Summit State Bank president and CEO Jim Brush told several dozen marijuana industry leaders and state regulators in Santa Rosa on Thursday he’s glad cannabis is legal in California and sees a bright future for marijuana in the state.
But it won’t involve loans or accounts with the Santa Rosa-based, $500 million bank.
“We don’t bank cannabis,” Brush said. “It doesn’t matter what California does.”
Brush spoke before the Cannabis Banking Working Group, a panel convened by California Treasurer John Chiang that has been traveling the state to discuss the obstacles and alternatives to banking for the state’s booming marijuana industry. Chiang formed the group after California voters passed Proposition 64 in November, legalizing the adult recreational use of cannabis. The group’s fourth meeting in downtown Santa Rosa drew about 80 people to the Glaser Center on Mendocino Avenue.
California’s marijuana marketplace is projected to soar upward of $6 billion in sales. But even as the industry enters an era of openness with the development of state regulations for the medical and recreational sectors, the cash-based economy is unlikely to move into financial institutions.
Banks have been tentative and unreliable in their dealings with marijuana organizations because it is still scheduled as an illegal controlled substance under federal law. There is no specific law barring banks and other financial institutions from doing business with cannabis companies, but they could be exposed to federal money-laundering laws and face costly audits.
Deputy Treasurer Tim Schaefer said the perfect solution is the decriminalization of marijuana by the federal government, but in the meantime California must aggressively seek alternatives.
Legalization on the federal level “is something that’s in the future and, many would agree, unlikely” to occur soon, Schaefer said.
The panel included Fiona Ma, the Board of Equalization chairwoman, and officials representing several other state agencies including the Department of Business Oversight, the Employment Development Department and the California Insurance Commission. Industry experts included representatives from the California Cannabis Industry Association and the California Growers Association.
The panel heard from experts in cash delivery systems. Ma said the state needed to find automated cash collection safes with the capability to handle payments going to different government fees, from taxes to permitting.
Ricky Bennett, chief operations and compliances officer for Denver-based Blue Line Protection Group, said running a business on cash, even a large one, has precedent in the country and can work.
“Cash does flow from several industries, not just cannabis,” said Bennett, noting banks deal in cash.
Kirk Anderson, chief operations officer of CannaCraft, a Santa Rosa medical marijuana manufacturer and distributor, said it’s costly for a business to operate without access to banking. He estimated some of the business’ staff spend up to 50 percent of their time collecting, counting, handling and safeguarding cash, an impediment to innovation.
“Conversations are great but at some point we have to make incremental changes to move the industry forward,” said Anderson, whose brother Darius Anderson is a principal with Sonoma Media Investments, which owns The Press Democrat.
Ancillary marijuana industry businesses may continue to see obstacles to banking as well.
Jan Lynn Owen, a commissioner for the Department of Business Oversight, which oversees state-licensed financial institutions, said the state aims to develop a set of strong regulations so that banks might have a clear set of rules to follow. Signals from the federal government that marijuana operators working within state regulations will be left alone have not given banks confidence they would avoid scrutiny and federal drug laws. It’s not yet clear how aggressively the Trump Administration will enforce federal laws in states with legalized marijuana.
He told the panel his bank will not work with organizations directly dealing with marijuana and also limits contact with entities working with marijuana businesses. One example of such a business, he said, would be an irrigation equipment company working with a pot farm, as well as the Sonoma County Fair, which rents its grounds to cannabis contests.
“Are we going to do business with the county of Sonoma? We’re talking about that,” Brush said.
You can reach Staff Writer Julie Johnson at 707-521-5220 or firstname.lastname@example.org. On Twitter @jjpressdem.