California Cannabis Business Banking Measure Rejected
Cannabis banking was one of many measures that were shot down by the appropriations committees of both houses.
Earlier this year, lawmakers in California proposed an idea that would give marijuana businesses access to banking resources. But this week, that proposal was rejected. Now, with the California cannabis business banking measure rejected, cannabis businesses in the Golden State will have to continue operating without easy access to banks.
No Banks for Marijuana Businesses
On Thursday, the appropriations committees of both houses voted on a slew of bills. More specifically, they voted to reject or approve more than 600 unique proposals. When everything was said and done, lawmakers ended up rejecting somewhere around 150 of those bills.
One of the bills on the chopping block was Senate Bill 930. This proposal aimed to alleviate some of the challenges faced by marijuana companies in California. In particular, banking problems.
This bill presented a plan to license a number of state banks. Instead of being federally chartered, these banks would be privately financed. Free from direct federal oversight, these banks would theoretically be able to work closely with marijuana businesses.
The bill was introduced by Senator Bob Hertzberg. He said that this type of privately-financed, state-level bank would be able to issue checks to marijuana businesses.
He also said such banks could provide important financial tools to make it easier for marijuana businesses to carry out regular operations, including paying rent and taxes.
After a series of reviews, including an official legislative analysis, lawmakers apparently felt the bill was still too risky. In particular, the LA Times said that many politicians in the state were worried about creating tensions between these state banks and the federal government.
One way or another, lawmakers ultimately chose to reject Senate Bill 930. As a result, there will not be any substantive new changes to the types of financial resources cannabis businesses can access and use.
Cash Only Continues
Banking has been one of the biggest challenges for the legal cannabis industry. In general, businesses that deal directly with marijuana, especially dispensaries, have a very hard time finding banks or credit companies to work with.
This is because of federal prohibition laws. Even though weed may be legal in a growing number of states, it remains illegal at the federal level. And most financial institutions don’t want anything to do with federally illegal activities.
As a result of all this, the typical cannabis business is forced to operate as a cash only enterprise. This presents a number of challenges.
For example, marijuana businesses can have a harder time accessing capital than other types of businesses. That’s especially true when nobody is willing to extend credit lines.
Similarly, having cash on hand presents security risks. Many times, dispensaries are especially vulnerable to being robbed. To counter this, cannabis businesses have to spend time and resources on beefed-up security measures.
Finally, lacking access to regular bank accounts and credit can also present unique challenges for many things that are simple day-to-day operations at other businesses. This includes cashing out customers and handling payroll.
Recognizing all this, many in California have been working to come up with a solution. Senate Bill 930 was one possible idea. But, after the bill was rejected this week, cannabis businesses will need to come up with other alternative solutions.