The number of states with new cannabis regulations on the books is nearing twenty. States like Colorado, Illinois, and Michigan have seen tens of millions of dollars worth of sales in a single week. But the financial institutions are still wary. That hesitation doesn’t just hurt this growing industry; it also hurts the environment.
Last month, Michigan began selling legal cannabis products for the very first time. In just six weeks, retail sales surpassed $10 million and generated $1.7 million in new tax revenue. All of that success came from businesses that relied on personal or small-scale venture rounds to handle the substantial investments that go into a successful grow facility. From the ground up, many of these firms have had no access to the financial support that nearly any other business would rely on to get started.
Marijuana remains illegal at the federal level, and banks rely on federal rules, licensing, and regulations to operate. At the end of the day, most banks won’t touch cannabis companies for fear of breaking federal law. In some cities and states, smaller credit unions and banks have very quietly financed cannabis operations. However, that liquid capital stream has been almost entirely out of reach for marijuana firms. That’s put a massive brake on growth, but it has bigger consequences, too. It’s also hurting the environment.
As we’ve discussed many times, marijuana growers face immense energy demands. Its lighting and HVAC demands are a massive strain on the grid, and that electrical need is expected to nearly triple by 2023. When companies cut corners and rely on outdated technology or press lamps designed for recreational use into industrial-scale applications, they don’t just waste their own money. They’re also wasting staggering amounts of electricity, and that added strain hurts both the grid and the planet.
Looking ahead, we see banking protections as one of the most important pieces of legislation in Michigan and in any of the twenty states with legal marijuana laws. There is traction on that front. The SAFE Banking Act passed the US House of Representatives way back in September of 2019, though with some reservations. Critics of the bill maintain often confuse the banking regulation with marijuana regulation more broadly, a misinterpretation that has slowed acceptance of the Act in the Senate which, as you may have noticed, has had other pressing issues pushed to the center of its attention.
We’ve seen first hand just how important cannabis’ reliance on energy is now, and with growth in the industry projected to skyrocket, what businesses have in place right now will dictate not just which companies will survive, but if our aging grid system will continue to be able to handle the load of growers and the general public successfully. By allowing banks to safely loan necessary funds to these firms, state and federal governments will benefit even more from tax revenue and let market forces work, without putting the environment at risk.