Cannabis legalization has had a significant impact on the economy since it first started being legalized in certain states. It has provided many benefits, including generating tax revenue, creating new jobs, and promoting economic growth. However, the industry still faces significant obstacles due to the federal government’s classification of cannabis as a Schedule I drug. One of the most significant issues facing the industry is the lack of access to traditional banking options.
Benefits of Cannabis Legalization
One of the most significant benefits of legalizing cannabis has been the increase in tax revenue for states that have legalized it. For example, in Colorado, which legalized recreational cannabis in 2014, the state collected over $387 million in taxes and fees from cannabis sales in 2020 alone. This revenue has been used to fund various state programs, including education, healthcare, and public safety.
Legalization of cannabis has also created new jobs, ranging from growers and processors to budtenders and delivery drivers. In California, which has the largest legal cannabis market in the United States, the industry has created over 67,000 full-time jobs. This job growth has been a boon to local economies, especially in areas that were struggling economically before the cannabis industry arrived.
Ongoing Challenges
Despite these benefits, the cannabis industry still faces significant challenges due to its illegal status at the federal level. One of the most significant challenges is the lack of access to traditional banking services. Since cannabis is still illegal at the federal level, banks are hesitant to work with cannabis businesses, even in states where it is legal. In fact, banks that work with cannabis companies can be open to the risk of being prosecuted for money laundering, aiding and abetting drug trafficking, and other federal crimes. This lack of access to banking services makes it challenging for cannabis businesses to pay their employees, pay taxes, and even access loans to expand their operations.
This lack of access to banking services is not only inconvenient for the industry, but it also presents a significant public safety risk. Without access to traditional banking options, cannabis businesses are often forced to operate in cash, which makes them targets for robbery and other crimes. This cash-only system also makes it more difficult for law enforcement to track and prevent illicit activities, such as money laundering and the sale of cannabis to minors.
The federal government’s stance on cannabis is slowly starting to shift, however. In December 2020, the House of Representatives passed the Marijuana Opportunity Reinvestment and Expungement (MORE) Act, which would remove cannabis from the list of Schedule I drugs and decriminalize it at the federal level. While the MORE Act still needs to be passed by the Senate and signed into law by the President, it is a significant step forward in the fight for federal legalization.
The Safe Banking Act
Government officials have also been working on providing cannabis and hemp businesses with banking solutions, specifically through the Secure and Fair Enforcement (SAFE) Banking Act. The SAFE Banking Act (Secure and Fair Enforcement Banking Act) is a proposed United States federal law aimed at providing legal protection to banks and other financial institutions that work with state-legal cannabis businesses.
The SAFE Banking Act seeks to address this issue by prohibiting federal banking regulators from penalizing banks and other financial institutions for providing services to state-legal cannabis businesses. The Act would also protect financial institutions from prosecution for money laundering and other federal crimes related to cannabis banking, as long as they comply with certain guidelines and regulations.
The Act was first introduced in 2013 and has been reintroduced in subsequent years. It has passed the House of Representatives multiple times, but has yet to pass the Senate and be signed into law by the President.
Conclusion
In conclusion, legalizing cannabis has had a significant impact on the economy, providing states with tax revenue, creating jobs, and promoting economic growth. Companies operating in the legal cannabis market, whether it be cultivation, extraction, or retail have all had a positive impact on the state economy. However, the industry still faces significant challenges due to its illegal status at the federal level. The lack of access to traditional banking services is one of the most significant challenges facing the industry, and it presents a significant public safety risk. While federal legalization is still a work in progress, the passage of the MORE Act is a promising sign for the industry’s future.
