As Congress and the White House work on a tax bill that will reduce revenues going to states, they are simultaneously impeding the growth of an industry that is set to add billions to state tax revenues: legal cannabis.
Under the guise of protecting public health and safety, federal policy is jeopardizing this sector despite its widespread popularity. Nowhere is this clearer than in federal banking policy, which deters federally chartered banks from working with cannabis companies.
Twenty-nine states and the District of Columbia have legalized cannabis for medical purposes, and eight states have done so for recreational use. More than 200 million Americans — more than 60 percent of the U.S. population — may now use marijuana medicinally or recreationally under state laws. With over 32 million yearly users and close to 9 million daily users, cannabis generates more than $6 billion in U.S. sales and is poised to become a $20 billion market by 2021, according to a recent Cowen and Company report.
Yet federal banking policy does not exempt banks from cannabis’s designation as a Schedule I illegal drug under the federal Controlled Substances Act. That means almost all of that $6 billion is transacted in cold, hard cash because the largest banks and credit and debit card networks refuse to work with cannabis businesses.
This stance undermines state regulations and threatens not just billions in state tax revenues but consumer safety and law enforcement efforts. Simply put, cannabis markets must be safe, transparent and efficient to operate successfully. But all-cash businesses jeopardize each of those goals.
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