interface layouts and institutional quality stock and option scanners, we aim to help traders reach their goals, no matter what their strategy is. We also offer our clients some of the lowest trading fees in the industry.

For more information on a professional trading platform with Lightspeed, please call us at 1-888-577-3123, request a demo or to open an account.

Lightspeed Financial Services Group LLC is not affiliated with these third-party market commentators/educators or service providers. Data, information, and material (“content”) are provided for informational and educational purposes only. This content neither is, nor should be construed as an offer, solicitation, or recommendation to buy or sell any securities or contracts. Any investment decisions made by the user through the use of such content is solely based on the users independent analysis taking into consideration your financial circumstances, investment objectives, and risk tolerance. Lightspeed Financial Services Group LLC does not endorse, offer nor recommend any of the services or commentary provided by any of the market commentators/educators or service providers and any information used to execute any trading strategies are solely based on the independent analysis of the user.

You may also be interested in...

The IPOX® Week, November 29th, 2021
Read More
The IPOX® Week, November 22nd, 2021
Read More
The IPOX® Week, November 15th, 2021
Read More
The IPOX® Week, November 8th, 2021
Read More

Try the demo

Compare Platforms
Check the background of this firm on FINRA's BrokerCheck

Our website uses cookies to improve the performance of our site, to analyze the traffic to our site, and to personalize your experience of the site. You can control cookies through your browser settings. Please find more information on the cookies used on our site in our Privacy Policy. By clicking OK, you agree to allow us to collect information through cookies.