Legalization of marijuana in California has helped some financial institutions in the state increase their assets at the same time many banks, feeling stifled by federal regulations, deny services to licensed growers, manufacturers and retailers, a new study shows.
Combining data on bank holdings and interviews with growers and bankers, the research paints an initial picture of how the marijuana and financial industries coexist in California now, and suggests that regulatory changes could create new opportunities for both.
The data analysis did make one thing clear: Legalization of the estimated $16 billion marijuana industry in California has been a boon to financial institutions. But restricted access to banking, from checking accounts to loans, perpetuates inequities for those participating in the legal production of cannabis—while unlicensed, illegal growing and exporting continues as an enormous cash-based sector of the industry.
“We need a better understanding of the economics of this industry and all of the questions and implications related to it so the impacts of policy choices are intentional,” said lead study author Zoë Plakias, assistant professor of agricultural, environmental and development economics at The Ohio State University.
“If we want to have a more equitable society and allow communities to keep more of the value of this crop, how do we do that? We first need to characterize what happens in communities when you legalize cannabis.”
Plakias and Margaret Jodlowski, assistant professor of agricultural, environmental and development economics at Ohio State, conducted the study with researchers Parisa Kavousi, Taylor Giamo and Keith Taylor at the University of California, Davis.
“Licensed cannabis businesses need to bank their cash and take out loans to build their businesses, but many banks worry that by doing business with the cannabis industry, they’ll be flouting federal laws,” said Taylor, University of California Cooperative Extension community development specialist. “Banks that won’t accept legal cannabis cash deposits and don’t provide loans aren’t monetizing their deposits. Marginalized cannabis communities are missing out on capital.”
Published: January 19, 2022
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