California has taken yet another step in the legalization of cannabis. Last month, the Los Angeles City Council announced that it had approved a resolution supporting a state Senate bill. This bill seeks to create a state-chartered bank that the marijuana industry can use. As of now, no city in the U.S. has its own bank. The only public bank, created in 191, is located in North Dakota.
One of the biggest problems – perhaps the biggest – for the marijuana industry has been finding banks willing to work with marijuana merchants. Without a marijuana merchant account, the businesses are unable to secure the payment processing services they need to process debit and credit cards, forcing these businesses to operate in cash only. And funding? Marijuana dispensary funding has simply been out of the question.
This resolution was originally introduced by Sen. Bob Hertzberg, D-Van Nuys, following City Council President Herb Wesson’s suggestion that Los Angeles should consider and explore the idea of opening its own bank to support the legal cannabis industry. The resolution was approved on a 11-0 vote and supports Senate Bill 930.
However, a recent report has caused some of the original supporters to think twice.Lawyers warned that the public bank would be subjected to the same laws any other bank must follow. Since marijuana is still a Schedule 1 drug at the federal level, accepting deposits from marijuana businesses could violate the Banking Secrecy Act; thus, exposing the city and bank employees to potential liability.
One of the reports the committee received stated, “Despite the recent legalization of cannabis by the state of California, cannabis-related businesses will continue to face many operational challenges as long as cannabis remains classified as Schedule I drug by Federal law. For purposes of this report, discussions regarding potential municipal bank assume no association with the cannabis industry.”
Even so, the Ad Hoc on Comprehensive Job Creation Plan Committee held a second meeting on the bank creation proposal. Surprisingly, marijuana and liability were not the focus. Other issues, like the complex details in the creation of the bank, were the main topic. Wesson has also cited other benefits that this bank could bring to the city of Los Angeles; such as, financing local entrepreneurs and affordable housing.
For now, marijuana merchants will need to continue to rely on alternative providers that are happy to work with the many obstacles and risks the marijuana industry faces.
Business Funding expert, Michael Hollis prides himself in being able to help the backbone of America; small business owners. When he isn’t helping merchants, you’re more than likely to find him scuba diving the California coast or eating at one of LA’s tasty Vegan restaurants