Cannabis cut-off: Banking system builds hurdles as legalization approaches

In just a few days, recreational marijuana will be legal in Minnesota for people over the age of 21.

But Mastercard’s decision this week to keep any of its bank partners from working with cannabis businesses is the latest reminder of a tough financial system for cannabis businesses.

Owners at Hemp House, which has a few locations in the Twin Cities metro area, secured banking for their hemp-derived THC business, but it wasn’t easy, and they’re expecting it to be even harder as they try to get in the marijuana industry as well.

Everything for sale at Hemp House is legal in Minnesota.

But the federal government frowns on cannabis products, so a lot of banks shy away from working with the industry.

Minnesota’s hemp-derived THC companies eventually got bank accounts, but with a lot of expensive hurdles.

"So you need a payment processor," said David Gonzalez, an executive at Hemp House. "You need a point-of/sale system, and there's two kind of areas. There's your in store point-of-sale and then e-commerce which is way more difficult."

Banking fees were one of the top three expenses at Hemp House last year.

Their current bank is unlikely to work with them as they try to move into legalized marijuana.

Only a few banks across the country are doing it, working with other businesses establishing their own debit cards and point-of-sale networks.

Regent Bank in Oklahoma is one of them, and it’s taking on businesses in Minnesota as recreational marijuana becomes legal.

Keri Cain says her bank needs stringent checks and balances, making sure cannabis customers don’t deposit too much cash by confirming sales figures.

"It's important that we make sure that the client isn't commingling funds, right?" said the Regent Bank senior vice president. "They that they're not putting cannabis money in there. And they can't put cannabis money in their personal accounts."

Those automated systems mean cannabis companies are constantly concerned about money in the bank suddenly disappearing.

That nightmare felt like a reality recently for Hemp House.

"So it's an algorithm that's shutting you down or flagging you," Gonzalez said. "There's three months where we couldn't touch any of our money."

One Colorado dispensary owner said he had 28 banks shut down his accounts, so company owners will often try to hide the nature of their business.

And Cain says it probably won’t get easier until the federal government changes its policy on cannabis.