Most banks refuse to service the industry because of federal rules, leaving marijuana sellers to deal with bags of cash.

The US cannabis business has a very particular cash flow problem – too much of it.

Marijuana can be sold legally in 36 US states and the District of Columbia (DC) for medical use and in 15 of them and in DC for recreational purposes. But it is still illegal on a federal level, meaning most banks refuse to service the industry in case they fall afoul of money laundering laws.

With the COVID-19 pandemic and increasing legalisation driving a surge in cannabis use, the sector’s producers, manufacturers and retailers are awash in cash, adding risk and costs to the most basic business transactions from paying employees and filing taxes to finding somewhere to store their income.

“All this cash flowing around is just a recipe for disaster,” said Smoke Wallin, chief executive of hemp health products maker Vertical Wellness Inc. “How do you account for it? Where do you keep it? How do you move it? Even in a safe, it’s a security risk for employees.”

Ryan Hale, a US Navy veteran and co-founder of cash management firm Operational Security Solutions, had to persuade a cannabis farmer in California to stop hiding cash in a tree. On another occasion, Hale had to help a bewildered retailer who had lost count of the dollar bills overflowing from his store’s lockers.

Legal US cannabis sales grew 30 percent to $22bn last year, more than the $17.5bn Americans spent on wine, according to data from Euromonitor. Sales are expected to jump more than 20 percent this year.

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