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Marijuana legalization in Missouri raises questions about cannabis banking

KANSAS CITY, Mo. — Missouri’s recreational adult marijuana use ballot measure could expand the demand for marijuana products by a lot if the pool of potential customers vastly expands.

Estimates say more than $60 billion are spend on legal marijuana products every year with future estimates continuing to climb.

One huge potential issue is where all that money goes, since large banks tend to shy away from the cannabis industry. Marijuana business owners often talk about having personal and business accounts shut down, forcing them to smaller state-run banks or credit unions.

“In 2009, we lost our first bank account,” said cannibus industry consultant Quantum 9 CEO Michael Mayes. “They just got rid of us. Without warning, they said, ‘You no longer have a bank account.”

The issue seems to be that FDIC Insured banks are concerned about running afoul of federal law, which still considers marijuana to be illegal even though various states have legalized its recreational use and even more have legalized it for medical treatment.

The bank’s reluctant persists even after the Financial Crimes Enforcement Network issued guidance in 2014 attempting to, “enhance the availability of financial services for, and the financial transparency of, marijuana-related businesses.”

Still, “for really any FDIC-insured bank, they won’t touch you,” said Clovr CEO Josh Mitchem.

It’s annoying but also dangerous because it forced the cannabis industry to rely heavily on cash.

“You’re paying your employees in cash, you’re paying your vendors in cash, there’s a lot of cash being exchanged hand to hand, it just creates a higher likelihood that there’s a mistake in accounting,” Mayes said.

Lack of access to banking institutions also creates challenges as Missouri voters consider legalizing adult use in November. If it passes, the potential customer pool would increase quickly, putting pressure on existing cannabis companies to scale up fast. If they were traditional businesses, they could buy equipment with business loans from banks. Since many banks won’t work with cannabis companies, they’re left to find other options that are generally not better.

“There are some equipment companies that will do their own internal financing,” said Mitchem. “But again, it’s really high rates. “You’re not getting five to six percent, these are ten to twelve, fifteen percent.”

The SAFE Banking Act is trying to help.

“Essentially, it’ll allow cannabis related business to be treated like any other busienss,” said Mayes. “Mainly that they have access to banking solutions.”

“It’s a scary thing for them to do something that’s federally illegal that the states says, ‘No, it’s fine to do this,” Mitchem said.

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