We’re starting to see tide shift towards more banking opportunities on the horizon.

Legalization is long overdue. And just last week, US Attorney General Jeff Sessions, while testifying before the US Senate, surprisingly said that cannabis should be researched and that there may be some benefits to medical marijuana. We’ll take a lukewarm comment from the man that said “good people don’t smoke marijuana” and take that to the bank. Which brings me to the topic of today’s post, banking.

It’s no secret that many cannabis operators have to operate as cash only businesses since many financial institutions still refuse to offer banking services to the cannabis sector (which has led to an increase in interest in cryptocurrencies).

In California, many banking institutions that were considering openly banking cannabis businesses decided to remain on the sidelines once A.G. Sessions rescinded the Cole Memo this January. However, like the slow but forceful gravitational pull of the moon, we’re starting to see tide shift towards more banking opportunities on the horizon.

Part of the shift has to do with fact that the cannabis licensing agencies in California (the Bureau of Cannabis Control, the Department of Food and Agriculture, and the Department of Public Health) will start issuing annual licenses in May.

To date, all of these agencies have only issued temporary permits, which required little more than a local permit, a location, and a premises diagram. The application for an annual license requires much greater detail. Although some applicants may balk at the amount of information they must provide, the fact intensive nature of the application process will undoubtedly help cannabis operators obtain banking services.

A cannabis business owner that has received an annual permit from the state, can use that permit as a stamp of approval when walking into a bank to open an account. Possession of an annual license will signify to banks that you’ve passed a background investigation and proven to the state that you have the procedures in place to run a compliant cannabis business. Don’t lose sight of that fact as you’re cursing all the hoops you’re jumping through.

Another step in the right direction when it comes to opening banking services to the cannabis industry is the progress of Senate Bill 930 in the California state legislature. SB 930 was first introduced by State Sen. Robert Hertzberg (D-Van Nuys) on January 25, 2018, and was approved by the Governance and Finance Committee last Wednesday.

SB 930 would provide for the licensure and regulation of cannabis limited charter banks and credit unions whose sole purpose would be to provide banking services to the cannabis industry. SB 930 is more workable and has a stronger likelihood of success than the prospect of a state backed bank, which we last discussed here.

In order for SB 930 to be successful, it is paramount that the FinCEN guidance issued by the Department of Treasury remain in place (see here for the importance of the FinCEN guidance). The bill would also create the Cannabis Limited Charter Advisory Board (“Board”) that would hold public hearings, submit reports of enforcement activities, and provide guidance on specified investment activities.

The Board will be comprised of the state Treasurer (you can find our analysis of the Treasurer’s banking report, here), the state Controller, and Chief of the Bureau of Cannabis Control. SB 930 would also authorize charter banks and credit unions to issue special purpose checks for the following:

To pay fees or taxes to the state or local jurisdiction;

To pay rent on property that is associated with the account holder’s cannabis business; and

To pay a vendor that is located in California for expenses related to goods and services associated with the account holder’s cannabis business.

SB 930 will still have to clear some procedural hurdles before it’s in front of the full Senate for a vote, but this is definitely another step in the right direction to ease the logistical burden – and enormous public safety concern – that dealing in all cash poses on cannabis businesses.

SB 930 is yet another piece in the fight against the federal government’s unjust war on cannabis. Eventually the final blow will have to come from the federal government, but in the interim California, along with many other states, will continue to lead the way.