Ohio's Cannabis Boom: Tips from the Cannabis Banking Playbook

Ohio's adult-use cannabis market has seen impressive growth since its launch in August 2024, generating more than $300 million in sales in just the first six months of operations. Strong product availability, healthy margins, and continued market development signal even greater potential as the industry matures. According to projections by New Frontier Data, Ohio’s legal cannabis sector could grow to around $1 billion in annual sales in 2025.

As we’ve seen in other states that have recently legalized cannabis, the introduction of a legal adult-use market often sparks a surge in new businesses and an influx of capital, presenting significant opportunities for community banks to serve this growing sector. However, the persistent divide between state and federal cannabis policies continues to create complex regulatory challenges.

To successfully navigate this evolving landscape and effectively serve cannabis-related businesses (CRBs), financial institutions need a strategic, informed approach. Fortunately, a well-established cannabis banking playbook offers guidance on the opportunities and risks associated with this industry. Below are key insights from this playbook to help community bankers make informed decisions in this growing sector.

Understand the Realities of Cannabis Banking

Banking the cannabis industry presents compelling financial opportunities, including low-cost deposit growth, non-interest income, and the potential for higher yield earning assets. However, it’s crucial for community banks to fully understand the unique challenges and dynamics of the cannabis sector and their own business motivations for entering this market. A clear grasp of what it takes to serve CRBs effectively will not only help bankers assess whether this industry aligns with their institution's goals but also ensure they are prepared for the regulatory and operational complexities involved.

Update Policies and Procedures for Compliance

Cannabis banking impacts nearly every facet of a financial institution, from audits and insurance to cash handling and branch security. To operate compliantly, banks must update their existing policies and procedures to meet the specific regulatory and compliance requirements of the cannabis industry — or, if necessary, create new ones. Robust risk assessment protocols are essential to ensure that only legal funds enter the banking system, requiring full transparency into the CRB and its beneficial owners.

Additionally, to meet the cannabis industry's unique compliance demands, banks must develop systems, applications, and onboarding processes that enable efficient access to customer and transaction data while maintaining a positive customer service experience.

Provide Specialized Resources

Bankers have a responsibility to ensure CRBs operate within state guidelines. Specialized technology enables community banks to operate more efficiently by automating processes and involving CRBs as active participants in their own compliance efforts. Automation also frees up valuable time for compliance staff, allowing them to focus on more strategic tasks such as judgment-based decision-making, analysis, and customer service, rather than routine compliance tasks.

While technology will aid with efficiency, banks should also hire or train employees as specialized cannabis bankers. According to our annual survey of licensed operators, this expertise is sought by CRBs and is instrumental in ensuring compliance while creating more engaged and trusted customer relationships.

Be Prepared to Scale

As with any emerging industry, banks must remain adaptable to market shifts. A key focus heading into 2025 is the potential impact of federal cannabis policy changes, such as rescheduling, on banking operations. While major reforms—like federal legalization or the passage of the SAFER Banking Act—could ease regulatory uncertainty, they won’t eliminate the need for robust compliance and due diligence processes. Being prepared for regulatory changes (big and small) and industry growth will allow community banks to scale effectively and stay ahead in a rapidly changing market.

This article was originally published in the Community Bankers Association of Ohio.