Can You Take That Cannabis Cash to the Bank? The short answer: Not yet.

• Author: Morton, Heather
• Position: FINANCIAL SERVICES AND COMMERCE

No question about it: People are happy to buy recreational and medical marijuana, dispensaries are happy to sell it and states are happy to rake in the tax revenue.

Since legalization eight years ago, Colorado marijuana sales have topped $11 billion, with nearly $2.2 billion in 2020 alone. The Arizona Department of Revenue estimates nearly $611 million in sales of both medical and recreational cannabis since the latter's legalization in January. In Nevada, taxable sales hit nearly $912 million in 2021. Ohio's medical marijuana program estimates $471.2 million in sales from April 2019 through July 2021.

Although they are a drop in the bucket compared with broad-based taxes, cannabis tax revenues are still significant, even exceeding cigarette and alcohol tax collections in many states. In 2019, marijuana tax revenues represented about 0.36% of state budgets, on average, in the seven states that had programs in place for the full year. In a few states, it's a little higher than 1% of total revenue.

Despite the billions being generated, there's one important industry that hesitates to get involved: banking.

For many in financial services, the risk is just too great. Federal law still prohibits the possession, distribution and sale of cannabis, even though 36 states and four territories allow for its medical use, and 18 states, two territories and the District of Columbia have legalized adult recreational use. Any money that can be traced back to a state marijuana operation could be considered aiding and abetting a federal crime and money laundering. The risks extend to companies working with cannabis businesses, including law and accounting firms, landlords, vendors, suppliers and employees.

That means cannabis businesses must operate in cash--and the cost can be high. Statistics can be difficult to obtain, but in its 2019 testimony to the U.S. Senate Banking, Housing and Urban Affairs Committee, the American Bankers Association said that while Denver cannabis dispensaries make up less than 1% of all local businesses, they accounted for 10% of all reported commercial burglaries from 2012 to 2016. On average, more than 100 burglaries occur at cannabis businesses annually, according to the Denver Police Department, and burglaries and theft comprise nearly 80% of Denver's cannabis industry-related crime.

"Having an entire industry operating with limited access to banking services is a serious public safety threat and makes commercial cannabis...