One-Hit Wonders

State Cannabis Banking Laws: Where Equity & Lending Access Stand Today – Eric Foster

Published

2 hours ago

March 13, 2025

admin

By Eric Foster |

Cannas Capital Holdings

The Patchwork of State Cannabis Banking Laws

As federal cannabis banking reform remains stalled, states have begun taking independent action to address the capital access crisis for cannabis businesses. While some states like Illinois, Maryland, New York, and Virginia have created state-backed cannabis lending programs, others have taken different approaches, ranging from self-administered programs with no external banking involvement to state protections for financial institutions but no direct state capital support. This mishmash of approaches leaves both Social Equity Cannabis businesses vulnerable to predatory lenders and financial instability and Corporate Cannabis businesses without debt-financed lending options.

This article breaks down state cannabis banking laws, highlighting:

Which states provide structured lending and financing support.
How different states approach social equity financing.
Key differences in state banking statutes and what needs improvement.

1. How States Approach Cannabis Banking & Lending

Since federal banks and credit unions remain hesitant to lend, state governments have adopted various models to facilitate financial access for cannabis licensees.

Four Common Models of State Cannabis Banking & Lending

✅ Model 1: State-Backed Cannabis Lending Programs (Best Practice) These states use cannabis tax revenue to fund capital access programs, creating low-interest or zero-interest loan funds and encouraging banks to participate through loan guarantees and risk-sharing mechanisms.

Examples: Illinois, Maryland, New York, Virginia
Best for: Social equity and minority-owned cannabis businesses needing fair access to financing.

✅ Model 2: State Self-Administered Loan & Grant Programs Without External Bank Partnerships Some states allocate funding for social equity applicants but do not involve external banks, credit unions, or CDFIs in the process. These programs:

Provide a limited total amount of funding per year, which must be replenished through annual appropriations.
Cap the maximum funding available per business.
Do not address the need for long-term lending partnerships that could expand financing options.
Examples: Connecticut, Michigan, Massachusetts, Colorado, New Jersey, New York
Best for: Short-term relief but not a scalable lending solution for long-term business growth.

✅ Model 3: State Legal Protections for Banks Without Direct State Capital Support These states allow banks, credit unions, and CDFIs to serve cannabis businesses without fear of state-level penalties, but they do not provide direct state financial backing for loans or banking relationships. As a result:

Banks must still manage all compliance risks independently, limiting participation.
No state-backed loan guarantees, lending facilities, or grant programs exist to make cannabis lending more attractive.
Only the most risk-tolerant financial institutions choose to engage with cannabis businesses.
Examples: California, Pennsylvania, Arkansas, Rhode Island, Texas, Oklahoma, West Virginia, Ohio, Missouri, South Dakota
Best for: Encouraging some legal banking relationships but fails to ensure broad financial access for cannabis businesses.

✅ Model 4: No State-Level Banking Protections for Cannabis Businesses Some states have legalized cannabis but have not enacted statutory protections for banks or credit unions working with marijuana-related businesses. As a result:

Financial institutions in these states face higher risks when serving cannabis businesses.
No clear legal framework exists to shield banks from potential enforcement actions.
Cannabis businesses in these states remain almost entirely cash-based, increasing security risks and limiting growth.
Example: Louisiana
Worst for: Any cannabis business seeking financial services.

2. State-by-State Breakdown of Cannabis Banking & Lending Programs

Illinois: The Gold Standard for State Cannabis Lending

Best for: Social Equity & Minority-Owned Cannabis Businesses Banking Model: State-Backed Lending & Capital Access Program

The Community Invest – Cannabis Banking Services Program provides state-backed capital to banks and credit unions, enabling them to offer low-cost banking services to cannabis businesses.
The Cannabis Social Equity Loan Program offers low- or no-interest loans to social equity applicants, helping minority businesses establish themselves in the market.

The Illinois Finance Authority administers state-funded loans and subsidizes loans through qualified Banks, Credit Unions and CDFI’s, prioritizing businesses in disproportionately impacted areas.

Maryland: A Strong Model with Loan Loss Reserve Protection

Best for: Small & Medium-Scale Cannabis Businesses Banking Model: State Loan Loss Reserve & Lending Program

Maryland’s Capital Access Program (Subtitle 14, Chapter 26 of 2022) provides loan loss reserve accounts for banks that lend to social equity cannabis businesses.
The state allows dispensaries to apply for loans up to $500,000 and growers/processors up to $1 million, reducing financial barriers.
Maryland’s cannabis tax revenue partially funds these lending programs, ensuring sustainability.

New York: Social Equity-Focused Cannabis Lending

Best for: Justice-Impacted & Minority Entrepreneurs Banking Model: State-Facilitated Loan Fund & Private Investment Pool

New York’s Social Equity Cannabis Fund is structured to provide financial backing to social equity licensees.
The state works with private financial institutions and impact investors to co-fund cannabis business loans.
Loan repayment structures are designed to minimize early financial strain, helping startups succeed.

Virginia: A Developing State Banking Model

Best for: New Market Entrants & Small-Scale Cannabis Businesses Banking Model: State-Led Lending Initiative

Virginia’s State Cannabis Lending Initiative is has not started due to obstruction from Governor Youngkin rejecting the second State legalization bill in 2024 and 2025 but is modeled after Illinois & Maryland.
The state intends to offer cannabis business loans backed by state funds both directly and through Community Development Financial Institutions and Banks, supporting social equity businesses.

3. Where Other States Are Falling Short

Model 2 States: Self-Administered, Limited Loan & Grant Programs

Connecticut, Michigan, Massachusetts, Colorado and New Jersey provide funding for cannabis businesses but do not involve financial institutions, creating short-term solutions but no long-term lending structures.

Colorado self administers their lending program through the Office of Economic Development & International Trade

Model 3 States: State Protections Without Capital Support

California, Pennsylvania, Arkansas, Rhode Island, Texas, Oklahoma, West Virginia, Ohio, Missouri, South Dakota have legal protections for banks working with cannabis businesses but no direct lending or grant programs.

Model 4 States: No Legal Banking Protections

Louisiana has no banking protections for financial institutions, making cannabis businesses in the state almost entirely cash based.

4. The Path Forward: Expanding State-Level Lending Programs

As more states legalize cannabis, the best way to ensure equitable access to capital is to create structured lending programs that involve banks, credit unions, and CDFIs. States that only provide self-administered grants or legal protections for banks are not doing enough to ensure sustainable cannabis financing.

By following the models set by Illinois and Maryland, states can:

✅ Create state-backed cannabis lending facilities using cannabis tax revenues.

✅ Offer loan guarantees to banks and credit unions to reduce lending risks.

The Illinois Cannabis Capital Investment eco-system

✅ Adopt compliance & underwriting frameworks like the Bank Black Initiative & Cannabis Compliance Banking Solution to support financial institutions.

How Bank Black & Cannabis Compliance Banking Can Help

Cannas Capital’s Bank Black Initiative and Cannabis Compliance Banking & Capital Solution offer: ✅ AI-driven underwriting to de-risk cannabis loans. ✅ Regulatory compliance monitoring for banks & state agencies. ✅ Social equity-focused lending frameworks to ensure minority-owned businesses have fair access to capital.

Final Thoughts: Why State-Led Action is Necessary

The federal government isn’t moving on cannabis banking reform anytime soon. That means states must take the lead in creating sustainable, scalable lending programs for cannabis businesses. Expanding access to capital is not just about financing cannabis businesses—it’s about ensuring that social equity applicants and minority-owned companies have the same opportunities to succeed as well-capitalized corporate players.

With models like Illinois, Maryland, and New York, we already see effective solutions that prioritize social equity financing. The next step is expanding these programs to more states—and integrating compliance-driven solutions like the Bank Black Initiative to make them even stronger.

Citations & Key References

Source

Key Information Referenced

Link or Document

Illinois Finance Authority Act (20 ILCS 3501/801-5)

Illinois state-backed cannabis banking program

Illinois Finance Authority Act

Maryland Chapter 26 of 2022 & Chapter 254/255 of 2023

Maryland’s cannabis loan loss reserve and capital access program

Chapter 254/255 of 2023

New York Social Equity Cannabis Fund

State-backed cannabis investment fund

[State Program Overview] Cannabis NYC Loan Fund

Virginia Cannabis Lending Initiative

Early-stage cannabis lending model

Chapter 15. Virginia Cannabis Equity Business Loan Program and Fund.

Eric Foster

Strategic Policy Executive & Board Chairman

Cannas Capital Holdings, LLC

Email: eric@cannascapital.com

Source link

One-Hit Wonders

Alert: December 2024 Cannabis Regulation in Mexico: Navigating the New COFEPRIS Permitting Process Under the Judicial Reform

Published

2 months ago

December 31, 2024

admin

Alert: December 2024 Cannabis Regulation in Mexico: Navigating the New COFEPRIS Permitting Process Under the Judicial Reform

Source link

One-Hit Wonders

Minnesota Office of Cannabis Management Issues Rejections to Majority of Social Equity Applicants

Published

4 months ago

November 21, 2024

admin

The Minnesota Office of Cannabis Management (“OCM”) has begun issuing final denials to the overwhelming majority of previously qualified social equity applicants (“SEA”s) ahead of its first statewide cannabis lottery on December 2 for 280 available “preapproval” cannabis licenses.

Flag of Minnesota in Marijuana leaf shape. The concept of legalization Cannabis in Minnesota. Medical cannabis illustration.

Per reporting from MJ Biz Daily, “The applicants who are barred from the lottery failed to complete the application process or acted improperly by submitting multiple applications or disguising the true investors in their companies, according to [OCM].” Obviously applying for more licenses than is allowed and/or concealing owners or financial interests are clear grounds for SEA application rejection. Other alleged “deficiencies” though may not be so cut and dry.

While state law does not permit appeals from denied applicants (which is not uncommon for states with cannabis licensing programs), impacted SEAs can still secure a review of their records submitted to the OCM within seven days of the rejection decision (by logging into their Accela Citizen Portal and pulling the internal record there).

The main issue emerging as a result of these rejections is the fact that the OCM did not consistently issue deficiency notices to rejected applicants if there was a material problem with their submitted applications (although as of October 16, the OCM had sent out deficiency notices to over 300 SEAs). In turn, there are instances here where SEAs were rejected for minor, seemingly non-material deficiencies in their applications (things like submitting incorrect corporate documentation that still contained the same information the OCM sought, or re-submitting documents upon request by the OCM only to be rejected for lack of the same document after-the-fact, or even blank denials altogether with no stated reason for rejection).

In an interview with the Brainerd Dispatch, Charlene Briner, the interim director of the OCM, cast these denied SEA applications into four categories:

Failure to meet the basic qualifying standards under state law (i.e., social equity applicant owning at least 65% of the business among others)
Failure to provide the requisite verification documents (i.e., legitimate business plans, source of funds, ID, etc.)
Hidden or inconsistent ownership or true parties of interest
Fraudsters (i.e., those trying to game the system by flooding it with multiple applications via proxy or otherwise by using the same address or phone number tied to the same person on multiple applications)

The first and second bullet points above are going to be the ripest ground for rejected SEAs to try to stop the OCM prior to the December 2 lottery, but that’s only if those rejected SEAs can very quickly obtain copies of their submitted documents (within 7 days of the rejection) and start the administrative litigation process and/or seek injunctive relief at the same time against the OCM.

What was once more than 1800 qualified social equity applicants for the lottery has been winnowed down to around 640. The OCM rejected applicants for a multitude of reasons, some of which are clearly legitimate and some of which appear to be questionably enforceable from the perspective of complying with Minnesota’s state constitution and its administrative procedure act.

If you’ve been impacted by an OCM rejection, you do not have much time to act ahead of the December 2 lottery. If you have questions about your potential civil or administrative claims against OCM due to a questionable SEA rejection, contact Jeffrey O’Brien, Hilary Bricken, or Nick Morgan.

Minnesota Office of Cannabis Management Issues Rejections to Majority of Social Equity Applicants

Source link

One-Hit Wonders

Wait? My CBD Business May Be Racketeering? A Potential Existential Crisis We Have Been Warning About

Published

5 months ago

October 23, 2024

admin

Even the most responsible hemp operator should understand that it operates in a world full of risk. But I doubt many of them believe they might be accused of racketeering. Last week, the U.S. Supreme Court heard arguments about whether to sanction a commercial trucker’s attempt to bring a racketeering claim against CBD companies, whose allegedly mislabeled products the trucker claims led to his firing.

As always, Sam Reisman at Law360 distills the issue nicely:

The case concerns an allegation that companies sold CBD products with detectable amounts of THC, purportedly costing plaintiff Douglas J. Horn his job as a commercial trucker after he tested positive on a drug test. Oral arguments on Tuesday hinged largely on whether Horn’s claims stemmed from a personal injury — which would be excluded from the Racketeer Influenced and Corrupt Organizations Act, or RICO — or whether his firing was an economic injury and therefore redressable under RICO.

In taking the case, the U.S. Supreme Court could resolve a 3-2 circuit split over whether the civil prongs of the RICO statute allow a plaintiff to seek damages for economic harms stemming from injuries to their person.

Again, from Reisman:

During oral arguments on Tuesday, the liberal wing of the high court expressed skepticism with the CBD companies’ rendering of the case, which they said foregrounded Horn’s ingestion of the product as the source of the injury, as opposed to his firing for a positive drug test.

…

Lisa Blatt, an attorney for the CBD companies, told the justices that agreeing with Horn’s interpretation of the statute would open the door for virtually limitless personal injury cases under civil RICO, as long as plaintiffs could allege some connection between their ingestion of a product and a loss to their business or property: “Respondent’s rule also leaves the personal exclusion [in civil RICO] toothless, since virtually all personal injuries result in monetary loss,” Blatt said. “It is utterly implausible that Congress federalized every slip-and-fall involving RICO predicates. Personal injuries are serious and may support state tort claims, but they are not the stuff of RICO.”

On the other side, conservative justices attempted to discern how to draw a line between bona fide economic claims and personal injury claims pleaded as economic claims.

Easha Anand, arguing on behalf of Horn, said the vast majority of personal injury claims, such as those alleging pain and suffering or emotional distress, would still be excluded even if Horn was permitted to pursue his RICO claim against the CBD companies: “In your average slip-and-fall case, you’re not going to be able to prove a predicate act, let alone a pattern of predicate acts, let alone a pattern carried on through a racketeering enterprise,” Anand said.

…

Justice Neil Gorsuch observed, “There’s a failure to warn that this product contains ingredients that your client didn’t know about and should have known about and had a right to know about. I would have thought that that would have been kind of a classic personal injury.”

The Takeaway

This is pretty scary stuff for CBD and other hemp operators. RICO is no joke and carries very serious penalties (both civil and criminal depending on who is bringing the suit).

From the perspective of a CBD manufacturer, it seems unfair to hold the manufacturer responsible to control how its products are used and, as in this case, the implications of that use (here, an alleged economic injury).

If the Court rules that CBD and other hemp manufacturers are subject to RICO charges simply by selling their products to people who do things outside of the manufacturers’ control, it could pose an existential crisis to the industry with potentially unlimited civil (and maybe even criminal) liability. We have warned about this before.

That said, while it’s always difficult to predict how the Supreme Court will vote on any issue, I do not believe the Court will push the hemp industry to the brink. I suspect the Court will either rule that the claims in the present case are personal injury claims excluded from RICO and/or provide guidance for how lower courts should examine such “mixed” claims.

We’ll of course provide additional information once we hear from the Court. Stay tuned.

Source link