420 Friendly Banks [Recent Laws and Regulations]

By Eric Ives
October 10, 2019

The world of marijuana has expanded far beyond our wildest imagination in recent years; while it used to be something…

The world of marijuana has expanded far beyond our wildest imagination in recent years; while it used to be something that was considered taboo and dangerous, it is instead quickly becoming something that everyone recognizes as a positive thing, with the majority of US states now fully legalizing it.

Despite its growing acceptance, however, there are still a few problems with trying to conduct regular business as a marijuana customer or retailer; how exactly do you pay for it?

While cash has been the regular tool for decades now, nothing beats the convenience of being able to use your credit or debit card and pay for things on the fly. The problem is that these all require banks, and that isn't exactly very easy to find. Are there are 420 friendly banks out there?

Why All Banks Aren’t 420 Friendly

It might seem strange to imagine any problem with using banks when buying or selling marijuana – after all, if it is legal to buy and sell it, what is the problem with using a bank to do so?

The problem is that banks need to operate outside of just the state you are in, which means they need to simultaneously follow the laws of both your local jurisdiction and that of other states at the same time.

What’s more, they need to contend with the federal legislation that differs dramatically from those states with legalized marijuana. This is because, on a federal level at least, marijuana is still technically an illegal substance, so if a bank provided financial services to cannabis retailers, then they would be at risk of infringing on federal laws, making it possible for them to be shut down by the various and sundry financial regulators that exist within the federal government.

This wasn’t always a problem, however; in the previous Obama administration, the Deputy Attorney General James M. Cole published a memo, commonly known as the Cole Memorandum, which advised that all federal investigators and thus concerned with enforcing federal law relax their position on marijuana crimes committed within states that have legalized marijuana.

This memo was commonly considered a major benefit to the marijuana community and began the idea that the Obama administration was supportive of the marijuana cause, but it is more likely that this was a statement on states’ rights rather than marijuana criminality; by issuing this memo, Cole was allowing the various US states that have legalized marijuana to enforce their own laws and not be dictated to by the federal government.

Unfortunately, the Cole Memorandum has now been officially repealed by the Trump administration, making the legal situation for marijuana more tenuous than ever.

This is the primary reason why pretty much no banks whatsoever will ever consider allowing their services to be used by a marijuana retailer, as they fear being raided by the federal government or fined for housing funds generated as a result of federally illegal drug dealing.

However, despite the horrendous situation that marijuana retailers find themselves in when it comes to banking, there are a few choices available to them that make it possible to utilize banking services. What are these 420 friendly banks?

Are There Any 420 Friendly Banks?

At present, you will find it very difficult to be able to find any kind of bank that would accept cash deposits or transactions as a result of marijuana trading, but it is possible that, in the not too distant future, this might change.

In the state of California – which legalized marijuana usage rather recently and has always been considered one of the most tolerant, marijuana-friendly states in the USA – the state recently passed a bill that seeks to allow its citizens to start local banks and credit unions to accept cash deposits generated from the sale of marijuana.

Under the current law, any bank or credit union, even one only operating within local jurisdictions where marijuana is entirely legal, has to deal with the fact that they might be raided, arrested and indicted under the charge of drug trafficking supporting the drug trade. But, with this recent bill, the state government of California promises to protect its citizens from the federal government when handling money generated from the sale of marijuana.

While this bill has been passed, it is still important to remember that it still has some legal quandaries to get through, and does risk being challenged by the federal government and indeed the Supreme Court, but marijuana retailers across California can at least rest easy that their local government is trying to fight for them.
For those outside of California, however, you might not have as much luck.

It is possible that you can find a bank willing to accept your cash transactions, but they do so as a substantial risk to themselves, as the federal government could attack them at any time. If you do actually want to try and use a local bank, you would probably do better to pretend that you are using their financial services for something completely different – instead of marijuana, maybe a coffee stand?
All of this might soon change though, as it isn’t just the state of California that is preparing to make changes – it is just possible that the federal government itself might soon change its mind and allow banks to do as they wish with the SAFE Banking Act.

How Will the SAFE Banking Act Affect Banks’ Ability to Accept Marijuana Money?

The SAFE Banking Act was first brought before Congress in 2018 and seeks to try and level the playing field with regard to banks across the USA being able to accept money from marijuana dispensaries.

In essence, the SAFE Banking Act, or rather the Secure and Fair Enforcement Banking Act, protects banking institutions from federal prosecution from financial regulators who would previously go after anyone even attempting to handle money that has had anything to do with marijuana.

This is the main reason why banks won't come close to dealing with money from any marijuana-based business, as they are under constant threat of being prosecuted by the federal government. It is especially frustrating for small banks or local credit unions, as those types of institutions focus themselves almost entirely on their local area, not reaching across state borders into areas where marijuana is not legal. So, despite the fact that they only ever conduct business within states with legalized marijuana, they are still at continuous risk of being investigated by the federal government.

If you have ever used cash to buy your marijuana and not understood why anyone would want to be able to use banks or card machines, then you have likely never had to return something due to it being defective – by being able to use cards or a banking institution, you give yourself an additional layer of protection that cash simply doesn’t provide.

This protection doesn't just help you, but also helps protect the marijuana dispensary as well; as it gives them a place to reliably and safely store their money without having to run the risk of keeping large quantities of cash on hand. No one likes putting themselves at risk of being robbed, but it is especially likely when you run a business that is famously cash-only – every single criminal that knows your address will have you on their list.

This is why it is so important that the SAFE Banking Act is passed as soon as possible, as it will not only afford marijuana dispensaries the protection that they need, but it will also give rise to a huge wave of new marijuana businesses, leading to even more innovation and brand new products within the marijuana market.

Not only does the SAFE Banking Act help protect users and sellers of marijuana, but it helps make the industry safer for everyone, growing it and making it a more popular choice for new businesses and funding opportunities. It isn’t just a piece of legislation, but a brand new burst of energy for the marijuana industry.

Final Thoughts on 420 Friendly Banks Recent Laws and Regulations

It can be quite frustrating as someone living within a state in the USA that is ostensibly marijuana friendly and finding out that your favorite dispensary or manufacturer is not allowed to use banks or financial institutions like any other regular business.

With there being no legally 420 friendly banks available in the USA, the situation for many marijuana businesses is especially dire; they are in constant risk of being raided by the police, as well as just generally being burgled by opportunistic criminals due to their overreliance on cash.

However, although it might take a few years still, the SAFE Banking Act will eventually make its way through Congress and be enshrined in law, leading to dozens of banks all over the country finally being able to accept money from marijuana businesses. It is still a short way off from being totally legal, but for those interested in the survivability of the marijuana industry, it can’t come soon enough.
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