Societal and Economic Costs of Saying “No” to Cannabis Banking

Paul Dunford
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February 27, 2020

This is the third part of a three-part series on the community, opportunity, and economic costs when financial institutions say "no" to cannabis.


If your institution is one of those in the 93% of U.S. banks and credit unions who don’t bank CRBs today, then you’ve already decided that the risks of Federal prohibition outweigh the potential rewards to your institution and your community - at least for now. Have you considered how staying within the boundaries of your current risk appetite could be harming the nation as a whole? As it turns out, keeping these businesses cordoned off from access to traditional banking channels affects a broader range of social and economic issues in the world beyond your branches.


A Tale of Forfeited Potential 

When cannabis businesses are suppressed, it weakens their potential to inform decisions and progress. Anecdotal and scientific evidence supports that mental and physical health benefits derived from responsibly sourced and properly administered cannabis-based products. In countries that are moving quickly to align public policy with sentiment and science on these issues, the data indicates that sustainable economic benefits are possible.


  • Cost of falling behind in medical and other scientific research and advances. In 2018, six countries were identified by 420Intel as the top countries to conduct cannabis research: Spain, Canada, Czech Republic, Uruguay, Netherlands and Israel. Because of U.S. Federal prohibitions, this type of research cannot be conducted in the States without clearing multiple regulatory hurdles, at great cost. This problem, in turn, leads to offshoring the research around critical issues - everything from health benefits or detriments to measuring advertised potency to testing for toxins added or left behind during processing - introducing another set of complications when determining policy risks of reliance on outsourced research. (The economic implications of these bans are further discussed below.)


In January 2017, the U.S. National Academies of Sciences, Engineering, and Medicine released its publication on “The Health Effects of Cannabis and Cannabinoids: The Current State of Evidence and Recommendations for Research.” The position of the study authors was summed up like so: “In the absence of an appropriately funded and supported cannabis research agenda, patients may be unaware of viable treatment options, providers may be unable to prescribe effective treatments, policy makers may be hindered from developing evidence-based policies, and health care organizations and insurance providers lack a basis on which to revise their care and coverage policies. In short, such barriers represent a public health problem.” (emphasis added)


  • Costs of pain and suffering to those in need of relief.  Even if your personal belief sets don’t allow you to explore cannabis topics with an open mind, you need look no further than your media feeds or Google searches to find immeasurable examples of individuals who claim that using cannabis or cannabinoids have provided them with physical and mental health benefits. (A good place to start might be Part 1 of this three-part YouTube documentary clips involving the man featured in the documentary “Ride with Larry.”)  Seeing real stories of real people, it is easier to understand why and how so many individuals and their families have decided that breaking the law is worth any potential consequences, if it means restoring some health or happiness to their lives. Many bankers have told us that ultimately, it was these stories from their fellow citizens, that softened their hard stance on the boundaries they’d placed around banking CRBs. In smaller local communities where the stories are personal, the effect is further magnified.


  • Cost of lost economic growth potential.  As indicated above, the research being conducted offshore adds to the GDP of those countries, not ours, and leaves key scientific data outside our access or control other than by goodwill or contractual arrangements. While exact numbers are hard to come by, there more than 110 studies taking place in Israel alone, funded at rates in the six and seven figures apiece. BNN Bloomberg reported that Canada’s legalized cannabis sector had contributed $8.26 billion to its gross domestic product during the first ten months of legalization in that country. The gap widens each day that the United States refuses to change policies in ways that allow America and Americans to reap some of the tangible economic benefits of CRBs. State-level legalization has allowed local communities to tap into some of this growth potential on a smaller scale. The support of banks and credit unions who can accept and reduce the potential risks of cannabis banking allows for models to be built, and performance to be proven, so that when broader expansion is possible, it can happen quickly, efficiently, and with fewer risks.


In this series, we’ve demonstrated the unintended but inevitable consequences when cannabis businesses are not given access to traditional banking and financial services. These hidden costs accrue to CRBs, the communities in which they are located, and to the financial institutions who avoid them - as well as to society at large. Even with justified concern about Federal prohibitions in light of State-level permissions, financial institutions and the communities they serve can no longer afford to “just say no” without taking a hard look at the potential consequences of that decision. If you can reduce risk to acceptable levels, while fostering progress, perhaps a “yes” to cannabis banking is in your future.



If you’d like to learn more about how your institution can more safely and successfully offer banking services to CRBs, contact us to hear how we are already helping banks and credit unions say “yes” to cannabis banking.

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