Cannabis industry operators and experts share banking challenges: ‘Logic and reason don’t apply’

• Even in legal states, banking is still a major hurdle for cannabis operators because of federal illegality.

• Operators tell Cultivated they’re finding creative ways to survive, from lawsuits to credit union partnerships.

• Federal relief remains uncertain — the SAFER Banking Act and potential rescheduling could help, but no timeline has been set.

The cannabis industry is growing fast. 

Fair access to the banking system is crucial for any emerging industry to develop. Operators need the ability to manage payroll, and open lines of credit and checking accounts. 

But cannabis remains federally illegal in the US, meaning it’s challenging for any banks and credit unions to provide loans or other financial services to cannabis businesses for fear of violating the law. 

This is due, among other reasons, to the Bank Secrecy Act, which was implemented in 1970 to prevent money laundering and banking for illegal operations, including cannabis. 

Even in New York City, the capital of global finance — and where cannabis is legal — many industry operators aren’t able to get loans at rates similar to other industries. 

Cultivated spoke to cannabis operators, lawyers, and banking experts to understand how the industry is managing these issues and whether regulatory relief may soon be on the horizon.

Foggy regulations, real-world headaches 

Marc Hauser, a corporate attorney for cannabis firms, said that federally insured banks are reluctant to work with cannabis companies because of foggy regulations guiding the industry. State-legal cannabis revenue is still loosely considered money laundering at the federal level, giving many banks pause. 

A section of the IRS tax code, 280E, also prohibits cannabis firms from deducting regular business expenses. This makes generating profits difficult, and contributes to the challenges cannabis firms have with getting loans at fair market rates, Hauser said.

He added that while most cannabis companies now have access to basic banking services, they remain limited and expensive. The loan process is also difficult for institutions because if their debtors fail to pay, seizure of a cannabis company is complex.

Specifically, the debt collector would need to be approved for a new license for the same store, and all parts of the licensing process would be reset. It’s not nearly as simple as, say, taking over control of a restaurant or corner store where the creditor could continue operations.

Cannabis operators get creative 

Geoff Rose, the founder of Island Time, a dispensary on Martha’s Vineyard, Massachusetts, shared some of his unique challenges with Cultivated. 

When he started the business in 2021, a medical license and nonprofit status were required for him to operate, and it’s still difficult for him to secure loans from banks. Rose described the ability for the bank to manage his money as a “firewall within the banking system.” 

That’s similar to what Jayson Tantalo, the vice president of the New York Cannabis Retail Association (NYCRA), shared about his challenges. Tantalo said that until recently, banks were generally unwilling to work with the cannabis industry, and would simply shut down accounts without notice if they discovered any cannabis-generated funds. And banks that would work with the cannabis industry required financial information he found “invasive,” Tantalo said. 

Despite these issues, both Tantalo and Rose have figured out creative solutions to stay in business. Rose recently won a lawsuit against the Massachusetts Cannabis Control Commission to allow him to import cannabis from the mainland to Martha’s Vineyard, an island a few miles off the coast. Tantalo said he was eventually able to secure an agreement with a credit union that has since expired because the credit union couldn’t keep up with demand. 

Federal reform remains uncertain

The industry is waiting on the federal government to bring clarity.

The long-debated Secure and Fair Enforcement Regulation Banking Act (SAFER Act) would provide protections for banks that work with state-legal cannabis firms. But experts like Hauser say the bill is unlikely to pass the Republican-controlled Congress. Even if it does, it would only cover retail banks, not investment banks, private equity firms, or credit funds.

On the campaign trail last year, President Trump has teased reclassifying cannabis from Schedule I to Schedule III under the Controlled Substances Act. That would eliminate the 280E tax — which only applies to Schedule I drugs — and improve profitability for operators, but so far there’s no timeline.Cannabis banking issues will persist until the federal government intervenes, whether that’s rescheduling or an act of Congress.

As Hauser put it, “logic and reason don’t apply to cannabis regulation.”

Story edited by Jeremy Berke.