Springfield Bank of Illinois pulled out of working with legal medical marijuana companies in the state this month, leaving many businesses working on a cash-only basis while scrambling to find another banking partner. The bank tied the move directly to actions taken by U.S. Attorney General Jeff Sessions earlier this year, rescinding Obama-era rules that essentially kept the federal government from interfering in states where marijuana is legal.
Meanwhile, in Canada, just the opposite is happening. The Bank of Montreal already is involved in two deals with legal marijuana companies and TD Bank Group is considering involvement as the country prepares to make cannabis legal nationwide this summer for both medical and recreational use.
TD Bank Group CEO Bharat Masrani told The Canadian Press that national legalization is an “important data point.” He said TD Bank Group is actively studying cannabis investment in the cannabis industry. Both TD Bank Group and the Bank of Montreal are among the “Big Five” banks in Canada.
Related: Baby Boomers Support Medical Marijuana but Skeptically
Actions Backing Words
The interest of Canadian banks in backing the legal marijuana industry took off in January, when the Bank of Montreal backed a $175 million stock-purchase deal to raise cash for Canopy Growth. Technically, the Bank of Montreal did the deal through a subsidiary, BMO Capital Markets, along with co-lead underwriter GMP Securities. Based in Ontario, Canopy is Canada’s largest licensed producer of medical marijuana. Importantly, they have no business dealings in the U.S.
Speaking about the potential of entering deals with cannabis companies, Masrani said TD Bank Group will not consider any deals with companies that have a presence in the U.S. A few weeks after the Canopy Growth deal, BMO Capital Markets was named in a similar deal involving marijuana producer Cronos Group.
Meanwhile, In Springfield.
Legal medical marijuana companies in Illinois may now have to deal in cash after the main bank for the industry, the Bank of Springfield, announced it was pulling out of the industry. The decision came after Sessions decision to rescind the Cole Memo.
It is one of the few concrete consequences, so far, of Sessions’ actions.
To be fair, the Bank of Springfield was something of an aberration. Most banks have refused to extend services to the marijuana industry because cannabis remains illegal at the federal level. Frustrated leaders in California are even considering setting up a state-run bank to serve the industry.
There were about $8.5 million in medical marijuana sales in Illinois in February alone, according to state numbers quoted in the Chicago Tribune.
Ross Morreale, co-founder of Ataraxia, a company that runs a cultivation facility and co-owns three dispensaries, told the Tribune: “This is the closest we’ve been to being without banks in Illinois in this industry … which isn’t good. It makes everything more difficult.”
For the bank, it was a process of doing a risk assessment given Sessions’ action. The bank could not jeopardize customers working with businesses “in the legal gray zone,” a bank spokesman told the Tribune.