Banking activity increased measurably in the first four states that legalized adult-use cannabis, according to a new white paper.
The study, released recently by four university researchers, concluded there was a “statistically and economically significant” jump in both bank deposits and bank lending in Alaska, Colorado, Oregon and Washington after those four states became the first to legalize adult-use marijuana.
“Our results indicate that banking activity (deposits and subsequent loans) increase considerably in legalizing states relative to non-legalizing states,” the researchers wrote.
The researchers examined banking data in the four states from 2011 to 2016, compared that to banking data from 42 other states and found that, overall, the four that had legalized adult use reported a higher average of deposits – $202 million compared with $160 million – and also higher average levels of loans – $143 million to $107 million.
The researchers also found that in the four states, “recreational cannabis legalization resulted in increased loans ranging from 8.62 percent … to 6.54 percent.”
The researchers were careful to note, however, that they were not able to determine whether the increases were because banks were knowingly working with cannabis companies or if the gain stemmed from a general uptick in economic activity thanks to marijuana legalization.
Either way, the paper reported, demonstrably more money was being circulated through banks in those four states after legalization.
“Our findings suggest that the risk from regulatory uncertainty did not decrease banks’ willingness to accept deposits or make loans,” the researchers wrote.
“In fact, legalization resulted in a significant increase in banking activity with no substantial dampening in deposit to loan conversions.”
Business leaders need reliable industry data and in-depth analysis to make smart investments and informed decisions in these uncertain economic times.
Order your 2022 MJBiz Factbook, out now!
- 200+ pages and 50 charts with key data points
- State-by-state guide to regulations, taxes & opportunities
- Segmented research reports for the marijuana + hemp industries
- Accurate financial forecasts + investment trends
Stay ahead of the curve and avoid costly missteps in the rapidly evolving cannabis industry.
The study was conducted by:
- James Brushwood, a senior lecturer on accounting at the University of Arizona.
- Curtis Hall, an associate professor of accounting at Drexel University in Pennsylvania.
- Amanda Marino, an assistant professor of accounting at San Diego State University.
- Roberto Pedace, a professor of economics at Scripps College in California.