Last Wednesday, California’s Senate approved a bill that would create a state bank for marijuana businesses. Senate Bill 930 or simply just SB 930, received bipartisan support from the senators, who voted 29-6 in favor of this new law.
Most cannabis companies can’t easily access traditional banking services because of the strict federal regulations. In some states, it is even impossible.
As a result, even legal cannabis companies are forced to conduct their business transactions largely in cash. The vast amount of money shows both logistical and security challenges in the industry and for the businesses.
SB 930 specifies that the state of California would form a special charter bank that could issue checks that can be used by the account holders.
Business in the cannabis industry can then use those checks to pay state and local taxes, rent, other business fees, and for them to reimburse California vendors for procured goods and services.
State and local bonds, debt instruments, leases, and other investment options can also be purchased by those who will have an account in this special charter bank.
Sen. Bob Hertzberg, from the Democratic party in Van Nuys, introduced the SB 930.
In a press release, he said that California’s fledgling marijuana economy needs a special bank for them to operate more efficiently and safely.
These banks will also increase the safety of the dispensaries, small business and companies that sell and deal with cannabis merchandise. At the moment, most of them store their cash in personal or business safes- a tempting target for robbers.
“The status quo for our growing legal cannabis industry is unsustainable,” Hertzberg said. “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.”
Hertzberg also said that he believes that sooner or later the federal government will permit traditional banks to provide their services to the marijuana industry but until then, this special bank will be available to the cannabis businesses for them to be able to have more flexibility in their budget, spending, and other financial options.
In an interview with NBC, Senator Hertzberg also added that they are not using the federal system or the federal wire. He said that the special bank is just a short-term creative approach to deal with these banking related problems.
Although the project is a huge step forward for the cannabis industry, Hertzberg admitted that the bank will only offer limited services outside of the federal regulatory framework.
For example, some expenses like paying the suppliers outside the state do not qualify for payment through the marijuana bank.
Katie Hazlik, Sen. Hertzberg’s Press Secretary said that unfortunately, companies can’t use the checks from the bank to pay for their employees because those dollars will be under the federal government’s radar and can be subjected to federal payroll tax.
Hazlik said that SB 930 still has limited scope, and the uses for the checks, was particularly made that way so that it is a closed loop system that will reassure banks and cannabis companies that they will not have to worry about the federal government interfering with their operations.
Another advocate for SB 930 is Fiona Ma, the Democratic Candidate for state treasurer and State Board of Equalization Member. Ma believes that the bill will benefit both the people of California and cannabis businesses. She added that California can’t wait to take action particularly in securing the banking for cannabis through SB 930.
Ma believes that California will greatly benefit with the bill. She forecasts a revenue boost and a safer state with cash from cannabis activities can now be transacted and stored in banks.
SB 930 is now headed to the State Assembly, where it will be referred for the consideration of the committee.