Banking Still a Challenge for Marijuana Dispensaries, but there are Solutions

marijuana banking

A recent article in DealBook made the case that banks are still wary of working with cannabis companies, which is both good and bad.


The State of Colorado legalized marijuana for recreational use in 2014, joining several other states where the drug has been decriminalized in some form, but Visa and MasterCard will not process transactions for pot dispensaries and most banks will not open accounts for the businesses — leaving dispensaries dealing with a constant influx of cash, and nowhere good to put it.

Tokken is one of several recently created companies looking to solve one of the most vexing problems facing marijuana businesses in Colorado and several other states: the endless flow of dirty, dangerous, hard-to-track cash. Tokken and others start-ups such as Hypur and Kind Financial, have been putting together software that helps banks and dispensaries monitor and record transactions, with the long-term goal of moving transactions away from cash.

Despite the various state laws legalizing it, marijuana is still listed by federal authorities as a so-called Schedule 1 drug. Such drugs, which also include LSD and heroin, are deemed to have the highest potential for abuse.

The Department of Justice has said that it will generally let states enforce their own laws on marijuana. And the arm of the Treasury Department responsible for enforcing money-laundering laws has provided guidelines for banks that want to work with marijuana-related businesses. But federally regulated banks have generally refused to open accounts, and credit card companies have prohibited transactions from going across their networks.

There are already several, less savory ways of dealing with the cash problem. Some dispensaries open bank accounts under fake names. The founder of Tokken said that in his regulatory work, he caught a number of these schemes when he was examining banks in Colorado.

In a slightly more legitimate maneuver, some small companies have offered prepaid cards that can be used for purchases in dispensaries, though the legality of this is still unclear.

A few credit unions and small banks in Colorado have opened accounts for dispensaries — but they generally take on only a few marijuana customers each, and even they are still generally unable to process electronic payments.

Most of the start-ups trying to help with this problem are focused, in one way or another, on tracking every detail of every purchase in a more sophisticated way. Careful record-keeping can answer the concerns of banks worried about violating anti-money laundering laws. The start-ups hope their software can allow banks to open up their accounts, and their payment networks, to cannabis businesses.

Hypur, a two-year-old company based in Arizona, has built software for banks that uses GPS to geo-locate each purchase and prove it was done in an authorized dispensary.

The California-based start-up Kind Financial is offering software as well as hardware, in the form of kiosks that can go inside dispensaries. Customers can deposit cash in the Kind kiosk to pay for their purchase, removing one headache for the dispensary.

Denver Consulting Group can help dispensaries and license applicants with banking. We have proven techniques and systems that have been put to the test in leading dispensaries. Call us for more information.