Underbanked cannabis industry struggles to finance double-digit growth, leaving business owners empty-handed

Harmony Dispensary, a medical marijuana cultivator and dispensary in Secaucus, New Jersey, has a Zen-looking shopfront with light green walls, clean glass shelves showcasing various offerings, and a line of modern-looking cannabis-related products — a pipe, herb grinder and stash jar — all emblazoned with the Harmony logo.

Since its opening in 2018, the dispensary has serviced thousands of customers, but it has struggled to hold on to a bank account. “We approached six institutions to support our banking needs and were eventually dumped from all three that agreed to work with us,” Shaya Brodchandel, chief executive of Harmony Dispensary, said. In each case, Harmony received no warning from the banks, just a check in the mail, forcing them to scramble for solutions to pay suppliers, bills, staff and conduct general business.

Harmony is far from alone. This is a common problem in the cannabis industry. Though medical or recreational use of marijuana is now legal in 33 states, marijuana is still classified as a schedule 1 substance under federal law, putting it in the same category as heroin, LSD and ecstasy. Most financial institutions, such as banks, Visa and Mastercard, will not work with the cannabis industry, fearing federal prosecution.

The SAFE Banking Act, which passed the House of Representatives on Sept. 25, was a milestone step toward making banking more available to the growing industry. The legislation would prevent federal financial regulators from punishing financial institutions that provide services to legal cannabis businesses. But now it’s up to the Senate, where a similar version of the legislation has been introduced. Senate Banking Committee Chairman Mike Crapo, R-Idaho, has said the chamber will vote on the legislation before the end of the year. Views are mixed on how the Senate will act.

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