Cash Poor

Cash Poor Joan McGuire

Solutions are emerging to the challenges of the cash-only nature of Oregon’s cannabis industry. 


It may seem profoundly silly to compare the billion-dollar legal cannabis industry to used bookstores, but they share a common thread: they both understand the pain of being cash-only enterprises.

A study from MIT way back in 2001 found that businesses that accept credit and debit cards have a large advantage over those that do not. The report found that consumers are, on average, willing to spend twice as much money at a store if they are able to use plastic.

It makes sense for certain companies to be cash-only. Coffee shops and food trucks which do frequent, small transactions throughout the day might see their overall profit margins rise without the banks’ small-transaction service fees. But this is not the cannabis industry, where the average amount per-transaction is around $25.



For Oregon’s cannabis industry, using cards at the dispensary isn’t an option. As an illegal substance federally, cards issued by national banks cannot be used to purchase cannabis.

How much revenue is lost from being cash only? There’s no hard data, but according to Don Morse, former director of the Oregon Cannabis Business Council, it’s “probably 20%.”

While cash-only has been an issue in the industry for a while, the Oregon cannabis industry could use a boost. A surplus of supply has left the sector facing market regulations, including a moratorium on vendors licenses.



“A lot of growers were going broke so they switched to hemp this year,” says Morse.

According to Cannabis Benchmarks, a division of New Leaf data services, demand for cannabis, as well as price of cannabis products, has gone up steadily since July.

“The bubble has already popped because the market has already crashed,” says Morse. “Prices are going up and supply should meet demand like any commodity market.”

Having a cash-only business, especially one selling consumable luxury products, creates challenges other then just affecting the bottom line.



“Having large amounts of cash and product on hand makes the dispensaries themselves targets for crime. This is a huge public safety issue for the staff and customers,” says Morgan Fox, media relations director at the National Cannabis Industry Association. “Cash payroll also makes employees even softer targets, as they are often prevented from having personal bank accounts.”

While there are certain services which use cryptocurrency, such as bitcoin, to purchase cannabis products, they are few and far between.

“There is a small percentage of the industry that is able to access banking services at a huge cost, and several companies have come forward offering alternatives like cryptocurrency and payment cards, but these don't have a large footprint in the industry,” says Fox.



A new bipartisan senate bill would solve this problem. The Secure and Fair Enforcement (SAFE) Banking Act is sponsored by Oregon senator Jeff Merkley and Cory Gardner, a Republican Senator from Colorado. The bill would give banks protection from legal action for keeping accounts for state-legal cannabis businesses.

If passed, banks could serve cannabis customers and employees with less fear. The bill has 20 co-sponsors.

The SAFE Banking Act only has a 2% chance of being enacted, according to research firm Skopos Labs, which cites the hazy language of the bill as an obstacle to success.

The SAFE act has cleared zero legislative hurdles at the time of this article’s writing.



In the meantime, Nevada has devised its own plan to solve the conundrum. During a three-year pilot program, the Silver State will allow marijuana businesses and customers to use electronic tokens for cannabis purchases.

The method is known as a closed-loop payment processing system, in which money is pre-loaded before purchasing begins.

The system will work in the same way a customer might buy chips from a casino.

A shopper could purchase as many electronic tokens as they desire, then take those coins and exchange them for products.



Since bank customers are using their accounts to buy tokens, which are not illegal federally, banks wouldn’t sully their hands during the transaction.

Such a system could work in Oregon, where laws allow for the purchasing of online credits to tiptoe around restrictions against online poker.

Of course, if cannabis were legalized federally, banks wouldn’t have to worry about potentially breaking the law.

Were it only that simple.


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