It's hard to imagine a more unique industry than the US cannabis industry, or one that is growing and changing faster. Arcview Market Research reports a blistering 34% compound annual growth rate from 2014 to 2016, driven primarily by Colorado and Washington initiating adult-use sales. This rate of growth will subside somewhat in 2017 to 22%, as the eight states that voted to open or expand their cannabis markets on Election Day in November 2016 work to implement the new programs.

The research firm forecasts that growth will reaccelerate beginning in 2018, as adult-use sales ramp up in California and Massachusetts along with medical sales in Florida. That will grow the $6.7-billion market of 2016 at a robust 27% CAGR to $22.6 billion in 2021.

"That 20+% annual growth rate is likely to continue for many years past 2021 as more states and countries legalize cannabis."

- Arcview Market Research

Polls show that 80% of Americans approve of legal access to medical cannabis and 60% approve of full adult-use legalization. That level of agreement is rare on any policy issue and it's allowing elected officials across the political spectrum to start to move past the stigma previously associated with this issue.

But the effort to repeal cannabis prohibition at the Federal level remains complicated. There was a glimmer of hope in late 2015 when the Drug Enforcement Administration (DEA) announced it would reconsider its 45-year-long classification of cannabis as a Schedule 1 controlled substance.

In August 2016, the DEA reiterated its Schedule 1 classification, though it did loosen the rules to allow more researchers to study the potential medicinal value of cannabinoids. Even that move was apparently too much for some inside the bureau; in December new rules were announced clarifying that the agency even considers non-psychoactive cannabidiol (CBD) extracts Schedule 1 controlled substances.

"Schedule I drugs, substances, or chemicals are defined as drugs with no currently accepted medical use and a high potential for abuse."

- US Drug Enforcement Agency

Beyond the threat of prosecution and asset forfeiture, the chief federal-level issue faced by cannabis businesses is lack of access to the banking system. North American consumers spent $6.7 billion on legal cannabis products in 2016, up 34% from $5.0 billion in 2015.

BDS Analytics' retail tracking data allows a deeper dive into three of the most important markets: Colorado, Washington and Oregon. In 2016, cannabis sales averaged $1.98 million per retail location in Colorado's adult-use market and $896,000 per location in the medical channel. In Washington state where medical dispensaries were shut down in favor of the adult-use market, the 357 remaining retailers averaged $1.55 million in sales per location. Oregon's 350 retail outlets selling cannabis to adult shoppers generated $238 million in sales or nearly $672,000 per location, and Oregon's 381 medical dispensaries experienced average sales per location of $294,000 over the same period.

While it is not actually illegal for banks to provide services to cannabis businesses, the regulatory burden for banks seeking to support cannabis businesses is so onerous and costly that the major players do not see a workable business model and so have shunned the cannabis industry.

In some states, this void in banking services is being filled by community banks and credit unions. Some of these smaller financial institutions, however, are unable to process the volume of cash deposits that larger cannabis businesses make on a regular basis.