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Montana’s Adult-Use Cannabis Program: What To Expect And How To Prepare

Retail sales of adult-use cannabis began in Montana Jan. 1, topping $1.5 million in sales the first weekend alone.


Looking at the experience of states that have previously implemented legal adult-use cannabis programs, we can predict fairly well what will happen next: a surge of investment, new businesses, and demand for capital.


Growth in Montana’s cannabis industry will be limited to existing medical marijuana operations until the state begins issuing new licenses to cultivate or sell marijuana in July 2023, which means a handful of businesses will need to scale rapidly to meet statewide demand. Existing cannabis retailers estimate their sales could triple, and future industry growth is inevitable as pandemic-driven sales gains hold steady and access to new capital increases.


A study from the University of Montana Bureau of Business and Economic Research estimates adult-use cannabis sales could reach over $215 million in 2022 and grow to nearly $260 million in just four years. For financial institutions interested in serving cannabis-related businesses (CRBs), the time to act is now.


Compliant banking operations require continuous enhanced due diligence to guard against inherent risks in a tightly regulated industry. Fortunately, a playbook exists to help banks capitalize on new low-cost deposit growth, non-interest income revenue streams, and the potential for earning assets.


There are steps banks interested in serving this market should take right away:


Present a Business Case for Cannabis Banking


Entrepreneurs are not the only ones in need of a cannabis business plan. Financial institutions and their boards must also be grounded in the realities of the cannabis industry and the business problem cannabis banking solves. While many financial institutions want to help local entrepreneurs and improve public safety, they must also have a financial objective to justify taking on the additional risk and effort.


Develop Policies and Procedures


Banks need to be prepared to invest resources into developing the policies and processes necessary to mitigate the risks and meet this industry’s compliance and regulatory requirements. This involves being explicit about the financial institution’s expectations for serving this unique set of customers.


It also includes developing the systems, applications, and processes to vet and onboard potential customers and access critical customer and transaction data. This will help financial institutions ensure funds coming through their doors are from legal channels, and they have a clear line of sight for their CRB customers and associated beneficial owners.


Invest in Compliance Technology and Staff Training


Investing in specialized compliance technology can help banks automate their processes and operate more efficiently. It also allows bank staff to focus their efforts on the highest value activities, such as judgmental decision making, analysis, and customer service.


Banks and their customers should expect to provide a high level of transparency in their interactions. While technology can help improve compliance outcomes, training staff as specialized cannabis bankers is essential to understanding and evaluating customers’ business activity and helping them achieve their business goals.


Be Ready to Scale


As an emerging industry, banks should anticipate ongoing market changes and adapt to remain competitive. The cannabis market has grown significantly since 2020, and more financial institutions will enter the market in the coming years. As cannabis laws change and competition grows, banks should structure their programs to scale with the industry, take advantage of new customer acquisition opportunities, and implement new revenue streams.



This article originally appeared in Community Banker on January 28, 2022