Cannabis Research Explores What’s Better: The Illicit Market or Legal Market
by Chane Leigh
Cannabis’s inconsistent legal status continues to cause issues. Due to the federal illegalities of cannabis, the legal industry has nothing but trouble accessing safe banking options. Because of this hindrance, nearly all transactions in the legal cannabis industry are completed solely with cash. Recent emergency rules due to changes made for COVID now allow for some states’ cannabis businesses to accept payments online. But that’s if a business can find a bank or merchant processor that will agree to process those payments. Historically, that’s been a continuous challenge for the industry and it’s also the reason why many cannabis shops are still cash-only businesses.
Since Federal cannabis laws supersede state laws, the cannabis market has become highly unregulated and excluded from financial services and supports. If a credit card company were to lend any amount of money to a cannabis business, they could be liable for prosecution. Because of this, credit card companies have detached themselves from the cannabis industry – in fact, no credit card company even has a merchant code that recreational or medical dispensaries can use.
More recently the National Credit Union Administration (NCUA) chairman Rodney Hood stated in an interview with Credit Union Times last year, credit unions are allowed to work with cannabis businesses as the industry continues to sort itself out. He continued “It’s a business decision for the credit unions if they want to take the deposits,” Hood told the banking publication. “We don’t get involved with micro-managing credit unions.” Despite the welcoming of booming-cannabis, financial services are nearly impossible to get.
To mitigate this issue a long-awaited boost for cannabis customers – and those who offer financial products to cannabis businesses – is now in the hands of Congress (finally). The Secure And Fair Enforcement Banking Act of 2019 (SAFE Banking Act) may not only help usher the industry through the coming pandemic-ridden economic slump, but it could also result in an impact akin to putting the sector on steroids.
If the SAFE Banking language remains the relief bill, and that bill is passed, it will pave the way for several large commercial carriers to get right into the cannabis market, as well as reinvigorate reinsurance interest, enable much-needed banking services, and bring in more capital. A provision states that the proceeds from a transaction involving activities of a cannabis-related business or service provider shall not be considered proceeds from an unlawful activity.
In recent months, researchers at Ohio State University found that instances of armed robbery at recreational and medical cannabis dispensaries have increased. The researchers have connected this public safety risk to the large amounts of cash dispensaries have on hand. In the midst of the COVID-19 pandemic, during which numerous states have declared cannabis businesses as essential, there’s also a health risk to handling cash to be considered.
If there are any bright spots to find for the legal cannabis industry from the COVID-19 pandemic, they are the collaboration between cannabis businesses and regulators and the continued trajectory for sales at the retail level. This includes recent allowances like cannabis delivery, curbside pickup, online ordering, and even further pushes for legalization to make up for lost economic activity. If the cannabis sector can make this kind of progress and headway during a time of crisis, imagine the bigger changes when we’re beyond it.
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