Cannabis companies are forced to deal in cash. Here’s how that could change

By Bob Hertzberg, Special to CALmatters

In 1996, California was the first state to legalize medical marijuana. Twenty years later, voters approved Proposition 64, legalizing adult recreational cannabis use.

This burgeoning industry finds itself growing month by month, in red and blue counties alike, but one reality remains: the federal government classifies cannabis as a Schedule I drug.

This means that the thousands of cannabis-related companies that do business in California can’t open an account with any existing bank or credit union. They’re instead forced to do business in cash, presenting tremendous safety risk to their business and their employees.

Think about it: cannabis businesses make tens of thousands of dollars each week. They can’t put it in a bank account, so where do they turn? One business owner I’ve talked with stores over $1 million in a tractor trailer with 24 hour surveillance. Others find short-term, and illegal, ways to get bank accounts, undergoing tremendous risk.

Storing so much cash comes at great peril for employees. In early 2018, an employee of an Oakland-based distributor who collects cash from dispensaries in San Diego County was beaten and robbed of about $9,000.

And when it comes time to fulfill their tax obligations, cannabis businesses arrive at government offices with bags of cash. Standard oversight and accounting practices become nearly impossible when most transactions are completed in cash.

As policymakers, we have a duty to further the will of the voters while protecting the public safety of our constituents.

That is why I introduced Senate Bill 51 with California Treasurer Fiona Ma. The bill would allow private banks or credit unions to apply for a limited purpose state charter so they can provide depository services to licensed cannabis businesses.

Fiona Ma

Last year, Ma and I introduced SB 930, which sought the same objective. The proposal received enthusiastic support from people who work in the cannabis industry because it would have helped get some cash off the streets.

While SB 930 moved through the legislative process, people were looking into other solutions. Former Treasurer John Chiang convened a feasibility study to look into opening a state-run cannabis bank, but that was abandoned when it was deemed too risky.

The federal government has given glimmers of hope it will help states address this issue, but we can’t wait for Congress to proceed in fits and starts.

Under SB 51, banks or credit unions could issue checks to account holders to be used to:

To pay rent,

  • Pay California vendors for goods and services,
  • Pay state and local taxes and fees, and
  • Purchase state and local bonds.

In crafting this bill, we made an effort to prevent any interaction with federal entities or systems. Banks and credit unions would be required to have private insurance, and they would exist in their own closed loop networks.

It has required creative thinking to figure out how to enter this uncharted territory, but several things are clear: everyone agrees on the urgency of this public safety issue, and acknowledge the profound potential of this emerging industry.

We know that this solution doesn’t completely solve the cannabis industry’s cash problem . But with lives on the line, this is just one small step in the right direction to get some of this money off the streets and into bank accounts.


Senate Majority Leader Bob Hertzberg is a Democrat who represents the Senate District 18 in the San Fernando Valley, [email protected]. He wrote this commentary for CALmatters.

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