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Cash & Carry Model Persists For U.S. Cannabis Businesses In Face of Lack of Banking Reform

One of the stranger aspects of the developing U.S. marijuana marketplace, particularly in the last year, is the lack of real forward progress on the aspects of banking reform required to turn a now billion dollar business even more legit.

As it stands now, state-sanctioned and legal cannabis vertical businesses in the U.S. even in states where some kind of marijuana business for recreational or medical use is now legal, cannot have bank accounts or transact easily and officially in anything other than cash. This is a particular problem for those who handle the plant directly, although it has also affected larger IT based companies like Weedmaps, the U:S. based dispensary finder.

This is because of several federal statutes, starting with the Controlled Substances Act (passed in 1970) which classifies marijuana as a Schedule I drug (with no known medical efficacy). The situation as it stands now is also made more complicated by a raft of other financial federal penalties which come from a four decades assault called The Drug War. Money laundering, for starters, is a federal crime often associated with drug cartels and has been frequently actively pursued by prosecutors with a zeal and mandate to do so.

This summer, as it became obvious to all that backdoor negotiations between Governors in two states (Colorado and Washington State) on this issue along with ongoing state reform and successful ballot campaigns and a furore on Capitol Hill over DEA raids, the issue began to reach fever pitch on a national level. In late summer, a Treasury official announced, via use of the SARS (or suspicious activity reports used by U.S. banks as part of compliance) that there appeared to be 107 banks across the U.S. who had agreed to take a plunge in to a bold new and highly profitable business. That said, bank names and customers have never been disclosed. Those businesses who have successfully and legally obtained banking services are not talking about this either for fear of retaliation.

As a result, this one issue is a pressing one for the growing, powerful and vocal voices of the business industry also who are advocating and in many cases, directly funding reform via political and other contributions.

In the first week of November, the issue raised its head again when hundreds of medical marijuana dispensaries and recreational shops across the country (mostly in Colorado and Washington State) served by Metabank cashless ATMs abruptly lost service to the same in their facilities. There was no heads up warning.

Cashless ATMs are password protected systems that allow medical patients to use debit cards or get cash advances on their credit cards.

Metabank is a major U.S. financial institution supporting ATM services. Other similar institutions, including Washington State based financial services firm Guardian Data Systems, have not followed suit but in this case, blast faxed warnings to customers telling them that this initiative was underway.

While this may be a late breaking instance of a major banking services organization having post midterm election cold feet, it is clearly a picture of the situation in an industry which is both legitimizing quickly and beginning to take organized umbrage to such wide spread and baseless if not unprovoked policy changes.

That said, retaliation against those who dare to speak out is also still highly muted. In today’s environment, however, with most of the major players in the domestic American industry now in Nevada celebrating the wins of the electoral season as well as the fact that Nevada reformers have now gathered enough signatures to put recreational reform on the 2016 state ballot, this is at most a temporary ghost of the industry’s (more recent) if not fading past.

by Marguerite Arnold

Cultivation information, and media is given for those of our clients who live in countries where cannabis cultivation is decriminalised or legal, or to those that operate within a licensed model. We encourage all readers to be aware of their local laws and to ensure they do not break them.


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