While the cannabis industry is rapidly expanding and gaining mainstream acceptance, one aspect remains surprisingly outdated: the reliance on cash transactions. Dispensaries across the United States predominantly operate as cash-only businesses, a practice that stems from the complex relationship between federal and state laws, financial regulations, and banking practices.
Why Won’t My Dispensary Accept Card?
The primary reason dispensaries are often cash-only is due to the federal classification of cannabis as a Schedule I drug under the Controlled Substances Act. This classification places cannabis alongside substances like heroin, LSD, and peyote, deeming them to have a high potential for abuse and no currently accepted medical use. As a result, federal banking regulations prohibit traditional banks from processing transactions involving cannabis-related businesses.
The federal ban on cannabis banking creates a significant obstacle for dispensaries, as they are unable to open bank accounts, access traditional banking services including loans, or accept credit or debit card payments. This restriction poses several challenges for dispensaries, including:
● Limited Access to Capital: Cash-only operations hinder dispensaries’ ability to secure loans, manage finances effectively, and invest in growth opportunities.
● Increased Security Risks: Handling large sums of cash increases the risk of theft, robbery, and loss.
● Inconvenience for Customers: Cash-only policies can be an annoyance for customers who prefer the convenience and security of cashless transactions.
Some dispensaries have tried various workarounds for the limitations of card use at their business, such as cashless ATMs. However, popular cards such as Visa and Mastercard have repeatedly voiced their opposition to their cards being used in such a way. Without the support of credit card companies, and with the constant threat of purchases being declined if they try operate through loopholes, most dispensaries find that it’s easier to only accept cash payments.
Can Dispensaries Use Traditional Banks?
While federal law prohibits traditional banks from directly servicing cannabis-related businesses, some dispensaries have found workarounds to access limited banking services. Some dispensaries have partnered with non-bank financial institutions (NBFIs) that specialize in serving the cannabis industry. These NBFIs may offer services such as merchant accounts, which allow dispensaries to process debit card transactions, though these often come with higher fees compared to traditional banks.
What Cannabis Banking Alternatives Can Dispensaries Use?
In the absence of full access to traditional banking services, dispensaries have explored various alternative solutions to manage their finances. These alternatives include:
● Cash Management Solutions: Dispensaries can utilize specialized cash management software to track and secure their cash holdings, reducing the risk of theft and loss.
● On-Site ATMs: Dispensaries may install on-site ATMs to allow customers to withdraw cash directly from their bank accounts.
● Payment Processing Services: Some third-party payment processing services have emerged to cater to the cannabis industry, offering solutions for online and in-store transactions.
● Cryptocurrency: While not widely adopted, some dispensaries have begun accepting cryptocurrency payments, which offer a degree of anonymity and circumvent traditional banking regulations.
Will Dispensaries Eventually Be Able to Use Traditional Banks?
The future of cannabis banking remains uncertain, as federal legalization of cannabis continues to be debated. If cannabis is rescheduled or legalized at the federal level, it could pave the way for dispensaries to access traditional banking services. However, even if federal legalization occurs, it may take time for banking regulations to adapt, and dispensaries may still face challenges in securing traditional banking relationships.
While this may prove to be an uphill battle for legalization activists, there has been a surge of support nation-wide in recent years, giving hope to those seeking federal legalization of cannabis. In the meantime, there are smaller steps being taken to pave the way for the cannabis industry. The most notable of which is the SAFER Banking Act that passed the U.S. Senate in September 2023. This bill aimed to allow cannabis-related businesses (CRBs) to have access to traditional banks and banking options, such as bank accounts and small business loans, while providing banks and financial institutions a safe harbor when banking CRB customers. Previous iterations of this bill, commonly known as the SAFE Banking Act has passed the House on multiple occasions, but then stalled in the Senate. While this new SAFER Banking Act bill passed the Senate, there is no tell of whether it will pass in the House. But the silver lining is that there is congressional support to move this industry forward and allow CRBs to have access to traditional banks.
Stay Current with the ACB
The Association for Cannabis Banking (ACB) is a leading advocacy organization dedicated to promoting safe and inclusive financial services for the cannabis industry. The ACB works closely with software producers, researchers, and financial institutions to advance cannabis banking solutions that support the growth and legitimacy of the industry.