Bankers who serve cannabis operators in Illinois, Michigan, and other markets convened virtually on May 18 to share how they do business in a federally illegal industry that most financial services companies won’t touch. 

“Having our clients well educated so we can support them fully is the key to a successful relationship,” explained Karla Haglund, President & CEO of Live Life Federal Credit Union in Sterling Heights, Michigan. “They need to understand compliance expectations and what services I offer.”

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For banks that charge an undisclosed premium for cash management and other services in what is a historically “off the books” and illicit industry, any whiff of non-compliance could result in a real buzz-kill.

“We don’t want to jeopardize our charter,” said Michael Busch, CEO of Chicago-based Burling Bank. “When we ask (our clients) for something, we expect to receive it on a timely basis.”

As for all the extra costs for banking cannabis, “as soon as the government stops charging me, I’ll stop charging you,” said Todd Gunderson, CEO of Credit Union 1 in Chicago. “Once all of that goes away, we won’t have as much overlay on compliance.”

Live Life by charter is restricted to Michigan, where it serves approximately 150 cannabis-related clients. While the Chicago bankers that operate in a more limited and less established Illinois market have fewer homegrown customers, they are able to serve clients whose operations extend beyond the border. 

“Chicago is the Silicon Valley of the cannabis industry,” said Gunderson, adding that “a lot of [Illinois operators] have business in other states.”

Positioning themselves as full-service financial partners, both Burling and Credit Union 1 are increasingly pursuing debt deals for their clients that leverage their real estate-specific assets.

“If you can sow enough separation between the operating company and the real estate company you can satisfy your board members,” said Busch, reaffirming difficulties in collateralizing cannabis anytime soon. “We are lending against real estate. A commercial mortgage if you will.”

Prognosticating as to when federal legislation would normalize banking in the cannabis industry, none of the panelists are holding their breath. While their guesses are as informed as anyone’s, they caution clients not to expect any legislative movement in Washington, D.C. until late 2021 at the earliest.

“We encourage our clients not to wait for some legislative moment,” said Busch. “The reality is that there is already a path toward bank compliance. The market is maturing and technology is maturing. We are a little bit away from the Wild West.”

Gunderson cited frustration with Democratic legislators who are trying to “get everything in under the sun” as far as cannabis regulation, slowing down progress for banking-specific lawmaking.

“They can’t get out of their own way,” he said. “Now it seems like they want to eat the elephant in one bite.”

During today’s interregnum, as states enable operators to sell federally illegal product with a handful of pioneering pot bankers embracing a new and complicated market, Haglund reiterated that serving her clients is all about managing expectations. 

“There is a lot of comparison of what we require versus what Chase [Bank] requires,” she said. “I have to constantly say to them that Chase doesn’t offer this type of banking.”

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Brad Spirrison is a journalist, serial entrepreneur and media ecologist. He lives in Chicago with his son. Interests include music, meditation and Miles Davis.