Will Federal Cannabis Rescheduling Really Help? 'We'll Still Be High-Risk,' Says Security Bank CEO

As the cannabis industry anticipates federal rescheduling, the question of what this will mean for cannabis banking remains at the forefront. Paul Antonacci, president and CEO of Security Bank, provided insight on the subject during an interview at the Benzinga Cannabis Capital Conference.

Antonacci clarified that despite the potential changes to federal cannabis regulations, the banking industry’s approach to cannabis businesses will remain largely unchanged. “Descheduling doesn't impact how we're treated with banking, cannabis, and cannabis,” he explained. “We'll remain a high-risk industry, regardless of legality or not.”

This statement highlights the ongoing challenges cannabis businesses face when accessing financial services, as banks must adhere to stringent oversight requirements.

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Competition in Cannabis Banking

One of the challenges Antonacci highlighted is the limited number of banks currently servicing the cannabis industry. As federal rescheduling looms, Antonacci sees an influx of new financial institutions entering the space. However, he cautioned against hasty decisions from banks looking to capitalize on the growing industry without fully understanding the complexities involved.

“We need more banks and competition,” Antonacci noted. “But I foresee many banks jumping in with two feet, not really looking at the regulatory burdens, and they could get in a little bit of trouble.”

Addressing the Needs of MSOs and Craft Operators

Security Bank has worked with small-scale craft operations and large multi-state operators (MSOs). Antonacci explained the unique challenges of banking MSOs, which often operate across numerous states. “MSOs present a different problem because many are not in just one or two states—they’re in 12 states,” he said. The complexity of managing accounts across state lines and varying state regulations has made consolidation a priority for MSOs.

On the other hand, craft operators are “right within our wheelhouse,” according to Antonacci. He emphasized that Security Bank's decision to expand its footprint in the Midwest was in response to the growing demand from smaller operators who need reliable banking solutions.

Lower Interest Rates Critical to Building Relationships

When discussing the cannabis industry’s access to capital, Antonacci pointed out that bank loans remain preferable for many businesses due to lower interest rates than private equity or institutional funds. “Our rates are very reasonable, and our credit quality is extremely good,” he said. For Antonacci, developing strong relationships with cannabis businesses is a top priority, and he believes fair lending practices are essential to building trust within the industry.

Antonacci's insights offer a clear picture of the complexities cannabis businesses face as they seek banking services, especially in light of potential regulatory changes. While the industry continues to change, his message remains clear: regulatory hurdles will persist, but with careful planning and strong partnerships, banks and cannabis operators can navigate the road ahead.

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Cannabis banking illustration via Shutterstock.