“The Epicenter of Risk:” Weed’s Endless Banking Problem

By Dan Mitchell
May 22, 2020

In the pot fields of California’s Emerald Triangle, the notion of a business checking account is still somewhat foreign. 

Many of the farmers there have been working the land for decades. Prior to legalization, they refused to take anything other than cash for their product. And that was just fine, because their buyers all paid in cash anyway. 

When pot became legal after California voters passed Proposition 64 in November 2016, some farmers continued taking only cash. Some were more comfortable with it. Others couldn’t get a bank to accept their deposits.

While many growers have found workarounds, and are now able and willing to take checks, there are still holdouts. One is Stan, a middle-aged, veteran pot farmer in the Emerald Triangle (Stan is not not his real name, but the one he asked to be called; he also asked that the county he lives in not be named). “After you get raided by the feds, you get a little paranoid,” he said. 

He and his partners once had their crop torn up and their assets seized by the DEA. And that wasn’t their only run-in with the law. He wouldn’t even say which decade that happened in, so nervous was he about being identified.


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So Stan still accepts only cash. This despite the fact that he said he does business with some fairly large, licensed distributors, which he wouldn’t identify. His operation is licensed by the state as a legal cultivator.  “I’m not going to have anything to do with banks until pot is taken out of Schedule 1,” he said, referring to the designation in federal law that puts cannabis in the same category as heroin and LSD. 

In other words, Stan wouldn’t open an account even if the Senate were to pass the SAFE Banking Act, which would shield banks from liability for doing business with cannabis companies. The House of Representatives passed the measure last year, only for the bill to be held up in committee in the Senate. The House passed it again earlier this month as part of the HEROES Act — the latest round of COVID-19 relief. 

Most growers, however, want SAFE passed. In this, they are united with the rest of the cannabis industry. The industry’s various sectors can be fractious but they speak with one voice on the need for access to banking services.

Without access, many businesses are forced to find expensive and friction-laden alternatives for accepting payments and making deposits. Others, generally the smaller ones, are left to do all their business in cash, leaving them and their customers vulnerable to robberies and burglaries. 

A cannabis farm in remote Humboldt County, where banks can be scarce. Photo courtesy Humboldt County Sheriff’s Office.

“The Epicenter of Risk”

Stan’s experience of being paid by large, legitimate businesses with bags of cash is far from rare. Flow Kana, a distributor and manufacturer that works with hundreds of farmers in the Emerald Triangle (and is a WeedWeek advertiser), was still paying growers in cash very recently.

Just a couple of years ago, “we were trying to pay our farmers with checks, but they couldn’t deposit them,” said Amanda Reiman, Flow Kana’s vice president of community relations.Most growers are now able to accept checks, one way or another. 

Farmers have a hard time in particular, Reiman said, “because they’re the closest to the plant, so they are seen as the epicenter of risk.”

It’s also a logistics problem. “Farmers are often remote and in less populated areas so access to banks and choice of banks is limited,” said Hezekiah Allen, chairperson of Emerald Grown, a growers’ cooperative. Fully legal businesses in rural areas don’t have much of a problem, but if there is only one local bank, and that bank won’t deal with cannabis companies, growers are out of luck, he said.

That was the case for one grower Flow Kana was dealing with a couple of years ago. The one bank in the Mendocino County town nearest the grower “just wouldn’t work with cannabis,” Reiman said. Eventually that grower landed with a credit union in southern Humboldt County, about 40 miles away.


Credit unions are increasingly serving as the backstop for weed businesses, but it’s mostly a stopgap solution. “The fees are high, they have limited services, they’re not FDIC-insured, and they’re not as well-capitalized, so they don’t make a lot of loans,” said Pamela Epstein, general counsel and chief regulatory and licensing officer for Eden Enterprises, an integrated cannabis manufacturer, grower, and retailer based in Oakland.

Smaller companies are often left to improvise. Many of them open bank accounts under generic-sounding names. When the bank catches on, they have to try again with another bank. “There’s a lot of Whack-a-Mole going on,” Reiman said. 

She noted that when you look at the businesses listed by California’s Bureau of Cannabis Control, “you won’t recognize a name on there.” In a hypothetical example, if a business is known to the public as “Bob’s Weed Emporium,” its bank account and business license might bear the name “ABC Enterprises.”

Other companies are making use of payments services so that at least they can accept debit cards, obviating the need for customers to walk into dispensaries carrying loads of cash with them, or allowing companies to do business with each other without the need to carry a satchel. 

CanPay is a service that is tied to customers’ checking accounts, sort of like Venmo. PayQwick works like PayPal, acting as an intermediary between bank accounts. Dama Financial (a WeedWeek advertiser) uses armored carrier services to pick up and deliver cash, and handles wire transfers. All of them solve some of the problems, but none of them offer the full range of services enjoyed by other businesses that aren’t outlawed by the federal government.

The McConnell Problem

What puzzles cannabis advocates is why they can’t get a simple bill protecting banks through the Senate. The SAFE Act was passed twice in the House on a bipartisan basis, and it has Republican supporters in the upper chamber as well. 

Banks are nearly as interested in getting it passed as cannabis companies are, but until they get an explicit nod from the feds, the biggest ones are staying as far away as they can.

Outside of prohibitionists, there is no constituency with an interest in blocking the measure, which after all would cost the government nothing.

It appears that Senate Majority Leader Mitch McConnell is in his familiar role of chief stumbling block, along with Senate Banking Committe Chairman Mike Crapo (Republican-Idaho.) It’s possible, cannabis lobbyists say, that he’s just using the issue as a cudgel against Democrats. 

Last week on the Senate floor, McConnell assailed the HEROES Act, noting that the word “cannabis” appeared 68 times, “more times than the word ‘job,” and four times as many as the word “hire.” This, he said, proved that the House’s relief bill was “a totally unserious effort” on the part of “Washington Democrats.” 

He did not note that the word “dairy” was mentioned in the bill 62 times, nor did he refer to the $16.5 billion in direct farm payments the bill proposed.

While most observers think it’s almost certain that the SAFE Act won’t pass this time around, as part of the HEROES Act, advocates say they’re still making headway. The pandemic and the resulting need for economic relief makes for a “unique opportunity” to get lawmakers on board, Epstein said. 

They’ll be looking for ways to juice up business and employment. “Cannabis is a brick-and-mortar business,” she said. It employs people at every income level. “If cannabis businesses could secure bank loans, they could spark the economic revitalization that politicians are looking for.”