SACRAMENTO, CA.—State Board of Equalization (SBOE) Member Fiona Ma, as part of an ongoing outreach effort, convened a stakeholder meeting today on banking issues facing the medicinal cannabis industry. The meeting, which was attended by industry leaders, banking and finance experts, and state and Federal Reserve officials, is the first in a series of meetings to discuss challenges facing this industry. Access to banking services has emerged as one of the key challenges facing the medicinal cannabis industry.
“As we move towards a paperless society, it is unfair for a whole class of citizens to live their lives using cash and manual transactions,” said Board Member Ma. “I was very pleased with the productive and insightful conversation we had today, which is helping us craft a proposal that will address the banking issues that are keeping the medicinal cannabis industry from fully integrating into the financial system and complying with California tax law.”
Medicinal cannabis operations have been legal in California since the passage of Proposition 215 in 1996. However, given the federal government’s classification of marijuana as a Schedule I Controlled Substance, banks and credits unions cannot provide banking services to medicinal cannabis operations without risking their eligibility to participate in the FDIC or NUAC (which guarantees deposits for credit unions similar to the FDIC’s guarantee for bank deposits).
“In order to continue serving our community and for the sake of the security of our community, people who work in credit unions and banks need to have a place at the table to ensure any laws and regulations are feasible,” stated Janet Sanchez, Senior Vice President of Community Credit Union of Southern Humboldt. “This will make sure financial institutions are willing and able to participate.”
This has the effect of forcing medicinal cannabis operations to remain strictly cash operations, making compliance and enforcement of California tax law significantly more difficult. Further, medicinal cannabis operations do not have access to checking accounts, ACH transactions or credit lines to finance their day to day operations or opportunities to expand. In addition, the all-cash nature of MCD operations means that employees are paid in cash, exposing them to liability for federal and state tax withholding errors, and keeping them from participating in the Social Security program.
Finally, because the medicinal cannabis industry operates on a cash basis, employees, patients and neighborhood residents are at greater risk of violent crime.
“Medicinal cannabis is a multi-billion dollar industry, and keeping them out of the financial system simply makes no sense,” Ms. Ma added. “If they were fully integrated today, our economy would be healthier, communities would be safer and our revenues would be larger.”
To view the recording of this stakeholders meeting, please visit: https://www.youtube.com/watch?v=5JqFuFlgfaI