Montana became one of four states to legalize recreational use of cannabis this month, making the state's bankers anxious.

"The banks in Montana are nervous about implementation of the ballot measure and how it's going to affect them in their communities," said Cary Hegreberg, president and CEO of the Montana Bankers Association. 

Voters in Montana, Arizona, New Jersey and South Dakota passed ballot measures to legalize the drug, joining 11 states in the country that already allow recreational use.

The Montana Bankers Association opposed the initiative but knew it was likely to pass, Hegreberg said.

"But we wanted people to know across the state how it might affect banks, and the trepidation that banks have toward doing business with marijuana-related industries," he said. Montana voters passed the measure with 57% of the vote.

Montana bankers are not alone in their hesitation to bank the industry. With cannabis still illegal at the federal level, banks in states that have legalized the drug find themselves in a situation where state and federal law conflict, and have been reluctant to bank the sector.

As a result, the cannabis industry has largely operated as cash-only, causing operational and safety-related hurdles for growers, dispensaries and the ancillary businesses tied to the Schedule 1 drug.

Hegreberg said the state's banks are fearful they may inadvertently finance a cannabis business by mistake, as marijuana-related businesses become more prevalent as a result of the ballot initiative's passage. 

"The example that always comes up is a bank that's financing commercial real estate. The owner of a strip mall is renting space to a marijuana dispensary, and the bank may not even know that that is the case, and may find themselves in a regulatory bind," he said.

Although passage of the measure legalizes the use of recreational marijuana, Montana has allowed medical use of the drug since 2004. Hegreberg said he is aware of only a few credit unions in the state that have opened up accounts for medical marijuana-related businesses. 

The Montana Bankers Association is taking a proactive stance as it prepares to navigate the new regulatory hurdles that come with state legalization of marijuana, and has reached out to its counterparts in Washington state and Colorado. Those states legalized recreational use of the drug in 2012. 

"Banks in other states have figured it out, so we're going to be relying heavily on our peers to help us navigate the choppy waters," Hegreberg said.

The trade group has already received some insight from the Washington Bankers Association, and plans to host a webinar with Colorado bankers who have experience dealing with the situation in their own state Hegreberg said, adding he's hoping to see more movement from lawmakers in Washington, D.C., regarding legislation he feels would put bankers at ease. 

"We've had some discussion with our state banking commissioner to look into legislative ways we can minimize the risk, but it doesn't really look all that promising because it's the federal examiners and the federal agencies that people are mostly concerned about," Hegreberg said. 

Like many other state banking associations, the Montana Bankers Association supports the Secure and Fair Enforcement (SAFE) Banking Act, federal legislation aimed to protect banks that service legal cannabis businesses. After the bill's historic passage in the Democratic-controlled House in September 2019, the bill remains stalled in the Republican-controlled Senate. 

"We do think [the bill] would alleviate a lot of the concerns and risks that come with banking, or inadvertently banking, marijuana-related businesses," Hegreberg said.

However, following the recent election, Montana bankers find themselves with a governor-elect who opposed the SAFE Act. 

Greg Gianforte, the Republican lawmaker who left his House seat to run for governor of Montana, voted against the SAFE Act last year. 

Gianforte has also called rescheduling marjiuana "a misplaced priority," and will likely be reluctant to embrace the implementation of the state's cannabis ballot measure.

The measure is also facing a legal challenge. The group Wrong For Montana, which has opposed the initiative from the beginning, filed a lawsuit Nov. 4, challenging the constitutionality of the ballot initiative. 

Regardless of the legal challenge, or Gianforte's stance, Hegreberg said Montana voters have made it clear they favor cannabis legalization. 

"At this point, we're all just holding our breath, hoping we figure it out and the banks stay out of trouble," he said.