Why U.S. States Need Their Own Cannabis Industry Banks

Authors

Christoph Henkel, Drake University Law SchoolFollow
Randall K. Johnson, University of Missouri - Kansas City, School of LawFollow

Publication Date

10-2023

Document Type

Article

Abstract

The legal cannabis trade is the fastest growing industry in the United States. In 2019, about 48.2 million Americans used the drug at least once. As such, it is easy to see why the legal cannabis trade may generate annual revenues exceeding $30 billion in Fiscal Year 2022 alone.

One inconvenient truth, however, is that the parties to any cannabis trade may face a range of difficulties due to conflicts between federal and state laws. These difficulties include the fact that many financial institutions are reluctant to handle cannabis proceeds. One reason is that a lack of alignment in terms of federal and state laws, at least when compared to otherwise similarly situated U.S. infant industries, drives up the cost of doing business in sub-national cannabis industries.

As a result, states that purport to authorize cannabis trades may need to intervene. The simplest way to do so, and thereby increase access to financial services in this infant industry, is by creating a new state-owned cannabis industry bank. Such a bank may be created, insofar as it would be possible, exclusively under state laws to avoid any actual conflict with federal cannabis laws.

There also are three additional reasons why states may want to create their own cannabis industry banks. First, each state is responsible for the creation of their own in-state cannabis industry and should receive the lion-share of future economic benefits that arise from the legal cannabis trade. Second, these sub-national jurisdictions incurred significant costs in creating these infant industries and are justified in receiving a robust return on their past investments. The final reason is states could use any such return on investment to compensate third parties that are harmed by the legal cannabis trade, at least in cases when their injury arises from lawful activities, such as African Americans that are disproportionately subjected to pretextual stops by law enforcement.

Publication Title

Washington University Law Review Online

Volume

101

Issue

1

Recommended Citation

Christoph Henkel & Randall K. Johnson, Why U.S. States Need Their Own Cannabis Industry Banks, 101 Washington University Law Review Online 1 (2023).
Available at: https://irlaw.umkc.edu/faculty_works/910