California is less than one month away from launching its long-awaited legal marijuana program, which economists forecast will be valued at $7 billion. State and local governments will eventually be collecting $1 billion a year in tax revenue.
But what to do with all that money? Since cannabis remains federally illegal, financial institutions still won’t allow these businesses to conduct traditional banking transactions. In order to provide public safety, San Francisco may become the first city in the nation to create a public bank.
“It is unfair and a public safety risk to require a legal industry to haul duffle bags of cash to pay taxes, employees and utility bills,” according to California Treasurer John Chiang. “The reliance on cash paints a target on the back of cannabis operators and makes them and the general public vulnerable to violence and organized crime.”
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In November, Chiang endorsed a study to examine the efficacy of opening a state bank for those in the cannabis industry.
San Francisco County Supervisors Malia Cohen and Sandra Fewer are backing the concept of creating a municipal bank, which also would end the liberal city’s use of large national commercial banks.
According to a policy analysis report filed last week:
Twenty‐six states, including California and the District of Columbia have legalized certain marijuana‐related activities. Because marijuana is illegal at the federal level, many marijuana‐related businesses do not have access to banking services and have to conduct all their business in cash.
Cohen believes this is not only a banking issue, it is also a safety issue. “In our long cannabis discussion, we have barely acknowledged that cannabis is currently an all-cash business — cash payroll, no banking, vaults of bills on the floors of retailers,” she said.
According to a report in the San Francisco Examiner:
The report suggests the board “request an opinion from the City Attorney’s Office on legal issues regarding serving the marijuana industry” through a public bank.
The task force, which is expected to be established in late January, is charged with issuing a report within six months, including cost estimates of establishing a public bank, staffing needs and how to provide banking services for the cannabis industry.
San Francisco is not alone in proactively searching for a solution. At least 10 other cities or states are considering public banking as an option.
