In 2012, Washington and Colorado became the first states to legalize recreational cannabis use, a move that quickly resulted in similar legislation from states across the nation, skyrocketing the herb’s popularity and legality.

Today, nearly 25% of the country’s population (62 million) report using cannabis, and nearly half of all states in the US allow recreational cannabis use, while even more allow it for medical purposes. In total, 39 out of 50 states have legalized some form of cannabis use, while many of the remaining states actively have legalization bills on the table. 

As cannabis becomes increasingly commonplace and legal, the number of cannabis related businesses and dispensaries needed to meet demand increases alongside it. These businesses require large amounts of capital but are often denied banking and lending services from traditional financial institutions, due to a lack of federal policy. As a result, these businesses are forced to rely on cash or seek out alternative and often risky means to secure capital and conduct transactions.

For institutions that are willing to put in the work needed to help these businesses, there is no shortage of benefits they can bring in return. However, despite the wealth of opportunity and growth for credit unions in this area, many are hesitant to work with cannabis clients on account of the increased due diligence, compliance, and risk associated with them. The good news for credit unions, though, is that with the right partner, it’s never been easier to figure out if taking advantage of this opportunity is the right move for your credit union, and if so, what it would take to get started. 

Meet Stacy Litke

Stacy Litke

A longtime veteran of the financial services industry, Stacy Litke has been involved in the banking industry since the 1980s, when she worked as a clerk at a community bank. In the years since, Litke has served in a variety of roles throughout the industry, from lending to education, consulting, and more.

Having joined Green Check Verified, a FinTech with the mission of connecting cannabis businesses with financial institutions, in 2020, she has served as the organization’s Vice President of Banking Programs, where she oversaw the company’s cannabis banking program, working with financial institutions around the country to help them open their doors to cannabis accounts.

To learn more about the challenges facing the industry and how credit unions can fit into this equation, CUSO Magazine sat down with Stacy Litke and asked her some of the most pressing questions credit unions have.

The history of credit unions and cannabis businesses

Historically, credit unions were some of the first financial institutions to work with cannabis businesses. Shortly after marijuana became legal in Washington, Salal Credit Union began collaborating closely with the state and with regulators to set up the proper systems and compliance required to serve these businesses, which it successfully achieved in 2014 and has been doing so in the eleven years since.

The work Salal put in paved the way for other credit unions looking to leverage the same opportunity and serve this underserved community. Since then, hundreds of credit unions across the country have opened their doors to cannabis accounts in some form or another. But even though the number of financial institutions willing to offer checking accounts to cannabis businesses has increased, they are still being kept out of the payments and lending space. This exclusion is arguably the biggest challenge still facing these businesses. It’s also the area where credit unions stand to benefit the most (more on that later).

Additionally, now that the secret of how lucrative these accounts can be is out, banks are eager to claim these businesses for their own and are beginning to outpace credit unions in this area, according to Litke.

“When I started five years ago,” Litke noted, “we had a 60/40 split with about 60% credit unions and 40% banks. However, over the last few years, that has actually gone in the other direction. Now, it’s about 40% credit unions and 60% banks, since the latter have figured out that cannabis accounts are not exclusive to the credit union industry.”

As the industry created with the purpose and mission of serving underbanked communities, no group is better positioned to offer the much-needed services these businesses need than credit unions. And with the cannabis industry on track to bring in over $45.35 billion in 2025 and looking to refinance $6 billion in loans before 2026, credit unions cannot afford to leave this opportunity on the sidelines for banks to snatch up.

What are the rewards of engaging cannabis businesses?

For credit unions willing to put in the work to provide marijuana businesses with not just cards and accounts, but with loans as well, there are a multitude of benefits to be had.

For starters, most cannabis shops are small and locally owned, meaning credit unions have the opportunity to build relationships with businesses in their community. These accounts are good for the credit union as well. According to Litke, the cost of deposits for cannabis accounts averages about 60 basis points, indicating it’s a low-cost deposit stream, which is something many financial institutions are seeking at this point. Rather than spending 4% on CDs, Litke suggests that they can bring in these business relationships instead. 

As for membership growth, once a relationship is established with the business, the credit union opens itself up to new accounts with the employees of these businesses as well, as many cannabis employees still have challenges creating banking relationships. Many traditional financial institutions often reject payroll checks from cannabis businesses, deny employees mortgages, and have even been known to remove their accounts entirely, says Litke.

Still, the biggest benefit for both credit unions and the cannabis businesses they serve, however, lies in lending.

Lending: a win-win

There are huge cross-selling and membership growth opportunities that come with cannabis accounts, particularly in the lending space, something cannabis businesses desperately need. As mentioned earlier, marijuana businesses still struggle in the lending space and often fail to gain small business loans needed to purchase equipment from traditional financial institutions. Historically, they had to seek out capital from alternative means at incredibly expensive rates, and unfortunately for them, that debt is coming due in 2026.

This so-called “debt cliff” coming next year—comprised of $6 billion in loans—will see cannabis businesses frantically looking to refinance these loans through traditional financial institutions, and who better to bring on those loans than credit unions?

“The industry is going to need a lot of support soon. With this debt coming due at the same time financial institutions are getting comfortable in this space, it is the perfect opportunity for those willing to take it,” said Litke. “The traditional lending space can price these loans somewhere between 9 and 12%, which is a great yield for a credit union to have in its portfolio, and it’s a lowering of the expense for the operators themselves. It’s a win-win situation.”

Once credit unions complete the regulatory work needed to bring in cannabis business checking accounts, they will be in a position to provide these much-needed loans. Furthermore, credit unions that can offer lending to them may see cannabis businesses shift all of their accounts over to that credit union as well, choosing to work with a financial institution with whom they can have a full relationship. They’ll also be able to provide those services to employees of the businesses, too, many of whom, as we noted previously, have also been denied loans because of the industry in which they work.

On lending, Litke says the potential payoff for credit unions is extremely high. “For anyone entering this space, I would strongly suggest that they consider lending directly to the industry. There are endless opportunities, from equipment financing with UCC filings worth $500,000, to refinancing existing lender debt, all the way up to very large real estate mortgages in the millions of dollars.”

What about the risks?

So, what about the risks? Many credit unions fear the regulatory burdens, compliance issues, and potential reputational risks they think may come with taking on these accounts. While some of these concerns may have some merit, credit unions can rely on resources such as their examiner, FinCEN guidelines, and knowledgeable partners such a Green Check to help them decide whether those fears outweigh the benefits.

It’s important to note that while working with the cannabis industry is indeed rife with growth opportunities, that does not mean it is the right opportunity for every credit union. Smaller credit unions or credit unions with very specific fields of membership—in which only one or two such businesses may qualify—may find that the regulatory burden and efforts will not be worth the payoff. The key, says Litke, is knowing what is right for your credit union’s unique situation, and relying on those earlier-mentioned resources to know what that is.

As far as reputational concerns, Litke assures credit unions that it is not an issue. “It’s a non-event. It really is,” said Litke. “Out of our 170 clients, 40% of those are credit unions. A couple of years in, I went through all of our credit unions and looked at their member numbers before launch after launch, and not one of them had a negative or reduction in their member count. They were either stable or increased.”

What about federal legislation?

If working with cannabis accounts is so beneficial and the risks overstated, one might ask, why haven’t more credit unions stepped up to the plate?

Many credit unions, perhaps, are waiting for the Federal Government to pass nationwide legislation explicitly permitting financial institutions the ability to work with cannabis accounts. But with nine failed attempts at passing the SAFE (or SAFER) Act—bills both designed to pass national regulations on cannabis banking accounts and protections for financial institutions that service these accounts—it’s unlikely we’ll see such reform anytime soon. Litke, while understanding of credit unions’ caution, argues that legislation like the SAFER Act is nothing more than a formality.

“Every credit union has its own risk tolerance, and if they are very risk-averse and they want a locked-up guarantee, I can understand why they would want to wait for SAFER. But really, what SAFE or SAFER is doing is putting into writing what’s already happening in practice,” Litke stated. “We have hundreds of financial institutions across the country that are banking the industry. They’re not getting put under consent orders. They’re not going to jail for money laundering. They are having good conversations with their regulators and examiners about how to do this the right way.”

Even with a lack of federal regulation on the issue, there are still established guidelines, guardrails, and rules used nationwide by both credit unions and banks. FinCEN published its national guidance back in 2014 that laid out the required rules, enhanced due diligence and filing needed, and red flags to look for, and it has stayed consistent in those guidelines since. In fact, both the NCUA and the FDIC look to FinCEN’s rules when making decisions, according to Litke.

Furthermore, she notes that historically, the NCUA has been supportive of credit unions looking to bring on cannabis businesses. The organization and its board members, especially former board members Rodney Hood and Todd Harper, took great effort to reach out to credit unions and let them know it was perfectly okay to bank the industry as long as the credit union had the right structure and policies in place.

So, while financial institutions can hope that somewhere along the way, federal regulation will arrive, they can rest easy knowing the NCUA has given its blessing and that many other credit unions have paved the way for them to follow.

Where to begin

If you’re a credit union executive reading this and you’re thinking about stepping into this space, Litke encourages you to do three things to see if this opportunity is right for the credit union and your members.

First, take a look at the FinCEN guidelines, regulations, and recommendations found on their website. Take the time to learn and understand what will be expected of your credit union and decide if you’re okay with the responsibilities outlined. You should also review your state’s specific regulations and requirements. If your credit union operates in multiple states, you’ll need to ensure you meet the standards set out by both states.

Next, reach out to your examiner and have an open conversation with them about what they will require and whether or not your credit union is in a position to take something like this on. Litke notes this is a crucial step in the process that should be done early on, as the examiner has the power to put the brakes on the whole project.

“We had a credit union in the Midwest who really wanted to get into this space. They were very excited about it,” said Litke. “They went through the motions, their board approved it, and then their examiner said, ‘Absolutely not. Your credit union is not well-positioned to take on a high-risk industry based on your capital and the current exam findings.’ So, having that conversation with the examiner is critical as well.”

Finally, Litke urges credit unions to speak to vendors and resources knowledgeable in the field who can help you determine if this move is truly the right one for your organization, and if so, can help you work through the process. With the right partner, deciphering requirements and getting started doesn’t have to be such a daunting and overwhelming task.

Taking the first step

The cannabis industry is massive and only growing larger by the day. Though federal regulations may be slow to recognize the need for this industry to have equal access to financial services and tools and respond accordingly, credit unions should not be. Cannabis businesses not only need accounts to safely hold their money, but fair lending opportunities, and they’re actively searching for the right financial partner who can provide them with those necessities.

If you think your credit union might be that perfect partner, there’s no better time than today to start doing your research and asking your examiner the right questions. With experts such as Litke and her team ready and willing to help, your credit union will be opening its doors to cannabis accounts in no time.