Banks and Marijuana Business

Ready to hit your local pot shop should it open next year? Bring cash. Unless something changes, credit card transactions won’t be possible in the state’s marijuana stores.

That’s because while marijuana is legal in Massachusetts, it’s still illegal federally, so financial institutions potentially risk prosecution if they work with cannabis firms. It’s why only one Massachusetts bank—Medford’s Century Bank—is openly doing business with them, although word is other local players are quietly doing so.

The result is a multibillion-dollar industry largely dependent on cash. In 2015, Marijuana Business Daily found that 60 percent of cannabis firms didn’t have bank accounts; those lucky enough to have accounts can find them shuttered without notice. Instead, marijuana businesses rely on armed security operations shuttling cash to well-secured storage facilities. That hasn’t stopped dispensary robberies elsewhere that have left security guards injured or killed.

The lack of business loans and other financial support systems also means it’s hard for newcomers to break into the industry. “For young entrepreneurs, the cards are stacked against them,” says Lamine Zarrad, founder of the marijuana payment processor Tokken. “The industry is being held back in a very direct way.”

Entrepreneurs such as Zarrad are developing apps that will allow dispensary customers to pay via their smartphones, while activists are pushing for federal- and state-level banking protections. In the meantime, when you go bud shopping, leave your plastic money at home.