Connect with us

Business

More Banks Welcome Marijuana Businesses, Federal Data Shows

Published

on

A steadily growing number of banks are willing to open accounts for marijuana businesses, according to new federal data.

Even as a string of conflicting signals from the Trump administration surrounds the debate about legalization with uncertainty, the number of depository institutions that are actively banking the cannabis industry has increased roughly 18% since the beginning of 2017.

Last January, 340 financial services providers were banking marijuana businesses. That number rose to 400 by the end of September, according to a report released late last month by the Financial Crimes Enforcement Network (FinCEN).

The rise comes despite continued confusion about the federal government’s approach to marijuana as U.S. Attorney General Jeff Sessions — a longtime legalization opponent — has made clear he is considering potential changes to the former administration’s mostly hands-off cannabis enforcement policies.

In 2014, the Obama administration’s Treasury and Justice Departments issued guidance to banks about how to serve the marijuana industry without running afoul of federal regulators. The policy, which requires financial institutions to regularly file reports on their cannabis customers, was intended to provide clarity and assurances to banks. But many have remained reluctant to work with marijuana businesses because of overarching federal prohibition laws.

Under a separate document — the so-called “Cole Memo,” named after the then-deputy attorney general who authored it in 2013 — the federal government set out certain criteria that, if followed, would allow states to implement their own laws mostly without intervention. Those areas concern priorities like preventing youth use, impaired driving and interstate trafficking.

While Sessions testified before Congress in November that the Obama-era guidance is still in effect, he later said that the Department of Justice is actively reviewing potential changes to the policy. He also held a closed-door meeting with anti-legalization activists last month.

Those developments are just the latest in a series of anti-cannabis signals sent by the attorney general over the course of the past year. Meanwhile, a number of anecdotal reports have emerged in recent months about individual cannabis business bank accounts being closed.

Umpqua Bank, for example, reportedly shut down the account of Greenbridge Corporate Counsel this fall after the law firm refused to turn over information about its cannabis clients without their permission.

But the new federal data shows that overall there has been a steady increase in the number of banks and credit unions willing to open accounts for marijuana-related businesses, even as Sessions has hinted that a cannabis crackdown could be in the works.

The new FinCEN report is part of a set of periodic releases in response to frequently requested data under the Freedom of Information Act.

Because of banks’ reluctance to work with marijuana businesses, many growers, processors and retailers operate on a cash-only basis, which can make them targets for robberies.

A growing bipartisan group of members of Congress has sought a legislative solution to the problem. House and Senate bills to provide permanent clarity to the banking industry about working with marijuana businesses have earned increasing cosponsor numbers, but haven’t been scheduled for hearings or votes.

In 2014, the House voted 231 to 192 in favor of an amendment to prevent federal authorities from punishing banks for servicing the legal marijuana industry. But the language was not included in the final version of annual appropriations legislation that year and was not enacted into law. Congressional Republican leaders have since prevented similar measures from even being considered for attachment to subsequent spending bills.

In November, the chair of the House Financial Services Committee used a procedural ruling to block a vote on a cannabis banking amendment offered to a bill on stress testing for financial institutions.

Meanwhile, a congressional budget rider that prevents the Justice Department from interfering with state medical cannabis laws is set to expire on January 19, barring an extension through a still-unresolved Fiscal Year 2018 spending package.

Legalization advocates believe that several more states will enact laws allowing recreational or medical use in 2018.

This piece was first published by Forbes.

Marijuana Moment is made possible with support from readers. If you rely on our cannabis advocacy journalism to stay informed, please consider a monthly Patreon pledge.

Tom Angell is the editor of Marijuana Moment. A 20-year veteran in the cannabis law reform movement, he covers the policy and politics of marijuana. Separately, he founded the nonprofit Marijuana Majority. Previously he reported for Marijuana.com and MassRoots, and handled media relations and campaigns for Law Enforcement Against Prohibition and Students for Sensible Drug Policy. (Organization citations are for identification only and do not constitute an endorsement or partnership.)

Business

California Marijuana Businesses Seek Tax Amnesty After Spate Of Robberies In Oakland

Published

on

Members of the marijuana business community in Oakland, California are calling on state and local officials to provide “tax amnesty” after numerous cannabis companies were robbed earlier this month.

At a press conference on Monday, the Oakland-based association Supernova Women urged officials to deliver financial relief after more than 25 licensed marijuana businesses were burglarized or robbed during the week of November 15.

Specifically, the non-profit group wants to see a repeal of the state’s cannabis cultivation tax and a “significant reduction” in the excise tax on marijuana products. They say that would help sustain small and minority-owned firms that are facing up to $5 million in losses following the robberies.

“All types of licensed cannabis businesses were impacted—cultivation, manufacturing, distribution and retail, delivery and storefront,” Amber Senter, executive director of Supernova Women, said at the press conference. “The cannabis industry needs tax relief.”

“Cannabis equity businesses in particular need more money and resources. Small businesses and small farmers need help,” she said. “Piling on and increasing taxes—and now with the threat of robberies and violence—is proving to be unbearable for cannabis operators. When we’re faced with targeted attacks, the effects are magnified. Our communities do not have the runway for robberies and tragedies of this time.”

Raeven Duckett, a social equity licensee who founded Text Johnnie, emphasized that “cannabis companies operating in Oakland pay at least a 6 percent tax rate while other non cannabis companies pay 0.12 percent—so cannabis companies are paying 600 percent more taxes than any other Oakland company.”

“Yet when organized crime organizations target at our facilities, we get little to no response and zero compassion from local law enforcement and city officials,” she said. “Our businesses are hurting. These operators are scared. These operators deserve the right to a safe work environment and local support in a city where we pay an exorbitant amount of taxes.”

Across the bay in San Francisco, activists have similarly criticized the police response to marijuana burglaries. Surveillance video from earlier this month that was obtained by The San Francisco Chronicle showed local police apparently observing and not intervening as suspects got away after they responded to a 911 call about a dispensary being burglarized.

Senter ended Monday’s event with a clear message to city and state officials: “Listen to us. This is our cry for help. Help us.”

“We’re not going to hire people with AK-47s and put them on the roof. That’s not our job,” she said. “That’s not why we started to sell weed. We didn’t decide to get into cannabis to kill people. We’re here to provide medicine and improve people’s lives.”

Prior to the spate of cannabis-related robberies, California Attorney General Rob Bonta (D) celebrated the 25th anniversary of the state’s move to legalize medical cannabis and described today’s market as “number one in the world.” However, he did acknowledge that more work needs to be done.

Separately, California officials started accepting concept proposals last month for a program aimed at helping small marijuana cultivators with environmental clean-up and restoration efforts.

Gov. Gavin Newsom (D) did veto a bill last month that would have allowed cannabis businesses to advertise on billboards along most highways in the state.

The governor also recently approved a bill to boost the state’s hemp industry by legalizing retail sales of a wide range of consumable products derived from the plant—including CBD-infused foods, beverages, cosmetics and dietary supplements. It will also eventually allow the sales of smokable hemp products in the state.

In September, Newsom signed separate legislation to require hospitals to permit medical marijuana use by certain patients in their facilities.

California officials are also making millions of dollars available for grants programs to support marijuana social equity initiatives and assist localities in processing pending cannabis business license applications.

Next year’s California State Fair will host a first-of-its-kind, state-sanctioned cannabis competition.

Marijuana Had ‘Unprecedented’ Success In State Legislatures In 2021, NORML Report Shows

Photo courtesy of Mike Latimer.

Marijuana Moment is made possible with support from readers. If you rely on our cannabis advocacy journalism to stay informed, please consider a monthly Patreon pledge.
Continue Reading

Business

Arizona Marijuana Equity Program Could Benefit Big Businesses, Critics Say

Published

on

“This is a program that, as currently written, is designed to fail.”

By Jerod MacDonald-Evoy, Arizona Mirror

When Arizona voters approved recreational marijuana use in 2020, the new law included provisions that aimed to give the opportunity of a lifetime to people most harmed by the War on Drugs: a chance to win a coveted license to operate a dispensary.

Now, the final licenses to sell marijuana in Arizona are set to be given out through the social equity program, which aims to right the wrongs caused by disproportionate policing of marijuana crimes. They are easily worth millions of dollars—maybe tens of millions—and the system was envisioned as propelling people once arrested for minor marijuana crimes into business selling cannabis.

But some advocates say the reality is that bureaucratic hurdles, corporate greed and a rapidly consolidating marijuana market will drive those profits directly into the hands of large companies intent on limiting competition and capitalizing on the billions of dollars to be made selling cannabis in Arizona.

“This is a program that, as currently written, is designed to fail,” attorney Julie Gunnigle said to Arizona Mirror. Gunnigle up until recently worked for Arizona’s Chapter of NORML, an organization that pushes for the reform of marijuana laws across the United States.

The social equity program, as it was dubbed in Proposition 207, the ballot measure voters approved in 2020 to legalize recreational marijuana, is intended to give minority communities—those historically most impacted by the War on Drugs—the inside track to claiming 26 dispensary licenses.

But the pool of potential social equity dispensary owners is limited by both the voter-approved measure and rules finalized last month by the Arizona Department of Health Services. Applicants must meet three of four criteria:

  • Have a low-level marijuana conviction—one that’s been expunged, if it was a felony
  • Have a family member with a low-level marijuana conviction
  • Live in one of 87 ZIP codes ADHS identified as being “disproportionately impacted by the enforcement of previous Arizona marijuana laws”
  • Earn less than 400 percent of the federal poverty limit; for a family of four, that would be a maximum household income of $106,000

And anyone who wants to be entered into the lottery to win a social equity license must pay a non-refundable $5,000 application fee after they take two separate two-day training classes. The deadline to complete those classes was Wednesday, about five weeks after the ADHS rules were announced.

Applications are due by December 1.

Funneling social equity applicants into partnerships with big companies

For Gunnigle, the exorbitant application fee is such a steep barrier that it all but forces would-be applicants to turn to large players in the Arizona cannabis industry for help.

The established marijuana sector is eager to find social equity applicants. Houses in the qualified ZIP codes have been blanketed with mail and door-hangers from large cannabis companies scouring the state for those who qualify.

Along freeways in Phoenix, billboards from large marijuana dispensaries and growers are advertising their intent to help eligible applicants through the process.

Some have even set up websites, such as YourBrightHorizon.com, set up by Copperstate Farms, one of the largest growers of marijuana in the country with a 40-acre operation outside of Snowflake, Arizona.

“The amount of general public knowledge of the program is pretty low,” said Doug Cole, a spokesman for Copperstate Farms. “We are helping applicants succeed and be successful under the social equity program.”

Copperstate has been helping put on free expungement clinics across the state—one of the qualifying criteria for applicants—alongside groups like NORML in order to find qualified applicants, often offering a monetary incentive of up to $500 to people who qualify and refer a friend who qualifies, as well.

“These licenses are worth $10-$15 million dollars before the ink is dry,” said Tom Dean, an attorney who specializes in cannabis.

Copperstate itself recently purchased a dispensary license in Phoenix for $15 million in cash, and established marijuana dispensaries have sold for upwards of $20 million. Arizona dispensaries have reported more than $50 million in sales every month except one since March, and the state is on pace in its first year of recreational marijuana to surpass $1 billion in retail sales. Wall Street analysts predict sales will swell to more than $2 billion in just a few years.

Not only are these the final 26 licenses that will be issued in Arizona, but their owners will be able to sell them—something not allowed for the other licenses issued earlier—making them even more valuable. Dean has been helping guide applicants through the process and said multi-state operators, investor groups and industry groups have all expressed interest in filing as many applications as they can.

Allowing the social equity licenses to be treated like a commodity is a bad thing, Gunnigle said, because it makes it easy for corporate interests to “game” the system and reap all of the profits meant to lift up those who had been oppressed by the system.

“Essentially, you’ve really created a lottery program for 26 people,” Gunnigle said, saying that the people who get these licenses will likely be flooded with inquiries about the licenses, be overwhelmed and likely sell them to the same groups who currently operate the majority of dispensaries in the state.

The rules technically require social equity licenses to be sold to another person or company that meets the ADHS requirements to apply. But Dean said there’s nothing stopping an established cannabis company from striking a deal with an applicant who didn’t get a license and “just creating a subsidiary that complies with that” so they can buy the license.

There’s no going it alone, cannabis industry says

While critics say the system is designed to give large companies an unearned path to profiting off of licenses intended to right a historic wrong, companies like Copperstate Farms say there’s no way the social equity license holders will succeed if they don’t join with experienced partners.

Though legal in Arizona and other states, marijuana is still classified as a Schedule I controlled substance by federal law. One critical effect is that many financial institutions will not give loans or take money from institutions that make their money off marijuana, for fear of being punished by the federal government. That makes getting start-up capital to open a dispensary—which can cost as much as $2 million—difficult for a would-be social equity licensee. And all that would have to be done within 18 months of receiving the licenses under the ADHS rules.

“The cannabis industry is a very regulated business and involves lots of permits and lots of upfront capital,” Cole, the spokesman for Copperstate Farms, said.

Just getting the proper zoning is often difficult in Arizona, with many cities and towns having passed ordinances that disallow dispensaries within their cities boundaries.

“We are experts in doing that, finding those and running those through planning and zoning meetings to get those approvals,” Cole said. And even with the expertise that his company brings, “that is going to be a sprint to get that done in 18 months.”

To Gunnigle, though, the program will not likely meet its goal of helping lift up people who have been harmed by the war on drugs. Likewise, Dean said it would be lamentable if the social equity license all ended up in the control of the big industry players.

“It’s meant to be something that is meant to be a permanent fixture in the Arizona industry,” he said. “It’s meant to be a balance in the industry [to stop] consolidation.”

But some marijuana industry insiders see it a bit differently.

“You don’t see people manufacturing dental floss and selling it at mom-and-pop shops, do you?” Demitri Downing, CEO and founder of the Arizona Marijuana Industry Trade Association, said. “They’re feel-good, nostalgic romantic notions.”

Downing said the presence of outside groups is good for applicants, as it gives them the freedom to choose their partners and get help they need—and also the freedom to sell their license outright for large sums of money.

“Whether they turn around and sell it or not is irrelevant—they benefit either way,” Downing said. “They are members of our community and they will be rewarded.”

This story was first published by Arizona Mirror.

Bipartisan Pennsylvania Senators Announce Medical Marijuana Home Grow Bill

Marijuana Moment is made possible with support from readers. If you rely on our cannabis advocacy journalism to stay informed, please consider a monthly Patreon pledge.
Continue Reading

Business

Illinois Has Sold More Than $1 Billion In Marijuana So Far This Year, State Officially Announces

Published

on

Illinois has officially exceeded $1 billion in adult-use marijuana sales in 2021, a major economic milestone since the state launched its retail market last year.

The Illinois Department of Financial and Professional Regulation (IDFPR) reported on Tuesday that there were $123,375,372 in recreational cannabis purchases in October, raising the total to $1.12 billion for the year so far.

Adults purchased 2,757,354 marijuana products last month, with most sales ($81,212,423) coming from state residents and the remainder ($42,162,949) from out-of-state visitors.

Via IDFPR.

The $123 million haul is lower than the state’s peak sales of $127,794,220 in July—which officials partly attributed to a boost from the music festival Lollapalooza—but it was the second biggest month since sales launched in January 2020.

This is the eighth month in a row that adult-use marijuana sales surpassed $100 million in the state.

The new figures do not include sales of medical cannabis, which are tracked separately by a different agency.

The Illinois Chamber of Commerce president predicted back in May that retailers would sell more than $1 billion in adult-use marijuana sales in 2021, and they’ve now accomplished that with two more months to go in the year.

The level of cannabis commerce means a significant increase in revenue for the state. Illinois sold about $670 million in marijuana last year and took in $205.4 million in tax revenue.

The state generated more quarterly tax dollars from marijuana than alcohol for the first time earlier this year, the Illinois Department of Revenue reported in May. From January to March, Illinois generated about $86,537,000 in adult-use marijuana tax revenue, compared to $72,281,000 from liquor sales.

In July, state officials put $3.5 million in cannabis-generated funds toward efforts to reduce violence through street intervention programs.

Wisconsin Gov. Tony Evers (D) is getting “tired” of hearing about these sales figures, he said in April, joking that Illinois Gov. J.B. Pritzker (D) always “thanks me for having Wisconsinites cross the border to buy marijuana” since the neighboring state does not have a legal market.

Illinois officials have emphasized that the tax dollars from all of these sales are being put to good use. For example, the state announced in January that it is distributing $31.5 million in grants funded by marijuana tax dollars to communities that have been disproportionately impacted by the war on drugs.

The funds are part of the state’s Restore, Reinvest, and Renew (R3) program, which was established under Illinois’s adult-use cannabis legalization law. It requires 25 percent of marijuana tax dollars to be put in that fund and used to provide disadvantaged people with services such as legal aid, youth development, community reentry and financial support.

Awarding the new grant money is not all that Illinois is doing to promote social equity and repair the harms of cannabis criminalization. Pritzker announced in December that his office had processed more than 500,000 expungements and pardons for people with low-level cannabis convictions on their records.

Relatedly, a state-funded initiative was recently established to help residents with marijuana convictions get legal aid and other services to have their records expunged.

But promoting social equity in the state’s cannabis industry has proved challenging. Illinois has faced criticism from advocates and lawsuits from marijuana business applicants who feel officials haven’t done enough to ensure diversity among business owners in the industry.

Pritzker’s signed a bill in July that’s meant to build upon the state’s legalization law by creating more cannabis business licensing opportunities to help people from disproportionately impacted communities enter into the marijuana industry. Regulators have since held a series of lotteries to award additional dispensary licenses, but losing companies have since filed legal challenges to the process.

Meanwhile, a House committee approved a resolution earlier this year that broadly condemns the war on drugs, calling it “the United States’ longest and costliest war and ultimately a complete and shameful failure.”

Marijuana markets have been booming in states across the U.S.

Maine recreational marijuana sales broke another record in August, exceeding $10 million for the first time since the adult-use market launched in October 2020.

Arizona brought in about $21 million in medical and adult-use marijuana tax revenue in July, state officials recently reported on a new webpage that enables people to more easily track how the industry is evolving.

California collected about $817 million in adult-use marijuana tax revenue during the 2020-2021 fiscal year, state officials estimated in August. That’s 55 percent more cannabis earnings for state coffers than was generated in the prior fiscal year.

A recent scientific analysis of sales data in Alaska, Colorado, Oregon and Washington State found that marijuana purchases “have increased more during the COVID-19 pandemic than in the previous two years.”

In July alone, at least three states saw record-breaking sales for recreational cannabis. The same goes for Missouri’s medical marijuana program.

Michigan marijuana sales broke another record in July with more than $171 million in cannabis transactions, according to data from the state’s regulatory body. There were $128 million in adult-use sales and $43 million in medical cannabis purchases.

Throughout the pandemic, many states allowed cannabis retailers to remain open—with governors and regulators in several markets declaring marijuana businesses to be essential services—and some jurisdictions issued emergency rules allowing curbside pickup, delivery services or other more relaxed policies in order to facilitate social distancing.

Meanwhile, New York officials are projecting that marijuana tax revenue will help keep the state’s budget afloat as cigarette sales continue to decline over the coming years. But retails sales have yet to launch as of now.

Senators’ Marijuana Amendment To Defense Bill Would Streamline Research

Marijuana Moment is made possible with support from readers. If you rely on our cannabis advocacy journalism to stay informed, please consider a monthly Patreon pledge.
Continue Reading
Advertisement

Marijuana News In Your Inbox

Support Marijuana Moment

Marijuana News In Your Inbox

Marijuana Moment