Despite the cannabis market growing in 38 states, the federal government continues to assert its right to classify cannabis as a Schedule I drug under the Controlled Substances Act. This classification creates a very unique challenge for the industry to succeed and the ability to obtain banking services.
The Controlled Substances Act makes the illicit possession, production and distribution of cannabis and other scheduled substances a federal crime and it punishes those who knowingly facilitate the violations of this Act. It is illegal for financial institutions to take money that is derived from activity that is deemed illicit by the federal government. Financial institutions are also heavily regulated by the federal government and are subject to fines and civil penalties if they violate federal laws.
As a result, the entire legal cannabis industry in California struggles to obtain basic services such as bank accounts and credit card services. These legitimate businesses in our state are forced to make all transactions – from rent to state taxes – in cash.
Today, cannabis is legal for adult use in nine states and medical use in another twenty-nine. In California, the legal cannabis market is projected to represent almost 30 percent of all legal cannabis sales in the United States and is projected to be worth $6.6 billion by 2025.
Can you imagine a $6.6 billion industry operating in cash? Not only is that is an unimaginable amount of cash, it is unsafe.
It is no secret that cash-only businesses attract crime. As the Chair of the Assembly Public Safety Committee, this is something that keeps me up at night. The inability to bank is a public safety hazard that puts the safety of owners, customers and entire neighborhoods at risk.
Where do business owners keep their profits? How easy is it for criminals to target an owner’s residence? How easy is it for armed robbers to go into a dispensary and cause harm to customers and employees? What will the prevalence of these cash-only businesses do to neighborhoods in my disadvantaged communities?
Another unfortunate byproduct of the lack of banking is that this industry does not have access to financial services either. Let’s think about that for a second – what type of individuals would be able to start their own business without accessing capital? Access to capital, checking accounts, and credit cards are an integral part of any business.
Some of the most business savvy individuals I have ever met went to prison for selling cannabis when cannabis was illegal. The inability to obtain business loans is a great barrier to entry for individuals from disadvantaged communities.
Nearly 80 percent of people in federal prison for drug offenses are Black or Latino however, legal permits have been given to predominately white males. They alone will profit from selling legal cannabis and that is unacceptable. Now that cannabis is legal and people can establish legitimate businesses, communities of color should be the first to profit as they were the victims of the failed war on drugs.
My biggest frustration as a state elected official, a legislator for the fifth largest economy in the world, is that there is no law I could ever pass to address this issue. We are at the mercy of the Trump Administration and the Federal Government.
I ask that you call, write and urge our federal representatives to pass legislation that will allow our state to provide banking services for the cannabis industry.
Serving as the voice of the people of California’s 59th District in the State Assembly, Reginald Byron Jones-Sawyer, Sr. was elected to the State Legislature in November 2012 and re-elected in 2014.