With medical marijuana now legal in 23 states and recreational marijuana legal in Colorado, Washington, Alaska and Oregon, cannabis is a legitimate growth industry generating substantial income. In Colorado alone, the pot industry is expected to pour an estimated $120 million in tax revenue in the state’s coffers for 2015. Nationwide, medical and recreational marijuana as an industry is expected to net between $2 and $3 billion per year in revenue.
You might think banks would be lining up to do business with these cash-rich entrepreneurs, but nothing could be further from the truth. The banks, rightfully so, in my opinion, assume they are putting themselves at risk with the federal government by engaging in marijuana-based businesses, as marijuana is still considered an illegal substance on the federal level. And the reality is today’s banking industry is all about risk mitigation, especially when it comes to cash-based businesses and the potential for rampant money laundering.
Yet, as I stated above, this is a quickly growing and legitimate industry in the states where it is legal. In its infancy, however, marijuana entrepreneurs are facing a mountain of regulatory and financial issues. The biggest of these issues is the lack of access to banking services. Here are what I’d consider the good, the bad and the ugly stories related to legal marijuana banking and taxation.
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Originally published at www.americanbanker.com on February 29, 2016.