Tags Posts tagged with "Marijuana Banking"

Marijuana Banking

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With an estimated projection of over $6 billion in revenue, there has been little to no access to marijuana banking. Currently, California’s marijuana industry stands as a cash-only market.

State officials are wrestling with how to move the industry’s money out of bags and into something more secure and stable as California leans toward a recreational marijuana marketplace next year when cannabis will be available for sale to adults without medical marijuana cards.

The obvious plan would be to have a bank account, yet that’s unlikely to be happening anytime in the near future, Deputy Treasurer Tim Schaefer stated in an interview this week. Shaefer and California State Treasurer John Chiang are talking about banking and its alternatives for the marijuana industry at a 9 a.m. public meeting that occurred this past Thursday at the Glaser Center in downtown Santa Rosa.

“If you have those kinds of bags of currency rolling around the state, you can see why it’s so important to solve the banking problem,” Schaefer said.

The event is part of Chiang’s statewide “Cannabis Banking Working Group” originally convened in December to get experts on banking and its options with professionals in the marijuana industry to discuss the issue in meetings throughout the state.

This past Thursday in Santa Rosa, representatives from Summit State Bank and Santa Rosa-based cannabis manufacturer CannaCraft will meet with experts on banking regulations, cash collection and payments systems.

A cash-only market comes with risks, from safety concerns for employees working with large quantities of cash to staff time required to handle all aspects of the business involving money.

There are other concerns, too. When CannaCraft was raided by Santa Rosa police back in July while the city’s rules on cannabis manufacturing were in flux, it was payday and the company had $500,000 in cash sorted into envelopes for staff. Police confiscated the money and still have it, even though the case has stalled and prosecutors have not charged any of the operators with a crime.

“It’s the most serious issue facing the industry,” stated Kirk Anderson, CannaCraft’s chief operations officer. Anderson’s brother is Darius Anderson, a principal in Sonoma Media Investments, which owns The Press Democrat.

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At the moment, four states have legalized recreational marijuana and that number will likely expand even if Ohio recently rejected the decision to legalize marijuana. Now that more and more states are legalizing marijuana, the marijuana industry is becoming much more profitable. Just in Colorado, recreational marijuana made $700 million and could even reach $1 billion in 2016, according to the Washington Post. Although the money is completely legal, most makes refuse to take the money accumulated from marijuana.

The reason that the banks will not take the money is because marijuana is still illegal under United States law, and banks are expected to comply to federal regulations. It would still be legal for the banks to take marijuana money without violating federal law, but many steps would need to be taken to make sure they are not breaking the law. Vice President of the American Bankers Association, Rob Rowe, stated that if banks do not accept funds from marijuana companies and something goes wrong, the bank may lose its charter.

For sundry banks throughout the United States, the extra steps are not worth it. Only 220 of America’s 7,600 banks and credit unions accept money from marijuana businesses according to Bloomberg in October. So this means that legal marijuana is a cash-only industry. This remains an issue for consumers because they must pat for marijuana in cash, but is an even bigger issue for growers and distributors.

“A lot of people hear ‘cash only’ and think that means they can’t accept credit cards,” Director of the National Cannabis Industry Association, Taylor West, said to ThinkProgress. “That’s true, but the real complications come on the backend. You’re paying your staff in cash, your utility bills, your mortgages, and your taxes. Not being able to handle these transactions electronically is just incredibly difficult.”


More and more states have been legalizing marijuana someway, somehow, and as a result, the cannabis industry continues to grow. The industry as a whole already generates billion of dollars annually, but cannabis entrepreneurs are still having a hard time when it comes to finding a store and managing their incoming cash flows.

Because pot is still illegal on a federal level, banks regulated by the federal government are not very willing to cooperate with owners of any businesses that personally handle cannabis. Bloomberg has reported that the answer to this dilemma lies within the form of a banking system run by the 560 American Indian nations residing in the United States. The Bloomberg article focuses on Anthony Rivera, a Harvard grad currently leading California’s Acjachemen Nation – a tribe who would like other tribes to legalize marijuana and use their experience from years of running casinos so that they may start their own banking system that could help the growing marijuana industry.

Here’s what Anthony Rivera had to say: “The Indian casinos are basically small little banks. They receive deposits in the form of gaming, and they manage that cash in a way which is highly regulated with commissioners and regulators.”
Rivera is the leader of CannaNative, an organization whose main goal is to link all leaders of the tribal nations with marijuana entrepreneurs because of their ability to establish their own regulated markets. In addition to just marijuana entrepreneurs, he would like to bring in financial professionals in order to find a banking system that would benefit the members of the cannabis industry.

The lack of banking options for marijuana businesses makes it extremely difficult for owners to find a way to manage their cash flow, which has generated issues in security and payment processes. The industry is projected to reach $10 billion by 2018, according to ArcView Group, a research firm. In addition, more states are expected to legalize marijuana, so banking issues are only going to need to be resolved sooner.

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As the state of California is preparing to hold what is debatably the most crucial vote that will be remembered in history throughout the marijuana industry in only 15 months, there seems to more questions than answers.

What will be the process of taxing recreational marijuana? Who is going to control what? Will there be a monolithic agency monitoring all points of the business or will various agencies take over the various points of interest. What will be government led? What, if anything, will be kept private.

And maybe the most crucial what about the cash that is generated. How are the revenues going to worked efficiently? What banks are willing to place their feet out of line from the financial mainstream and start worrying with marijuana shops and various industry accounts, especially with pot currently illegal at a federal standpoint.

The California Marijuana Control, Legalization, and Revenue Act, if it makes it onto the ballot and all signs point to that conclusion it would be put to a vote in November 2016. The Initiative is required to have 365,000 signatures to get on the ballot, and taken from one estimate from ReformCA, 70,000 have currently been obtained.

If the vote is given a green light and passes, California would become the fifth state to legalize the growing and the sale of recreational cannabis. As well as, it would also become the most intriguing marijuana state to do so. California currently has over 1,000 medical marijuana shops attending to more than a million medicine users.

A majority of the bureaucracy needs to be established to control the coming and going off what could be fastest expanding industry within California. To that conclusion, the state Board of Equalization, which deals with taxation and revenue, has made a proposition to provide a state-run bank to work with the fiduciary business.

At this current time, the marijuana industry is a cash only business. Even fees add taxes locally and to the state are financially taken care of with cash only. For standout resins that need to change.

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Besides hollow gestures by the federal government that said they are willing to let the banking industry to work with business in the marijuana industry, not long ago a denial of a Colorado credit union by the nation’s centralized banking operation implies a different behavior altogether.

The Fourth Corner Credit Union in Denver applied this past year for a “master account” with the Federal Reserve that would have developed a go to banking location exclusively for the state’s marijuana industry.
Yet, after months of consideration, the feds eventually denied the credit union the ability to start conducting business like the rest of civilized America.

Not only would this first of a kind banking selection have provided cannabis business with a place keep millions of dollars in cash revenue, yet it would have also allowed cultivation operations and marijuana shops to be on the look out for loans and various other important financial solutions to promote proper growth. However, after submitting to months of grueling inquiries from the Fed, the credit union was denied.

Yet the result is not etched in stone for the credit union. According to the New York Times, Fourth Corner Credit Union, which has the backing of Colorado Governor John Hickenlooper, filed a federal lawsuit against the banking operation this past Thursday, insisting that the marijuana trade be given “equal access” to the centralized bank of the United States.

Attorney, Mark Mason states that throughout the whole application process, the Fed was looking for a smart way to deny their application. Currently, the organization is preparing to let a federal judge, well versed in “applying the law” make the choice.

“The Fourth Corner Credit Union (“TFCCU”) sued the Federal Reserve Bank of Kansas City and the National Credit Union Administration in federal court in Denver to get a fair and impartial hearing on its request for a master account,” Mason said in a statement.

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