In 2013, the Cole Memorandum, which advised U.S. attorneys to refrain from prosecuting state-licensed marijuana businesses unless they violated a federal law was signed by the Obama administration. The Cole Memorandum has since been rescinded in 2018 causing uncertainty among the industry.  

Today, 34 states have legalized medical marijuana while 11 states have decriminalized marijuana. (Click here to view DISA’s interactive map for your state’s laws) Although cannabis is legal in specific states, it still remains federally illegal under Schedule I of the Federal Controlled Substances Act. Thus, making it difficult for cannabis companies to secure banking relationships, legally pay its people, and operate in accordance with other US industries.


The federal government oversees all U.S. banks and credit unions. While there is no specific law that restricts banks from taking on cannabis clients, many banks remain wary about the potential risks- and for good reason.

Under the federal law, any money that is obtained from illegal transactions cannot be FDIC insured. This serves as a huge red flag for banks, as they are required to insure all of their depository accounts.

Furthermore, banks also have to file reports detailing any suspicious or illegal activities. Maps Credit Union, a small credit union in Salem, Oregon, filed nearly 13,500 reports for its 500 cannabis clients. Failure to report or accurately report such activities can result in hefty fines.

Banks tend to err on the side of caution and try to avoid being involved with any act that may be federally considered as money laundering. As a result, many cannabis companies are having to operate as a cash business, becoming vulnerable to theft and open to compliance risk.


Hand-in-hand with the banking dilemma, cannabis companies are facing challenges when it comes to paying its people. Many cannabis companies have outsourced its HR & Payroll services with big-named providers, only to be dropped, or “bambooted” as our clients say, after receiving notice that cannabis companies are no longer being supported. Cannabis companies are generally given anywhere from 30-60 days to make a change.

Some cannabis companies have been misclassifying its employees as 1099 contractors, avoiding state and federal taxes to be taken out of employee paychecks. This may sound like a great loophole for many, but the consequences that can stem from employee misclassification and unpaid taxes can be significant. It is only a matter of time before the Department of Labor (DOL) catches up.

Other Challenges

In addition to the banking and payroll challenges, there are many opportunities that cannabis companies miss out on that impact the business and make operating like any other company very difficult.

62% of Americans now believe in the legalization of marijuana. A number that has doubled from 31% in 2000, but the stigma surrounding marijuana use remains. Even for cannabis companies that are promoting wellness and the medicinal benefits.


Legal cannabis is the greatest job creator in the U.S. right now. However, this high-growth goes untracked as the U.S. Bureau of Labor Statistics does not recognize the industry and lumps any cannabis-related job into an assortment of other categories like agriculture, farming, manufacturing, or retail.

For marketing purposes, Google and mainstream social media platforms have strict policies prohibiting cannabis advertisements. New social media platforms like LeafWire and MJLink have erupted to provide a cannabis friendly community, but the number of members simply does not compare to the larger social media players. In addition, email providers continue to flag emails for “inappropriate” language and have forced marketers to get creative with their word choice when promoting green grass. 

Not having the ability to advertise freely can greatly hinder a cannabis company’s recruitment efforts as well. It not only limits the number of viewers and makes it difficult to build a brand, but not being recognized as a “professional” industry can create uncertainty. This uncertainty can deter applicants, who might be excellent employees, from submitting an application.

So what are cannabis companies to do when it comes to banking and payroll?

Establish a solid banking relationship

Reduce the risks of being a cash-operating business and do your research to find a bank that supports the cannabis industry. Finding a bank may seem like a daunting tasks as only 1 in 30 U.S. banks or credit unions accept a cannabis customer, but the future looks promising as the number of banks and credit unions taking on cannabis clients grew nearly 20% in 2018.


With cannabis being the fastest growing industry in the U.S., we can expect this number to continue to grow throughout 2019. Due to the high demand and low supply of cannabis supporting banks, be prepared to incur heavy monthly account and transaction fees.

Find a trusted HR & Payroll partner

Speak with other professionals in the space, hire a consultant, or visit online cannabis software marketplaces such as CUE Cannabis to find a solution that works for your cannabusiness. Think twice before entering into a partnership with a big brand service bureau that may initially bring you on as a client, but forced to drop you a few months later. Attend tradeshows like NCIA’s Cannabis Business SummitU.S Cannabis Conference, or MJBizCon to find smaller partners that specifically concentrate on the space and have a book of cannabis clients as references.

As a final reminder, don’t forget to ask specific, detailed questions surrounding payroll, taxes, and banking to ensure your company is in compliance and has the information it needs to complete mandatory forms such as the 280E.

Use caution before selecting a Professional Employer Organization (PEO)

A PEO is an outsourced solution for HR, payroll, benefits, and compliance. This may sound like what any other HR software provider does, but with a PEO, companies are entering into a co-employment model. Under this co-employment model, the PEO will now run your payroll under the PEO’s tax ID numbers.  Just like a traditional payroll service bureau, validate that there will be no risk of being suddenly dropped.

There are PEOs offering services to cannabis clients, but we suggest to proceed with caution, as the (DOL) have guidance warnings that will directly affect the legitimacy of PEOs and cannabis operations. 

Do not pay employees illegally or “under-the-table”

For cannabis companies that are unable to secure a bank, paying employees “under-the-table” or in cash may seem like a viable option. An employer doesn’t have to worry about dealing with a bank and an employee doesn’t have taxes being pulled out of their paychecks. This sounds like a win-win until you’re fined by the DOL or a former employee is unable to collect unemployment because unemployment taxes were never paid.

Although there may be hope in the near future where cannabis companies will be treated like other U.S. businesses, cannabis companies must adhere to the law of the land until further notice. For now, cannabis companies should continue to stay up-to-date with laws, secure trusting partnerships, and promote its business through approved mediums.