Each state has its own laws regarding medical marijuana and the use of cannabis in general, which can be a little confusing at times. For example, in some states it is legal to grow and consume marijuana, but not to buy it. Cannabis is the most popular drug in America, and more than a half-million people are estimated to be using it every day. Cannabis businesses are flourishing all over the country, and all these people are looking to make money.

One of the most interesting aspects of the cannabis industry is the cash flows that are generated by sales. Every state has its own rules, and some can be confusing. But the end goal is the same: to put cash back into the hands of those who helped to generate it.

American cannabis has a very specific cash flow problem – there is too much of it. Marijuana can be legally sold for medical purposes in 36 states and the District of Columbia (DC) and for recreational purposes in 15 states and DC. But it’s still illegal at the federal level, and most banks refuse to serve this industry because it can fall under money laundering laws. With the COVID-19 pandemic and increasing legalization leading to a rise in cannabis use, the industry’s producers, manufacturers, and retailers are awash in cash, increasing the risks and costs of even the simplest business operations, from paying employees and taxes to finding a place to store their profits. All that cash flow is just a recipe for disaster, says Smoke Wallin, CEO of Vertical Wellness Inc, which makes cannabis-based health products. How are you going to account for that? Where do you keep it? How do you move it? It also poses a threat to the safety of the workers in the vault. Ryan Hale, a U.S. Navy veteran and co-founder of Operational Security Solutions, a cash management company, had to convince a cannabis farmer in California to stop hiding money in a tree. On another occasion, Hale had to help a confused employee who didn’t know which way to go amidst the one-dollar bills coming out of his store’s cabinets. According to Euromonitor, sales of legal cannabis in the US rose 30 percent last year to $22 billion, more than the $17.5 billion Americans spent on wine. This year, sales are expected to increase by more than 20%.

Too much cash

Because few banks serve cannabis growers, some of them hide the money in safe deposit boxes [File: Reuters/Handout] word-image-17900 According to Headset.io and New Frontier Research, the sales boom may have resulted in more than $10 billion in cumulative sales for cannabis companies last year. The big players can afford unmarked armoured vans and heavily armed guards to move the money, but the smaller operators are on their own. A Los Angeles producer, who did not want to give his last name, said he should carry $120,000 in a bag and drive six hours from Los Angeles to Oakland to pay the salesman, rather than fly and risk being robbed or having the money confiscated by airport security. During the last weekend of May 2020, when protests against police brutality and racism broke out across the US in the wake of George Floyd’s murder, West Coast dispensaries were targeted at least 43 times, according to a review of police reports and statements from business owners by cannabis media site Leafly. One of the stores attacked was Melrose Cookies in Hollywood, owned by rapper Gilbert Milam Jr, known by his stage name Berner. A spokesman said the store suffered six-figure damage when about 100 people attacked it on the 29th. May attacked.

Political support

As cannabis legalization gains traction in several states – New York and New Mexico will allow recreational marijuana use in the coming years – policymakers are looking for ways to make it easier for the industry to bankroll. The House of Representatives passed a bill in April that would allow cannabis businesses to have bank accounts, get loans and accept credit card payments, but it may not make it through the Senate because Senate Majority Leader Chuck Schumer wants to work instead to lift federal cannabis prohibition. The industry’s ultimate goal is to get the green light at the federal level, but it’s not counting on Schumer’s promise of that next year. Shares of U.S. cannabis companies listed in Canada because they are not allowed to trade on U.S. exchanges are up just 9% this year and down nearly 29% from their peak in February, according to data from the AdvisorShare Pure U.S. Cannabis ETF.

Banking at the highest level

Meanwhile, marijuana companies have been forced to seek out friendly banks. Only 515 of the more than 8,200 federally registered banks and one in 30 credit unions in the U.S. worked with marijuana businesses at the end of 2020, according to data collected by government agencies. This service is paid for because federal illegality increases the administrative burden on banks. As demand grows, investors invest in cannabis industry tech startups [Feature: Shannon Stapleton/Reuters] word-image-17901 Chris Driessen, CEO of manufacturer SLANG Worldwide Inc, said it costs his company $40,000 to provide banking services in Colorado, one of the 12 states where it operates. Opening a checking account for a business usually costs less than $100. Standard business banking services are often 95 percent cheaper than the cost of banking for cannabis businesses, Driessen said. Maps Credit Union is one of the oldest financial institutions to work with the cannabis industry. The Oregon-based company has accepted more than $1.79 billion in cash deposits from the cannabis industry since January 2017, but that required tens of thousands of reports under the Financial Crimes Enforcement Authority’s (FinCEN) cannabis banking guidelines. The service of these companies is not cheap. It’s a whole different game, says Rachel Pross, chief operating officer of Maps, referring to the use of expensive anti-money laundering software, external auditors and lawyers. As demand grows, investors have poured more than $2.5 billion into cannabis technology startups since 2018, and special purpose companies (SPACs) focused on the broader cannabis industry have raised $3.9 billion to date, according to Viridian. However, within the industry, some cannabis managers are unable to obtain credit and even have difficulty maintaining personal accounts. Cookie Berner, the owner, said many banks have refused to do business with him since he began using cannabis in 2015. My clothing company brought in $32 million last year, but several banks asked us to leave, he said. You want to go to a normal banking institution and be treated like a normal person.

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