skip to Main Content
California Seen as a Force for Solving Banking Business Dilemma

One of the most pressing issues of the cannabis industry continues to be banking.

Just Tuesday, June 20, the Marijuana Policy Project, a cannabis advocacy and lobbying organization, announced that they were going to be shut down by PNC bank.

This was an organization with a 22 year line of business with PNC, and some fear a move like this has signaled that mixed messages coming out of the Trump administration are starting to resonant with prudent business people and skittish bankers.

There have been similar stories like this for the last few years, as more businesses attempt to get into the industry. Well-known companies like Medicine Man, which operates a dispensary and a cultivation operation, for example, had to work through three banks in their early days before landing one that worked out for them, according to Owner Andy Williams.

Some dispensaries and other business owners would often set up a banking account by describing their company as being a horticulture operation or a nursery, just to have it shut down when banking officials discover the true nature of their business.

Enterprising entrepreneurs have been working on fixing this issue, with mixed success.

Steve Janjic, CEO of Amercanex, created an e-commerce business solution that attempts to get around the banking dilemma, similar to a PayPal method of transactions. “What many of these startup businesses don’t know is that if you walk into a bank and say that you are growing marijuana, or even take it one step further, that you are working in software but don’t touch the plant and want to set up a fintech account, what you are going to find at every step of the way they are not going to allow you to do this because you are in the industry that is 80 percent cash,” Janjic said during a presentation at the Cannabis World Congress and Business Exposition show in New York in mid-June. “Wells Fargo or the Bank of America have a fear of this business because it’s 80 percent cash. And frankly banks don’t want to touch cash transactions at all.”

Janjic says the banking problems have prevented the cannabis industry from working in a “business as usual” space. A cannabis business, like a dispensary, would conduct business one day, then their banks would cancel their accounts the next day and they were essentially temporarily out of business. But it was actually worse than that. “The bank wouldn’t just close their accounts,” Janjic said. “They would hold on to their money to do some of their own investigation, further delaying the restart of the business.”

All that may be coming to an end, or at least beginning an evolution toward the end, according to Derek Peterson, founder and CEO of Terra Tech Corporation, when California’s market opens up next year. The hope is that more positive information about how the industry is operating is catching the attention of banking regulators. “We worked in a hostile environment in 2010 and 2011 in California, where the state was shutting facilities down that were completely compliant, with people going to jail for five years or more,” Peterson said during another panel presentation at the show. “We’re nowhere near that now. Now we have data. Before we didn’t have data. The naysayers were saying that if you legalized cannabis your kid is going to end up doing heroin in the alley. Not true. Your kid is going to end up running a publicly traded company.”

Nick Kovacevich, CEO of Kush Bottles, another panelist at the show, sees that California is really set to become the driving force behind banking change. “The biggest issue is the billion dollars in taxes coming in cash,” he says. “Cash has been very disruptive in the legalized states like Colorado, and in California it’s going to be ten times that. So that will drive the change on banking and they need to get that figured out.”

It’s all a matter of getting the banking industry to understand the true depth of the issue in the industry, Janjic says. “Try to buy a house with a million in cash in 2017,” Janjic says. “Or try to take $20,000 in your suitcase and get through the airport. It just doesn’t happen.”

With California soon to open up recreational sales, and with Canada gearing up, it’s just a matter of time before there is a lot of capital chasing a handful of deals. And banks need to be aware of that inevitability, and be ready to respond.

“We can really capitalize ourselves as companies and not at $10 million or $15  but at $150 million,” Peterson says. “But until then we will look at some of the political legislative headwinds and try to influence those as much as we can. There is just too much of a narrative around the positive associated with this.”

David Hodes

David Hodes

David Hodes is based in the greater Washington DC metropolitan area. He is the former editor of seven different business magazines, and has contributed feature articles to several business/lifestyle publications and national cannabis magazines. Hodes is also a former field producer for CBS News, NBC, NFL Network, ESPN and other media outlets; worked as a news promotions producer for two network affiliates; and was the morning news editor for a third network affiliate.

He is member of the National Press Club, and deputy booking agent for the National Press Club Headliners Committee.

This Post Has 0 Comments

Leave a Reply

Your email address will not be published. Required fields are marked *

Recent Stories

What Must Be Done To Enact Germany’s New Cannabis Law And What Will Its Adult-Use Market Look Like?

With Germany’s Government-in-waiting set to deliver adult-use cannabis, BusinessCann explores the delivery challenges and how the legislation may be shaped. BACK in 2015 the German Green Party published its Cannabis Control Act (CCA). Although it made no progress in the Bundestag at the time, it is now emerging as the blueprint for the creation of…

ESG and Cannabis is No Easy Task Right Now

by Hilary Bricken, Principal Harris Bricken Socially responsible and “sustainable” investing is picking up in popularity across retail and institutional investors alike. According to Wikipedia, “[i]n less than 20 years, the ESG movement has grown from a corporate social responsibility initiative launched by the United Nations into a global phenomenon representing more than US$30 trillion…

Who Needs a License? New York Weed Dispensaries Are Already Opening

Stores that offer recreational marijuana might not be entirely legal yet, but entrepreneurs are ready to start righting the wrongs of the war on drugs list prices, per se, but “Suggested Donations,” starting at $20. The packages offered in return are thank you “gifts.” “We don’t sell anything,” says one register operator at Uncle Budd’s…

Germany’s incoming government unveils plans to legalize cannabis

Three German political parties have sealed a deal for a new government, with left-leaning Olaf Scholz the proposed next chancellor following lengthy coalition negotiations and a historic election that sees Angela Merkel stepping down after 16 years at the helm. The incoming government’s vision for Germany includes plans to legalize cannabis. It also aims to…

More Categories

Back To Top
×Close search
Search