The legal marijuana industry in California loses another battle for access to banking.
Since the first states have legalized cannabis, entrepreneurs working in the industry have been fighting for access to banking services. As marijuana continues to be illegal on the federal level banks can't work with cannabis ventures in even legal states without risking their own operations. One potential fix to this issue would be to establish state-run banks that can provide banking services to the local marijuana economy—but this won't be happening in California anyway.
The plan to implement a cannabis friendly bank in California has been discussed as long as legalization started becoming a likely scenario. And back in May it looked like the canna-bank might just come to be, as a bill was passed in senate that paved the way for the bank to appear. However, the implementation has been hung up with the Cannabis Banking Working Group chaired by State Treasurer John Chiang. The Group released a 151-page feasibility report on Thursday that said getting the new bank up and running would be too expensive and risky.
The report says it would take California six years to get the bank running, costing $35 million, would take 12 years to break even and at least 25 before the government could reap the benefits of any dividends. And money aside, there still would be no garuntee of safety from federal prosecution.
"The inconvenient reality that a definitive solution will remain elusive until the federal government takes action," Chiang said during a hearing when the report was released. "They must either remove cannabis from its official list of banned narcotics or approve safe harbor legislation that protects banks serving cannabis businesses from prosecution."
Chiang also acknowledged that the current cash-only system the California cannabis industry is forced into is far from ideal. It makes tracking taxation of these business difficult, and means business owners are vulnerable to theft and robbery when transporting large amounts of cash to the tax collector's office.
"It is not only unfair, but a public safety risk to require a legal industry to haul duffel bags of cash to pay taxes, employees and utility bills," Chiang said. "The reliance on cash has painted a target on the backs of cannabis operators."