A bill that would allow cannabis businesses to legally open bank accounts at state-licensed financial institutions is on its way to the Assembly Appropriations Committee, another sign that the cannabis industry is rapidly becoming an accepted business enterprise in California.
The Assembly Appropriations Committee hears all bills that will have a fiscal impact and is typically the last stop before a bill lands on the governor’s desk for approval or rejection.
Senate Bill 930, sponsored by state Sen. Bob Hertzberg (D-Van Nuys), passed the Assembly Business & Professions Committee on June 26. It would establish a framework for cannabis businesses to legally bank with state-licensed financial institutions.
SB 930 previously passed the Assembly Banking and Finance Committee on June 18 and the Assembly Business and Professions Committee on June 26.
The proposed legislation is co-sponsored by Board of Equalization member Fiona Ma. Voters passed Proposition 64 in November 2016, authorizing the use and sale of recreational marijuana in specific instances.
Currently, federal regulations prevent cannabis-based businesses from doing business with banks and other financial institutions, a practice that Hertzberg says is not practical given the legalization of marijuana retailers in California.
“The status quo for our growing legal cannabis industry is unsustainable,” the senator said in a statement. “It’s not only impractical from an accounting perspective but it also presents a tremendous public safety problem. This bill takes a limited approach to provide all parties with a safe and reliable way to move forward on this urgent issue.”
According to Hertzberg’s office, under SB 930 cannabis businesses with bank accounts would be able to use checking accounts to pay state and local taxes and fees, pay state vendors for goods and services, and pay rent.
“California can’t wait to take action,” said co-sponsor Ma, who is running for state treasurer. “With secure banking for cannabis through SB 930, the industry will benefit, the state will get a revenue boost and pot cash will get off our streets.”
California is among eight states and the District of Columbia to have legalized the sale and consumption of marijuana in some form.
SB 930 has had bipartisan support in an increasingly partisan political environment.
“This bill continues to enjoy bipartisan support because it is a huge step in the right direction to address the public safety challenges associated with a multibillion-dollar industry operating all in cash,” Hertzberg said after the June 26 vote.
While some might still consider the cannabis industry outside the mainstream, it is hard to argue with its financial success. The state Department of Finance estimates that approximately $600 million in cannabis taxes will be collected this year.
Operators of cannabis-based businesses both here and outside California have lamented how they can only transact business in cash, leaving them vulnerable to robberies and internal theft.
Daniel Li, a spokesman for MedMen, a cannabis company with outlets throughout Los Angeles, did not return calls for comment. The California Cannabis Association Industry did not respond to email requests for comment.
The Los Angeles Chamber of Commerce opposed Proposition 64; it is unclear if the organization has taken a position on SB 930.
According to Senate committee documents, in the first two months of adult-use cannabis legalization, consumers bought an estimated $339 million worth of marijuana products from retailers in California.
The bill will allocate an estimated $190,000 a year for conducting field checks by the state Department of Business Oversight for every two new banks or credit unions that are created if SB 930 becomes law.
Hertzberg spokeswoman Katie Hanzlik said there is no existing legislation in the nation comparable to the proposed bill.
In Colorado, which was among the first states to legalize the sale of marijuana, Fourth Credit Union received a conditional master account from the Federal Reserve earlier this year. The credit union can only open accounts for cannabis advocacy groups.
In Hawaii, CanPay has allowed retailers and customers to use debit cards instead of cash. Severn Savings Bank has opened accounts for cannabis businesses in Maryland. Each day, dispensaries must email the bank detailed daily financial and inventory logs from Metric, the software system that regulators use to track marijuana from seed to sale.
Hanzlik said that, because SB 930 is a bill that could have a financial impact, it most likely will not be heard until after the Legislature’s summer recess in August.