Huge (but complex) pot banking potential awaits clearer U.S. signal

Nearly 700 banks and credit unions are active to some degree in banking cannabis-related businesses in the 44 states that now have some form of legal marijuana use. Only a handful of institutions feel comfortable talking about it openly, however. That could change if Congress passes clarifying legislation, which could happen in 2021.

A $52 billion question has lingered in the air far longer than the smoke from any smoldering joint: Will banks and credit unions deem the rewards outweigh the risks and burden of serving state-legal marijuana-related businesses?

Several hundred already do to varying degrees, but large, national entities including the major credit card companies don’t. The ongoing tension between the 44 states that legalize cannabis sales in one form or another and the federal blanket condemnation of pot as a “Schedule 1” narcotic (high potential for abuse) creates a full stop for the majority of banks and credit unions.

But the stakes are enormous and growing. The California Cannabis Industry Association pegs the current national marijuana market at $52 billion (of which California alone tallies $5.6 billion, rising to $7.2 billion by 2024.) Analysts at Secured Finance Network predict the industry will have a $77 billion impact on the economy by 2022. Rep. Ed Perlmutter, Democrat of Colorado, notes the legal cannabis industry supports 321,000 jobs across the country, with a job growth rate estimated at 250% by 2028.

As it is, financial institutions are dealing with the situation in vastly different ways. Most that offer cannabis-business services tend to underplay that fact to avoid possible reputational risk. Plenty of people still regard recreational pot use as unhealthy, immoral or both. While more than twice as many banks as credit unions are involved (515 versus 169 as of first quarter 2021), credit unions tend to be more open about it.


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