As Illinois gears up to legalize recreational weed, a couple of bills have been tabled to protect state-chartered banks that decide to accept cannabis businesses as clients.
Under federal law, any money from cannabis businesses is regarded as drug money and banks that accept such money may be prosecuted by the federal authorities.
Consequently, most banks have been reluctant to do business with marijuana companies even if the allure of the huge sums of money that can be made from the cannabis industry is strong.
The past years have seen medical cannabis companies struggling to find a bank that is willing to take them on, and this is the situation that the newly introduced bills seek to fix.
Last year, medical cannabis sales generated approximately 136.5 million, and that figure is likely to grow to $224 million by 2022 once recreational sales begin. This is a huge amount of money to be lying around in sacks or safes within cannabis business premises.
More practical problems like how to pay employees and clients get worse once businesses don’t have access to banking services. For example, Ascend Illinois, one of the leading medical cannabis firms in the state, narrates how they had to take several days to drive cash to different vendors and employees around the state when the bank they were using withdrew its services.
Such a scenario creates a huge attraction to criminals who would want to lay their hands on such a huge amount of cash.
It is also hard for state authorities to track whether the cannabis companies are meeting their tax obligations if there is no paper trail to follow in order to verify the volume of sales each month.
The passing of state laws to shield local banks from federal prosecution can help to remove some of the concerns that the banks may have.
While it is true that no bank or credit union has so far been targeted by the feds for doing business with cannabis companies, a state law would protect the banks in the event that a change in policy at the federal level exposes the banks to risks.
For example, President Obama’s administration had passed a policy not to prosecute banks that do business with cannabis firms in states that legalized marijuana. However, President Trump’s administration rescinded that policy, effectively making it possible for federal law enforcement agencies to go after banks that accept marijuana businesses.
Such fluctuations in federal policy are what the bills introduced by state Sen. Tol Hutchinson and state Rep. Jehan Gordon-Booth want to shield local banks against.
The sponsors of those two bills believe that just as the states have taken the lead in seeing marijuana legalized, they too must play a leading role in ensuring that banking laws are reformed to accommodate those cannabis businesses. The Flowr Corporation (TSX.V: FLWR) (OTC: FLWPF) and The Green Organic Dutchman (TSX: TGOD) (OTCQX: TGODF) wish that such laws were passed much earlier so that legitimate cannabis businesses stop being treated like second-class entities.
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