“There’s a high degree of urgency, so it’s something we need to start talking about,” Hoffman said in an interview. “Unfortunately, it’s a real possibility” that the recreational industry won’t have access to any banking services, he said. “We’re working as hard as we can to preempt that, but we can’t force any bank or credit union to service this industry.”

With recreational pot sales scheduled to begin in July, Cannabis Control Commission chairman Steve Hoffman said no local banks or credit unions have committed to providing financial services to recreational marijuana shops and other licensed cannabis operations, wary they will run afoul of federal restrictions.

Massachusetts should consider creating a state-run bank to serve recreational marijuana companies, the state’s top cannabis official suggested Wednesday, warning that an all-cash industry would create security risks and regulatory headaches.


Without banks, marijuana businesses would have to deal exclusively in cash — for sales to customers and between retailers and suppliers, to meet payroll, and make tax payments to the state. Storing and handling potentially tens of thousands of dollars could invite robberies, law enforcement officials warned, and complicate tax collections and efforts to track the sale of the drug and prevent it from being diverted to the black market.

“If word gets out on the street that there’s large amounts of cash on hand at these places, someone’s going to roll the dice and go in with weapons,” said Chelsea police chief Brian Kyes, vice president of the Massachusetts Major City Chiefs of Police Association. Hoffman’s suggestion “for some mechanism that would remove the cash,” Kyes said, “would certainly be a positive step.”

The shortage of banking services is the latest challenge as Massachusetts approaches a July 1 deadline to begin sales of legal pot. The cannabis commission has been sparring with the Baker administration over the scale of the industry at the outset, with the governor advocating for a smaller, more controlled rollout and the commission proposing an expansive range of retail options.


Baker’s office was cool to the idea of a government bank Wednesday, saying it has no plans to create such an entity.

Hoffman said he has not discussed the idea with other state officials, and acknowledged such an entity would likely need to be authorized by the Legislature, where some lawmakers remain steadfast opponents of marijuana despite legalization by voters in 2016.

He said discussions with Massachusetts financial institutions left him feeling pessimistic, with some executives saying they doubted they could convince their directors, or members, in the case of credit unions, to overcome their reservations at a time when US Attorney General Jeff Sessions has threatened to crack down in states where the drug is legal.

Currently, Century Bank of Somerville is the only Massachusetts bank that accepts deposits from the state’s medical dispensaries, according to industry executives.

It’s unclear if Century will offer services to recreational pot companies, and the bank did not return requests for comment. But a federal budget rider that offers protection to businesses involved in medical cannabis does not apply to recreational pot.

Even if Century takes the plunge, industry experts doubt one bank can handle the Massachusetts recreational industry, which is projected to generate more than $1 billion in sales by 2020. There’s also some fear in the industry the Trump administration will rescind federal banking protections for cannabis that were put in place under President Obama.


Larger banks, which have federal charters or operate across state lines, generally refuse to work with marijuana companies for fear of triggering a crackdown. In their place, a meager patchwork of state-chartered banks and credit unions have entered the pot business in other states where the drug is legal.

But pot companies frequently face long waits to open accounts and pay high fees for even basic services, thanks to a lack of competition and demanding compliance requirements faced by banks.

Executives at medical dispensaries that are considering entering the recreational business said they were intrigued by Hoffman’s idea; dealing in cash would be a nightmare, they said, requiring them to hire security, and complicate basic functions such as paying employees and settling bills.

“It’d be untenable not to have any banking in Massachusetts — incredibly inconvenient and risky,” said Keith Cooper, chief executive of the Revolutionary Clinics dispensary in Somerville. “Chairman Hoffman’s suggestion and creativity around trying to create a backstop is admirable, and I’d support it 100 percent.”

However, Kim Napoli, who works for the New England Treatment Access medical marijuana group, wondered if illicit marijuana operators would be reluctant to go legitimate and be licensed — a major goal of the state’s legalization law — if they are required to sign up for a government bank account.

She said the best solution would be to change federal law to allow more banks to handle marijuana money, increasing competition and making it easier for states to track pot transactions.


“Ideally, we’d like to operate like anyone else,” said Napoli, who stressed she was not speaking on behalf of her organization. “Take away the cannabis and it should be business as usual.”

An all-cash industry would also be a challenge for the state Department of Revenue, which has said it expects to collect between $44 million and $82 million in pot taxes next fiscal year.

Hoffman said his agency is working with revenue officials on a system where marijuana companies pay taxes in cash at state offices, using money-counting machines overseen by armed guards.

Other states are also considering government-run marijuana banks, including California and Ohio, but none has implemented one so far.

Mike Hartman, executive director of the Colorado Department of Revenue, which oversees that state’s recreational marijuana market, said the shortage of banking services makes it harder to determine if Colorado pot firms are shipping marijuana to other states or laundering money.

“It would be a significant benefit to our regulatory infrastructure if all operators had access to banking, so we could see all the cash inflows and outflows and validate that they don’t have cash coming into the business that shouldn’t be there,” Hartman said.

Because that state’s constitution prohibits a state-created bank, Colorado is exploring a more limited financial system to serve pot companies. Hartman said it would be easier to set up a state-run bank before marijuana businesses open this summer.


“The concept would be much more effective it was done at the outset of legalization,” Hartman said. “There are logistical challenges of putting anything in place after the marketplace is up and running.”

An earlier version of this story misstated Mike Hartman’s position that Massachusetts should adopt a state-run pot bank.