Slow your roll, pal
With recreational marijuana legalization passed in three more states (CA, MA, NV), you might be thinking now is a great time to launch that lucrative pot business. But first you need to consider how you’re going to deal with all the money.
All dressed up with nowhere to go
Banks in Colorado still don’t offer most services to businesses in the marijuana industry because of the clash between legal state and illegal federal marijuana regulations. With the federal ban, banks are reticent to become involved; they have to comply with federal banking laws and report back how they obtain their money.
According to Pew Charitable Trusts, 40% of marijuana operations in Colorado don’t even have bank accounts. Those who do use banking services are limited to opening checking accounts.
Federal banking regulations make it impossible for pot businesses to use credit or debit cards. As a result, businesses are finding themselves with piles of cash and nowhere to put it.
Some companies are opening shell businesses to make their money look more accessible to the banks. “There are large amounts of cash floating in the system that makes money laundering very easy,” said Colorado Attorney General Cynthia Coffman, who is working to convince federal regulators to allow the banks to work with marijuana businesses in states with legalization.
The high-volume cash flow is cause for concern. This year, dispensaries in Oregon have already sold $160 million worth of marijuana productions.
With that much revenue in cash, businesses have an increased risk of burglary.
Niche security companies specializing in protecting marijuana operations have sprung up in Colorado, Washington, Oregon and California; part a cash-heavy dispensary business plan has to be armored vehicles and bulletproof glass.
In Oregon and Washington, a company called PayQwick has developed a cashless intermediary that facilitates sales. The company calls itself a “money transmitter” and is registered federally. Sprout News asked PayQwick founder and CEO Ken Berke how his platform is legal when every other way seemingly is not.
“So, if this is all possible under current statutes, why has no one else managed to pull this off? The answer to this is the very source of Berke’s confidence in his growing business: it’s possible yes, but damn-near impossible. ‘One, the software platform is no easy trick,’ Berke begins. ‘It’s very complicated. Number two, getting licensed to do what we’re doing is no easy feat either. It’s a long, arduous process. You need a full Bank Secrecy Act and Anti-Laundering Control Act compliance program to do it. There is a lot of brain damage that is involved in trying to do what we’re doing.’”
Oregon’s sales reflect the obvious boon that a “weed PayPal” service could be. The question remains why more dispensaries have not caught on.
If you’re thinking about developing your own dispensary or marijuana brand, now is the time; but don’t forget to consider how to protect yourself and facilitate your business in a new economic era.