In states like Colorado, where marijuana has only recently become legal, the industry is already booming. But even as shops flourish, restrictive federal regulations prevent them from simple necessities like safe banking options.
The ArcView Group, a cannabis investment group, predicts that legal weed could make $10 billion in revenue by 2018. In 2014, it made $2.6 billion. Greenwave Advisors, another marijuana industry research group, estimates that weed could make much more–$35 billion by 2020–if it were legalized at the federal level.
Paypal founder Peter Thiel’s venture capital firm recently became the first institutional investor to take stake in the marijuana industry.
“If you look at Colorado alone, this year it’s forecast to exceed $700 million – that’s massive expansion,” the CEO of Denver’s Dixie Elixirs & Edibles told Marketplace.org at a cannabis convention in Las Vegas hosted by ArcView and others.
Yet despite increased legalization by the states, the federal government continues to ban marijuana and classify it as a Schedule 1 drug—the same rating as heroin, and a more severe rating than that assigned to meth or cocaine.
Federal restrictions make tax and banking for the marijuana industry incredibly difficult. For most banks, dealing with a federally-banned industry is simply too risky—they could face fines or even criminal prosecution. This leaves many marijuana shops dealing in cash: a dangerous and unsustainable business practice. Meanwhile, the IRS forbids marijuana businesses from deducting their business expenses, regardless of the drug’s legality in a given state.
“Banks are nervous to take our money,” another marijuana industry professional, Bruce Granger of Denver-based Kind Love, told Marketplace. “How do you do accounting? Most people don’t have a bank statement. So it’s all cash.”
One pot store owner attested to paying their employees in cash, accompanied by armed security officers.
Rep. Earl Blumenauer (D-Ore.), who leads a bipartisan pro-marijuana effort in Congress along with Rep. Dana Rohrabacher (R-Calif.), wants to eliminate these federal restrictions. “If you care about money laundering or tax evasion or just theft, forcing legitimate businesses to pay their taxes with shopping bags full of $20 bills is insane,” Blumenauer said at the ArcView conference. “Let these legitimate businesses have fair taxes and banking services. They’ll be better off, but so will society.”
And, aside from federal regulations, the marijuana industry continues to face regulatory challenges even in the states that have legalized it. Restrictive advertising rules, for example, block some marijuana shops from purchasing billboards or other outdoor advertising spaces.
