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Inside the risky world of marijuana banking

Mark Parker



Trulieve operates several medical marijuana facilities throughout Tampa Bay. However, providing banking services to cannabis-related companies remains a federal crime. Photo by Wendell Leigh.

Despite the illegality of medical and recreational marijuana at the federal level, over 700 banks and credit unions filed paperwork with the U.S. government earlier this year acknowledging relationships with licensed cannabis companies.

According to the National Organization for the Reform of Marijuana Laws (NORML), that number represents a slight increase from the first quarter of 2021. However, it remains below the totals reported in the first quarter of 2020. The Treasury identified 553 banks and 202 credit unions, representing 11% and 4% of the respective U.S. institutions, that are “actively providing banking services to marijuana-related businesses.”

One of those institutions providing banking services to licensed cannabis companies has a significant presence in Tampa Bay. Founded in 2018, Cogent Bank is headquartered in downtown Orlando but serves the region with two of its eight branches in Clearwater and Tampa. Cogent focuses on flexible and forward-thinking services, especially in the area’s growing fintech and blockchain industries.

Jackie McIntosh, Market President of Pinellas County for Cogent, explained why the bank accepts deposits from cannabis-related businesses, despite the inherent risks.

“Being entrepreneurial is one of our corporate core values at Cogent Bank,” said McIntosh to the Catalyst. “We pride ourselves on providing innovative ideas and responding to the needs of the business community, especially the underserved.

“The cannabis industry is rapidly growing, and they have tremendous financial needs.”

Jackie McIntosh, Market President of Pinellas County for Cogent, explained why the bank accepts deposits from cannabis-related businesses, despite the inherent risks. Photo provided.

The revenue stream

In June 2021, Florida Trend reported that the state’s medical marijuana industry generated nearly $1.23 billion in taxable sales in 2020, putting it ahead of every state except for industry leaders California and Colorado.

While Florida does not levy an excise tax on medical marijuana, transactions are still subject to the state’s 6% sales tax. That indicates that Florida generated around $73.8 million in tax revenue from marijuana transactions in 2020, in addition to $50 million in licensing fees from the 22 cannabis business licenses the state offers.

Florida Trend reported the state’s Department of Health planned to issue up to 19 new licenses, which could nearly double sales and tax revenue by the end of this year.

On May 12, gubernatorial candidate and Florida Agricultural Commissioner Nikki Fried penned an unsuccessful call for Florida congressional members to maintain the inclusion of the Secure and Fair Enforcement (SAFE) Banking Act. The legislation would protect banks and cannabis-related businesses in the final version of the America COMPETES Act.

In the letter, Fried noted that 37 states, four territories and the District of Columbia legalized medical marijuana programs, and 18 states, two territories and the nation’s capital have legalized adult recreational use. Together, they generated $17.5 billion in sales in 2020.

“As a bank focused on commercial clients, we view cannabis like we would any other business,” said McIntosh. “We offer our entire suite of products and services to the industry … It’s important to us to be the bank for all businesses, especially the underserved, like cannabis.”

However, McIntosh noted numerous regulatory and compliance standards that institutions must comply with to provide banking services to marijuana-related companies. “In addition, cannabis is still not legal at the federal level,” she said.

Fried noted that medical and recreational marijuana generated $17.5 billion in sales in 2020.

A risky service

Federal law discourages banks and other financial institutions from maintaining relationships with marijuana-related businesses as the plant remains classified as a Schedule I controlled substance. According to survey data from Whitney Economics, over 70% of participating companies responded that a “lack of access to banking or investment capital” was their top challenge to operation.

Only 42% of respondents said state regulations were the most serious hurdle, and just 39% cited illicit market influence.

NORML reports that the U.S. House of Representatives has passed legislation – the SAFE Banking Act – to permit financial institutions to engage in business relationships with marijuana companies without running afoul of federal law, on six different occasions.

“The impact of the financial barriers to participation in this growing industry have caused inequitable economic growth and opportunities within the cannabis market, effectively restricting participation to those who can participate without the support of a financial institution,” wrote Fried in May.

“The federal government’s antiquated cannabis prohibition has resulted in the incarceration of countless persons of color and created barriers preventing them from accessing employment, housing and capital.”

Congress dropped the SAFE Banking Act from the final version of the larger America COMPETES Act in late June after it once again failed to muster enough support in the Senate.

In light of the federal hurdles, McIntosh said cannabis-related companies must maintain the highest level of transparency.

“At Cogent, it’s critical for us to have a strong relationship with our clients that is built on mutual respect and trust,” she said. “The more transparent a potential client is with us, the stronger of a relationship we can form.”

Florida’s first marijuana banker

Ken LaRoe, founder and CEO of Climate First Bank, said his previous bank, First Green, was the first and only institution in Florida to provide banking services to cannabis companies.

Ken LaRoe, founder and CEO of St. Petersburg-based Climate First Bank, knows the industry well.

According to LaRoe, his previous bank, First Green, was the first and only institution in Florida to provide banking services to cannabis companies. Chartered in 2009 and headquartered in Orlando, the bank announced it accepted medical marijuana money in August 2017.

“We had almost the entire market, instantly,” said LaRoe to the Catalyst. “Which was fantastic.”

LaRoe explained that the Cole Memorandum, issued in 2013 under the Obama Administration, stated that the federal government would not prosecute marijuana offenses in states where it was legal. He said the state expressed that if the federal government rescinded the memorandum, First Green would have 24 hours to exit the industry.

In 2018, former Attorney General Jeff Sessions rescinded the memorandum.

Additionally, LaRoe was in the process of selling First Green to Seacoast Banking Corp., and the buyer was not interested in continuing that aspect of the company. Just months after First Green began taking medical marijuana money, its foray into the industry came to a screeching halt.

“We hated it,” said LaRoe. “We were heavily vilified by the industry – like we got a lot of business and then decided to pull out because we sold.

“No, we decided to pull out because we were required by the regulators to pull out.”

While the federal government has yet to enact legislation similar to the Cole memorandum, he said law enforcement agencies continue to “turn their back” on banking activities in the cannabis industry.

“If you’re doing it pursuant to the Cole Memorandum – how weird is that – then they still won’t prosecute,” he said.

LaRoe added that federal authorities could still prosecute if they wanted to, and banks and insurance companies that participate in the industry still face “a huge risk.”

“It’s positively stupid.”

LaRoe said Climate First, which just celebrated its first anniversary, is interested in providing cannabis-related banking services. However, its charter states that it must wait three years after its inception to join the industry.

He said the prohibitionary period “stinks” because he wants to help an industry in need of assistance.

“We know how to do all the protections and robust stuff that they need,” said LaRoe. “But again, it’s a matter of getting some sort of assurance from everybody that we aren’t going to get arrested.

“It’s not just the regulatory violations – it’s actually criminal violations.”



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