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Could banking reform minimize the illicit marijuana market?

Sundie Seefried (Photo courtesy of Safe Harbor Financial)

Illicit marijuana operations are booming across the country and have been undercutting regulated companies awaiting banking and tax reform.

The unregulated cannabis market in the United States is estimated to be worth roughly $60 billion, with the state-regulated sector coming in at a little more than half that number, according to Colorado-based market intelligence firm BDSA.

This presents serious challenges for businesses as well as serious concerns for consumers.

In 2022, the New York Medical Cannabis Industry Association released a report that revealed the presence of contaminants such as E. coli, pesticides, heavy metals and salmonella in 40% of unregulated marijuana products, which are still sold across the state.

Many of the products tested also contained different amounts of THC than was advertised on the label; in one case, a product contained double the amount of THC listed.

Earlier this summer, authorities raided a warehouse in Oklahoma City being used as a distribution hub for marijuana trafficking, seizing almost 7,000 pounds of cannabis worth about $28 million.

The sting followed a similar operation in April, when law enforcement seized another 7,000 pounds of marijuana headed east.

With a growing number of states moving toward the legalization of medical and adult-use marijuana, more significant steps must be taken to curb the illicit market.

One of the most important opportunities is the integration of the cannabis industry into the banking system.

Here’s how a federal banking program could help legitimize the cannabis industry while minimizing the illicit market:

Enhanced transparency and accountability: The illicit marijuana market thrives on the absence of oversight and regulation.

By allowing legitimate marijuana businesses access to banking services, regulators can ensure enhanced transparency and accountability within the industry.

Banks are well-versed in conducting due diligence and monitoring transactions, which can help prevent money laundering, tax evasion and other illegal activities associated with the illicit market.

Safer transactions: Cash-based transactions dominate the cannabis industry in places where the plant remains illegal or where banks refuse to work with marijuana businesses because of federal regulations.

This cash-heavy environment poses serious security risks for business owners, employees and customers.

Banking services can reduce the need for large cash transactions, making the industry safer for all stakeholders.

Tax collection: Legal cannabis markets generate substantial tax revenue for governments, contributing to public coffers for various essential services.

Banking integration enables efficient tax collection, ensuring that the industry plays its part in supporting public services, education and infrastructure.

Access to capital: One of the key challenges faced by cannabis businesses is access to capital.

Banks can provide business loans, lines of credit and other financial tools that can help companies grow and thrive.

This not only legitimizes the industry but also stimulates economic growth.

Market expansion and job creation: With legal access to banking services, cannabis businesses can expand their operations, create more jobs and contribute to the economy.

This has a ripple effect on related industries, such as agriculture, transportation and retail, and leads to economic growth.

Consumer safety: Legal marijuana businesses are subject to quality and safety regulations that protect consumers.

However, the illicit market produces unregulated and potentially untested products.

Banking integration can facilitate compliance with state regulations and ensure that consumers have access to safe, lab-tested products.

Research and development: Banking services enable cannabis companies to invest in research and development, driving innovation in products and cultivation techniques.

This leads to better products, increased efficacy and, ultimately, more acceptance within the mainstream medical and wellness industries.

Regulatory compliance: Regulatory compliance is crucial for the legitimacy of any industry.

Banking institutions can work in tandem with regulatory bodies to ensure that marijuana businesses adhere to local and federal laws. This fosters trust in the industry and encourages responsible practices.

Integrating the cannabis industry into the banking system has the potential to significantly reduce the illicit market while promoting legitimacy and responsible business practices.

It offers numerous advantages, from enhanced transparency and accountability to safer transactions, increased tax revenue and economic growth.

By providing marijuana businesses with the tools and services they need to operate legally and responsibly, the banking sector can play a vital role in transforming the industry into a legitimate and well-regulated sector, ultimately benefiting consumers, businesses and society as a whole.

Sundie Seefried, a four-decade veteran of the credit union industry, is the CEO of Colorado-based Safe Harbor Financial, a leader in facilitating financial services and credit facilities to the regulated cannabis industry. She can be reached at

To be considered for publication as a guest columnist, please submit your request here.

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