Illinois State Treasurer Michael Frerichs called Monday for changes to rules that prohibit banks from providing basic services to the legal cannabis industry like writing checks, depositing money and taking out loans.
Frerichs said “outdated” regulations have forced the Illinois medical marijuana industry to operate on a cash-only basis. The issue is among many complications faced by companies as the drug becomes legal in states across the country but not at the federal level. That means it remains illegal for banks to do business with the cannabis industry because marijuana is still considered an illegal controlled substance by the federal government.
“We have an industry that handles money hiding in the shadows because banking rules, which were established decades ago, have not kept up with changes in behavior and in law,” Frerichs said.
As a result, he said, the medical marijuana industry in Illinois — which had revenue of $136 million in 2018 — is ripe for theft, fraud and tax evasion. Illinois legalized the use of marijuana for certain medical conditions in 2015. This year, state lawmakers are also considering legislation supported by Gov. J.B. Pritzker to legalize adult use of recreational marijuana.
“As residents of this state, we needlessly invite risk to people and property as $136 million in cash is shuffled from place to place in duffel bags in the front seat — or trunk — of cars,” Frerichs said.
Frerichs was joined by several other politicians at a press conference supporting the changes. One of those, DuPage County State’s Attorney Robert Berlin, said the goal was to stop problems that arise when such a large industry can’t use banks.
“I’m not aware of anything that has happened illegally [yet], but certainly there is great potential and we’re hoping to stop that,” Berlin said.
There are two bills in the Illinois House and Senate that would prohibit state regulators from punishing banks that serve legal marijuana businesses. Frerichs said the state is also working to build incentives for banks to work with the industry and advocating for changes to the federal laws.
“Thirty-one states in the country have some form of legal cannabis, whether medical or [recreational], and most are operating minimally banked or unbanked,” said state Sen. Toi Hutchinson, D-Olympia Fields, who is the chief sponsor of the legislation.
About 85 percent of the Illinois medical marijuana industry was served by a single bank, the Bank of Springfield, before it pulled out of the business last year, said state Rep. Kelly Cassidy, D-Chicago.
“As the Trump administration ramped up threats towards [the] legal cannabis industry, [Bank of Springfield] got nervous about potential backlash and informed all of these businesses that they would cease to have a banking relationship,” Cassidy said.