The legal marijuana industry, because it currently exists in a nebulous legal environment created by the conflict between state and federal law, is like a series of concentric circles or a spiral of complications.

At the center are retail locations which actually sell marijuana to customers. The further removed a firm is from the center, the less risky it is legally and the easier it is logistically to be involved in the industry. A rough indicator of the perceived level of risk for each layer is the degree to which banks are unwilling to work with that part of the industry.

Marijuana retailers face the biggest legal liability from the federal government, the most significant federal tax issues, problems finding property, and issues with outside investment. On top of all that, they need to deal with the bulk of the new state regulations. If the federal government did decide to reverse course and try to shut down the legal market, these businesses would probably be the top targets. They consequently have the most trouble accessing banking services, forcing many to be all-cash operations.

Just slightly further out from the center are the state licensed growers and processors. Since they make their money selling what is still classified as a Schedule I drug by the federal government, they face most of the same complications, but there are some marginal differences. For example, Numerica, one of the only credit unions to publicly take accounts from marijuana businesses, will deal with growers and processors but not retail stores.

Next, you start getting to the auxiliary businesses. The fact that they don’t actually sell marijuana greatly reduces many issues but doesn’t eliminate all the problems with being associated with marijuana. Merely touching the plant as a certified testing lab is enough to make banking more difficult. As Dorian Des Lauriers, CEO of ProVerde Laboratories, Inc told me:  “The bank that I have had a relationship with for many years declined our new business.  The VP that I have dealt with for years didn’t even have the courtesy to tell me directly, rather he left a message with my controller!” After some research he was able to find a different bank that would take his money.

Further out still are auxiliary companies that don’t even touch the plant. This is often far enough removed they can operate without serious problems but it isn’t always sufficient to avoid all the complications that radiate outward. “Stable access to banking is a serious issue for everyone in our industry, whether they handle the product directly or not. Just having a reference to cannabis in your name or your business model can be enough for a bank to cut you off,” said Taylor West, Deputy Director of the National Cannabis Industry Association.

Take, for example, Apek Supercritical makes extraction equipment that can be used for many applications but the marijuana industry is their biggest custumer base. Since the industry doesn’t have banking services, Apek was getting a lot of cash deposits, and that alone was enough to scare off their old bank. Owner Andy Joseph told me, “They shut down all of my accounts, my business account, my personal account, my credit card account.” They have a new bank now, but one with high fees for cash deposits.

I spoke with several companies that sold their goods or services primarily to marijuana businesses, and there didn’t seem to be a rhyme or reason as to which few had banking accounts shut down. For this reason, some didn’t want their names or the details of their companies used. As Steve Fox told the crowd at the Cannabis Business Summit, “The first rule of marijuana banking is you don’t talk about marijuana banking.” Even without direct banking problems, having customers who want to physically pay in cash and can’t get access to basic lines of credit creates logistical hassles that most other industries don’t need to worry about.

It is once you get roughly two steps removed from the actual plant that it seems the perceived risk and all the problems disappear for the most part. I thought it was telling that one of the only big international companies sponsoring the Cannabis Business Summit was Qiagen, and their booth was pushing pathogen detection equipment which would be of interest to certified testing labs.

What this dynamic could mean for the future of marijuana

This isn’t just an interesting snapshot of a young industry; it could also have significant, long term policy implications. What this dynamic means is that in the next few years before the federal government ends its marijuana prohibition, the largest and most established companies in the “marijuana industry” are likely to be these auxiliary companies instead of any one retailer or growing company. They have an easier time banking, getting loans, getting investment, and functioning nationally. A childproof container manufacturer can expand nationally a lot more easily than a marijuana company that can’t even move its product across state lines. In Washington state, you even have licensing rules that directly limit marijuana growing or retail companies to just a few licensed locations.

Importantly, many of these auxiliary businesses actually rely on strong regulation to create a demand for them — companies like independent testing labs, testing equipment makers, seed-to-sale tracking software companies, childproof container manufacturers, high quality air filtration systems, etc. Tough regulation doesn’t hurt these business, it makes them possible.

When the federal government does finally move to end marijuana prohibition they may surprisingly find some of the largest and best politically-positioned companies related to the legal marijuana will not being fighting federal regulations but actually promoting a strong regulatory structure to maintain their market.

Jon Walker is the author of After Legalization: Understanding the future of marijuana policy