The Weight Of Federal Prohibition And The Cost To Bear It

JPMorgan Chase CEO Jamie Dimon put the matter bluntly earlier this year: “If there’s a federal law, we probably would.” That rare moment of candor reveals what has kept the biggest banks on the sidelines—legal exposure. Under the Controlled Substances Act, cannabis remains a Schedule I substance, and proceeds from its sale are still considered illicit at the federal level. For a federally regulated bank, that poses existential threats: money laundering charges, seizure of assets and potential criminal liability for executives. The question isn’t why they are hesitant—it’s why any bank would step in at all.

The Financial Crimes Enforcement Network’s 2014 guidance established a fraught framework for institutions willing to serve marijuana-related businesses. Banks must file extensive Suspicious Activity Reports, maintain intensive due diligence and monitor compliance with state licensing regimes. The compliance burden alone—verifying licenses, potentially tracking transactions against state seed-to-sale systems and filing frequent SARs—could consume more staff time than the revenue generated.

Yet a growing number of financial institutions have decided the calculus is changing. By late 2025, FinCEN’s own numbers suggested that around 800 FIs were servicing cannabis businesses. (Note: Many insiders believe the 800 number is far too high, and a “truer” number may only be around 100; a future article will discuss why that 800 figure is misleading). So, what is driving these institutions to take the risk?

The Bait: Low-Cost Deposits And Real Differentiation

The primary lure for financial institutions is straightforward: Cannabis businesses need somewhere to park their money, and they are generally cheap to serve. Licensed operators primarily hold non-interest-bearing checking accounts, giving banks access to sticky, low-cost deposits without the expense of paying interest to attract them. In an environment where deposit competition has become ferocious, that is no small advantage.

Fee income is another driver. When I first started in cannabis banking, there were some fee schedules with cannabis specific fees that ran into the thousands of dollars per month, and that was just for a no-frills business checking account. Today you can find fees in the hundreds of dollars per month. As another example, it used to be the norm to charge an application fee; my first application fee was $500 (nonrefundable!). Today I do not charge an application fee.

While competition has driven down onboarding and account fees in some mature or maturing markets, cannabis-related businesses still generate reliable non-interest income for banks willing to serve them. For community banks and credit unions squeezed by margin compression, cannabis banking offers a differentiated revenue stream that large national institutions have largely ceded.

Then there’s the question of competition and market share, to wit: There are only 19 FIs listed on NYS Office of Cannabis Management’s Cannabis Banking Directory, and fewer than half are actually based in New York state. Most of the institutions listed have no locations in New York at all. With thousands of active licensees and thousands more coming online in the state of New York alone, there is, relatively speaking, little competition for such a large and rapidly growing pool of potential customers. For the cannabis businesses that need or want a local presence from their bank, the competition field is even smaller.

The Unseen Opportunity

The real money in cannabis banking isn’t deposit fees—it’s lending. Chris Van Dyck, a former financial regulatory attorney, general counsel at cPort Credit Union, a Maine-based financial institution and now partner at Cogent Law advising banks and credit unions on cannabis banking, sees a shifting landscape.”Financial institutions are now trying to find ways to distinguish themselves from their peers in the cannabis banking space. The most effective way to do this is by offering commercial financing. For years cannabis business owners have been struggling to find trusted lenders willing to offer reasonable rates,” said Van Dyck via email. While at his financial institution, Van Dyck recalls getting calls several times a week from cannabis businesses looking for reasonable financing terms. That does not surprise me, where capital may be found, it might be as high as triple the rates of comparable loans of non-cannabis businesses.

But lending also exposes banks to the industry’s fundamental fragility. New Jersey’s BCB Bancorp, a longtime cannabis bank, swung to a first-quarter loss after establishing a $13.7 million specific reserve tied to a troubled cannabis loan. The $34.2 million loan remained current, but the borrower’s deteriorating financial condition forced a downgrade. The lesson is harsh: In a market characterized by oversupply, falling prices and intense competition, even diligent lenders get burned.

Veteran financial services and cannabis law attorney Steve Schain, who runs Malkin Law’s cannabis practice and builds banks’ cannabis depository and lending programs, said via email that “lending’s core principle is no different for a cannabis company than it is for any other business: does the borrower have sufficient assets to cover the loan and, if so, can they be executed upon easily. Because most cannabis companies are startups, lack assets, and seldom own the real estate in which they operate, and because the collection laws and regional sheriffs’ offices’ policies vary, identifying, seizing and liquidating a cannabis company’s assets is often difficult. For example, will a sheriff enter a cannabis dispensary, seize inventory or machinery containing cannabis, or sell cannabis, or cannabis-tainted assets, at a sheriff sale? The loan’s unclear collectability undermines the cannabis business’s attractiveness as a prospective borrower and, to mitigate the risk, requires the bank to demand above-market interest rates and broader personal guaranties.”

A Long Road Ahead

For all the momentum, cannabis banking remains an incomplete solution. The SAFER Banking Act, which would provide explicit safe harbor for depository institutions serving state-legal cannabis businesses, remains stalled in Congress, despite bipartisan support from 32 state attorneys general. Until federal law changes, the largest banks will likely remain spectators. Rescheduling, of course, will have a huge impact; a future article will discuss rescheduling vis-a-vis cannabis banking.

But the institutions stepping into the void have already made their calculation. The deposits are real. The fees are real. The community need is urgent. And while the regulatory framework is imperfect, it is navigable. For a growing number of financial institutions, that is enough—for now.