Bankers leery of pot industry’s accounts
Fear lawsuits, $ losses
Bankers and insurers are grappling with the financing issues around the nascent marijuana industry, amid concerns the clash between state and federal law could leave the financial industry vulnerable to losses and even prosecution, insiders told a Boston conference of national legislators yesterday.
“Bankers want to make money, they don’t want to go to jail,” Michael Correia of the National Cannabis Industry Association told the National Conference of State Legislatures.
“Until Congress changes the laws, we’re still going to be in this gray area.”
Jeffrey Gerard, chief risk officer of Greylock Federal Credit Union, which has 12 branches in Berkshire County, said his 11-member board is divided on whether to service to the rapidly growing industry. For now, it’s only offering accounts to landlords who rent space to pot dispensaries.
“Some board members are for it, and some are strongly against it,” Gerard said.
“And if we do say yes to the marijuana accounts, it will be a go-slow approach.”
Gov. Charlie Baker signed a law last week establishing a tax and regulatory structure for marijuana sales after voters legalized them last year, and the first shops are set to open in July 2018.
But U.S. Attorney General Jeff Sessions, in a shift from the Obama administration, has warned the federal government will crack down in states that have legalized pot.
That has left banks reluctant even to provide bank accounts to dispensary employees and laborers such as carpenters who help build them, Gerard said.
But he admitted the potentially $1 billion state business is a tempting risk-reward proposition.
Marijuana sales are “the fastest growing industry in America,” a $6 billion national business expected to explode to $20 billion in five years, particularly after California implements a ballot initiate voters there approved in November, Correia said.
“It is a big deal, and we can’t ignore its presence,” Gerard said.
The industry is also a conundrum for insurance companies, who could make a killing selling property loss policies to dispensaries, but are concerned they might not withstand legal challenges or will be too expensive for most companies to afford.
The yield for an acre of wheat is about $250, while the yield for an acre of cannabis is $1.1 million, said Brenda Wells, a business professor at East Carolina University.
“You have to understand the values that are stake here that need to be covered,” she said.
There would even be a market for kidnap and insurance coverage, because marijuana sales is an all-cash business and employees tasked with handling money could make easy targets, she said.