Ohio became the 21st state nationwide to launch licensed and regulated adult-use cannabis sales. Through the first 61 days following Ohio’s adult-use sales launch on Aug. 6, the state’s roughly 130 dispensaries—including 124 with their dual-use certificates of operation to serve both patients and nonmedical consumers—reported $98.3 million in adult-use sales and $67.6 million in medical cannabis sales, according to the Ohio Division of Cannabis Control. The combined total of $165.9 million in sales through the first two months of an expanded market represents an annual run rate of nearly $1 billion in sales, meaning Ohio will likely join the ranks of 11 states with billion-dollar markets forecasted for this year*, and is on track to exceed $3.2 billion in sales by 2030. Neighboring Michigan recorded $3 billion in cannabis sales last year. In nearby Illinois, total cannabis sales exceeded $2 billion during the state’s 2024 fiscal year. The growth of these midwestern cannabis markets – and others across the country – demonstrates the tremendous financial opportunity for participants in this industry, including for banks and credit unions.
You Don’t Have to Like Cannabis to Bank Cannabis
The cannabis industry is known for having passionate supporters, business owners, and customers who proudly advocate for their product and its benefits. But does that mean you have to be “pro-cannabis” to bank cannabis-related businesses (CRBs)? No. You just have to be “pro-access-to-banking.” Community banks and credit unions are founded on the idea that access to banking is vital to the health and well-being of their communities. Cannabis banking reflects those values and extends the benefits of banking and financial services to licensed local businesses. Here’s how:
Access to banking ensures cannabis businesses operate safely and legally. Cannabis-related businesses are often very cash intensive. This is big business, and it carries a big risk. Large amounts of cash on hand can make these businesses and their employees targets and creates a public safety risk. Moving that cash out of a business and into a financial institution reduces risk, improves public safety, and protects employees by enabling them to be paid by check or ACH payroll deposit.
Thanks to strict reporting requirements, financial institutions are among the first line of defense against illegal activity. BSA/AML compliance for cannabis banking requires visibility and transparency into the everyday operations of a business and its investors, ensuring that shady characters don’t take advantage of legal businesses to launder illegal funds. Suspicious activity reporting, a central component of all cannabis banking programs, offers an immense benefit to law enforcement and aids in their enforcement activities.
As bankers, we want the businesses in our communities to operate in a legal fashion that keeps their employees, workplaces, and neighborhoods safe. Understanding how serving CRBs can be fully in line with the values and mission of the bank or credit union can help management make the case to board members who may have concerns about unsettled federal questions or potential risks to the institution’s reputation. But the fact remains that the need for banking exists, and providing financial services to licensed cannabis operators offers concrete benefits to your community.
A Financial Opportunity for the Financial Institution
In addition to making the case that cannabis banking serves your mission as a community bank or credit union, there is also a business case for banking this industry. For those ready to serve licensed cannabis businesses, there will be a significant first-mover advantage. This includes access to low-cost deposits, non-interest income, and higher yield earning assets through lending. Fee-based services, such as consumer and B2B payment systems offer additional opportunities to generate ongoing revenue. With the right technologies and processes in place to enable a robust cannabis banking risk management program, the new revenue generated from this line of business can offset operational costs and enable the financial institution to grow and scale efficiently.
Regardless of your personal views on cannabis, serving cannabis-related businesses can be part of your financial institution’s long-term growth strategy. It can help build and strengthen relationships in your community by providing a much-needed service that improves public safety and the lives of local business owners and their employees. And it can provide a path for growth and new revenue for your bank or credit union. What’s not to like about that?
The Cannabis Banking Playbook
The emerging legal cannabis industry brings significant growth potential, along with challenging operational demands and complex regulations. But cannabis banking does not have to mean high-risk banking.
Informed by the experiences of pioneer bankers, the Shield Compliance Cannabis Banking Playbook defines a path forward for banks to serve cannabis-related businesses compliantly while gaining the financial rewards from this market. Download Now
*Ohio Adult-Use Cannabis Sales Top $98 Million in First 2 Months (Cannabis Business Times)