Banking Woes Continue To Plague Legal Pot Industry

Marijuana Leaves on Top of PlantsFederal Banking Rules Not Working In Favor Of The Legal Cannabis Industry

Legal marijuana entrepreneurs still find a difficult time getting banks that will accept them. The situation is devastating for the cannabis industry given that more and more states have decriminalized the medicinal and recreational use of marijuana.

Mason Tvert is a renowned Denver-based marijuana policy specialist who has actively participated in the passing of cannabis laws, e.g. Amendment 64 in 2012 that saw recreational cannabis become legal in Colorado.

The struggle to streamline marijuana banking laws

Tvert has spent years trying to solve the banking issue in the cannabis industry. And though hailed as “marijuana’s top evangelist,” he admits that streamlining marijuana banking laws has been a “formidable hurdle.”

But he is positive, “more so now that there’s a bill in the House of Representatives with over 90 co-sponsors: The bipartisan measure dubbed the “States Act” sponsored by Massachusetts Senator Elizabeth Warren(Democrat) and Colorado Senator Cory Gardner (Republican) may shed new light on the issue.” Tvert says.

According to him, passing this bill will mean all transactions initiated at the state level will be viewed as legal under the federal law provided that the business falls in line with the state laws.” Only that way can banks feel safe (from feds) working with entrepreneurs in the pot industry.

Tvert, however, remains realistic about his expectations despite his “strong support for the measure.”

“Regrettably, it’s one of many matters falling victim to the stalemate we experience in Congress. Big Banks need reassurance—most of them want it in a bill and not merely in policy enforcement.”

Among the victims is MPP, the firm that Tvert’s presently stands for.  Last year, MPP’s supporting bank PNC—a non-profit advocacy foundation they’ve been working with since 1995— surprisingly cut ties with the firm.

Tvert says that according to news stories, PNC had concerns about the dangers of working with marijuana-related business.

Luckily, MPP later found a new bank that they have kept secret, but Tvert is afraid they may lose a partner owing to the unforgiving banking policies.

Why Did PNC reject MPP after years of working together?

“I’m not aware of the bank’s concern was “offering services to a state-regulated marijuana business,” says Tvert.

The marijuana activist also says he is not aware whether the bank’s decision was linked to the Trump administration known for fervently anti-marijuana advocates like Attorney General Jeff Sessions.

How are marijuana businesses handling their finances?

What happens to all the money these legal cannabis firms make if banks won’t work with them?

Most legal pot companies are now forced to deposit money in safe boxes or contract their cash holding firms, says Tvert.

Secondary vendors like security firms and armored vehicle companies have also come in to fill the niche.

Wrap Up

While these “banking” options are helping marijuana businesses move on, it’s obvious these alternatives are still enough surety of legitimacy for such an upcoming industry.


Unforgiving Federal Banking Laws Threaten To Render Marijuana A Cash-Only Industry

Female scientist in a hemp field checking plants and flowers, alternative herbal medicine concept

Female scientist in a hemp field checking plants and flowers, alternative herbal medicine concept

Oklahoma adopted medical cannabis amid a web of challenges, but the worst it will face is operating in a cash-only industry.

Marijuana, still being a federally illegal drug, medicinal cannabis businesses won’t easily get their way into federal banks which leaves the sector solely dependent on cash. Customers must pay in cash; employees must be paid in cash, taxes too, and equipment in the dispensary will be paid for in cash.

For a quick economy like the marijuana industry, a cash-run market will present a host of challenges in the product’s supply chain. Handling payroll will be a problem and the use of cash at each stage could make the sector a target for criminals.

All states that have legalized either recreational or medicinal cannabis face similar problems.

Reforms for Marijuana Banking laws remain pending in Oklahoma as state regulators have failed to agree on the implementation of State Question 788. Meanwhile, The Oklahoma Medical Marijuana Authority is scheduled to start approving marijuana license applications by Aug 25. Oklahoma’s Medical Cannabis Authority works under the Oklahoma State Department of Health.

Sometime back, Oklahoma’s Board of Health repealed its controversial rules that prohibited smokable forms of medicinal marijuana and insisted on a certified pharmacist at every cannabis dispensary. It agreed to a few sets of rules based on advice from the attorney general’s office, but two lawsuits are in court alleging that the Board “overstepped its bounds.”

Federal banking laws particularly those that monitor money laundering and protect bank secrecy hinder cannabis businesses in the District of Columbia plus all the 30 states that have adopted medical cannabis. Marijuana classification as Schedule 1 by federal law makes it illegal for banking institutions to handle the finances on any related entities and any violators may face administrative and criminal charges.

“Banks prefer to keep off anything that might lead to claims of money laundering and will therefore not marijuana businesses to deposit their finances,” said Chris Odinet, a banking law professor at the University of Oklahoma Law. “That is to say no access to payment and credit card services or payroll for staff. We’ve seen employees receive cash, and customers pay cash in Colorado and California.”

However, there are a few exceptions for issuing medical marijuana payments to cannabis-related enterprises under the Treasury Department’s Financial Crimes Enforcement Network. Around 400 banks and credit organizations provide some controlled services to marijuana businesses.

One noteworthy firm is Seattle’s Salal Credit Union which supports 40,000 members and marijuana-related industry enterprises in Oregon and Washington.  According to Vice President Carmella Murphy Houston of Salal, the company started offering cannabis banking services in 2014.

“Dealing solely on cash has its drawbacks. You have to worry about transporting and storing cash,” Murphy said. “We have to provide armored vehicles for cash pickups. And while we accept small cash deposits and withdrawals at branches, we need an armored vehicle for anything $5,000 and above in cash per day.”


Why Banks Won’t Touch Legal Marijuana and the Risk it Creates

MarijuanaAs each state legalizes medical and/or recreational marijuana, much has been said about the issue of money. Despite the continued federal prohibition, the marijuana industry has grown rapidly. The emerging market brought in nearly $9 billion in sales in 2017, according to managing director of BDS Analytics, Tom Adams. With the POaddition of the Golden State, it is estimated that this number will increase to $11 billion in 2018.

Believe it or not, money is a problem. A very big problem. The massive amounts of money these marijuana dispensaries are bringing in have nowhere to go. With this cash floating around, marijuana business owners find themselves in a dangerous situation.

Just this summer, the owner of a successful marijuana dispensary in Southern California was abducted from his Orange County home, tortured and mutilated by kidnappers. The reason? They mistakenly believed he had buried tens of thousands of dollars somewhere out in the desert and wanted to know where it was.

In another horrific incident, a 28-year-old employee of a cannabis shop was left to die after being shot by masked men. Witnesses said they saw them escape with a duffel bag full of cash. In South LA, a teenager was shot dead by a dispensary security guard during a robbery attempt.

While California has allowed medical marijuana for years and fully legalized recreational in January of 2018, the state’s largest crop is still very much illegal under federal law. At the federal level, cannabis is classified as a Schedule I substance with no currently accepted medical use and a high potential for abuse.

Afraid to place themselves under federal prosecution if they accept money from marijuana sales, banks turn these businesses away. This leaves marijuana dispensaries with lots of cash and nowhere to put it. A large majority of a multi-billion dollar industry is forced to deal almost exclusively in cash. Thus, more and more dangerous encounters and tragic events are taking place.

“It is a sad, misfortunate, bad application of public policy,” Aaron Klein, policy director of the Brooking Institution’s Center on Regulation and Markets, told The Daily Beast. “One of the purposes of decriminalizing and legalizing marijuana is to reduce crime.”

MedMen is one of the largest cannabis companies in the world, with stores in California, New York and Nevada. Despite raising roughly $135 million in venture capital money and having Chris Leavy as co-chairman, “the world’s largest money manager,” according to Bloomberg, no national financial institution wants anything to do with its money.

“Banking is definitely a challenge for this industry. I think everybody recognizes that,” MedMen spokesperson Daniel Yi said. “As an industry, of course we would like to have access to full banking services, including commercial loans, a line of credit — that’s what every business runs on.”

For now, marijuana dispensaries are continuing to rely on marijuana POB from an alternative provider like Marijuana Merchant Account. This option ensures businesses have a safe way to process transactions and handle their cash.


Lawmakers Advocate Marijuana Banking Protocol Reforms

marijuana-money-profits-earnings-medical-marijuana-projectCash is King, but having a multibillion-dollar industry rely entirely on it can be a struggle! The whistleblower, Senator Cory Booker pointed out an issue that lawmakers must mull over. He says businesses, even those that sell medical cannabis cannot obtain bank accounts, access funds or issue payroll – even in a place like New Jersey, where medical marijuana has been legal for almost a decade (since 2010).  All these because marijuana is still classified as Schedule I under federal law.

“People are literally sitting on thousands of dollars in cash because no banks will open doors for them. They are settling invoices, buying equipment and paying employees in cash, which is a very dangerous system,” Booker said.

Advocating for the same, Sen. Bob Menendez says it is better to have a “legal, transparent process” than a practice where cash rules the day because the money is unbankable due to pre-set banking laws.

The two New Jersey Democrat senators spoke at a seminar courtesy of NJ Spotlight in Pennington.

Booker is backing the Marijuana Justice Act, which advocates legalization weed and obliteration of possession criminal records while Menendez’s bill looks to lay down marijuana banking procedures.

Sen. Menendez condemned U.S. Attorney General Jeff Sessions, a pro-anti-marijuana activist a who at one time said, “Good people don’t smoke marijuana.”

Sessions has so far fought against legalization and any related efforts, even managing to reverse the 2013 Obama administration memo that begged for restraints on prosecution.

But marijuana banking activists and lawmakers still stand their ground.

“The Justice Department should now allow states that have decriminalized marijuana either for recreational or medical uses to operate,” Menendez said.

The Health Commissioner for New Jersey, Shereef Elnahal agreed that amending marijuana banking laws will broaden the marijuana marketplace, more so if New Jersey decriminalizes recreational cannabis.

“Obtaining capital is a major challenge for the medical cannabis dispensaries, and the existing laws only benefit the big players. So such reforms will diversify the market ensuring local entrepreneurs get support as well,” said the Health Commissioner.

The group declared to go up against Trump administration attempts to “weaken the Affordable Care Act.” The bill could be a bone of contention in the oncoming New Jersey congressional campaigns.

Elnahal announced that New Jersey would publicize the individual market and erect a command center to assertively advertise the next Obamacare enrollment period notwithstanding federal funding cutbacks to healthcare providers.


California Moving Towards Public Banking for Marijuana Businesses

medical marijuana payment processingToo much money? Is that even a thing? For marijuana-related businesses, it is. They make a lot of cash, but have no way to safely deposit it at the bank like other businesses. Banks are subject to heavy regulations and are unwilling to offer solutions to the cannabis industry. Under federal law, marijuana is still a Schedule I substance – listed alongside heroine and LSD. As far as the Drug Enforcement Agency is concerned, there is no accepted medical use of marijuana and a high potential for abuse.

As a result, cannabis-related deposits are not federally insured. These business’ cash are also subject to seizure by the feds. To try to find some solution for these businesses, California is considering whether a state public bank could be the answer. With a projected $6.5 billion in revenue by 2020, the state is anxious to find secure processing options for this potentially very lucrative industry.

On August 10, state treasurer John Chiang met members of the Cannabis Banking Working Group. This meeting was arranged following Californians vote to legalize recreational marijuana, and the issue on the table was exploring bank access for cannabis businesses (or the lack thereof). California estimates that 70 percent of marijuana-related businesses are currently unable to secure the bank accounts they need.

According to Chiang, public banking is an increasingly popular idea for not just marijuana businesses, but others as well. The Great Recession of 2008 left many business owners dissatisfied with the private finance system in the U.S. If California successfully establishes a public institution, it would be run by local treasury officials and beholden to state taxpayers.

The only public bank in the U.S. (for now) is the Bank of North Dakota. This institution was established in 1919 when farmers were unable to secure loans through private banks under the federal system. Colorado and Massachusetts are also considering a similar solution to California. However, those brave enough to consider this option face many obstacles and risks and a complicated process. For example, marijuana-related businesses would still be unable to secure traditional marijuana credit card processing.

While many Californians are optimistic about the future, for now the safest options for marijuana-related businesses remain either in cash (extremely unsafe and impractical) or an alternative solution – like marijuana credit card processing from a high-risk provider like MMA. Depending on the business type, merchants can secure either a recreational or medical marijuana merchant account in as little as 24 hours.