Marijuana firms in cloudy haze over banking woes

(Reuters) – Zach Lazarus, chief executive officer of A Green Alternative, a marijuana dispensary in San Diego, California, has lost count every time he re-opened a bank account after it was closed because of his connection to the cannabis industry.

Lazarus has had to play a game of “whack-a-mole” with banks, likening his frustrations to a popular arcade game in which a player repeatedly gets rid of something only to have it re-appear somewhere else.

“We have had Chase Manhattan and Wells Fargo shut us down … my wife’s personal bank accounts and credit cards have been shut down as well, all because I‘m in the cannabis industry,” he says.

Lazarus and other marijuana business owners in the $8 billion industry resort to cash-only transactions for business and to pay employees because they cannot get access to banks.

Despite making legal inroads in the United States, with California the latest state to legalize marijuana for recreational use starting Jan. 1, owners still feel the pinch.

The main problem is the classification of marijuana as a Schedule I controlled substance by the U.S. Food and Drug Administration, alongside heroin, LSD, and ecstasy – making it almost impossible to get banking services.

Banks are governed by federal laws and doing business or extending services to the firms means tougher scrutiny, often at significant costs, as banks have to do their own due diligence to prove transactions are legal.

They are required to prove that the firms are not selling to minors, funding crime groups, and not using the pretext of selling marijuana to push illegal drugs among other things.

A poll conducted by industry publication Marijuana Business Daily in 2015 showed 60 percent of the companies operating in the cannabis industry reported not even having a basic bank account.

UNDERGROUND ECONOMY

The void makes it hard for cannabis companies to conduct basic financial transactions such as deposit money, receive federal insurance or pay taxes.

“Most marijuana companies have a courier service, or a Brinks truck, or a big wheelbarrow full of cash that they send to the Internal Revenue Service to pay their taxes,” says Stuart Titus, CEO of California-based Medical Marijuana Inc (MJNA.PK).

With an estimated 165,000 to 230,000 full and part-time workers, according to Marijuana Business Daily, many marijuana business owners pay their employees in cash. bit.ly/2nQBeYw

“It is basically a kind of underground, cash-based economy,” said Titus.

Sapphire Blackwood, director of public affairs for the Association of Cannabis professionals, says she got paid in cash at her last firm, a San Diego-based cannabis consulting company.

“Because I get paid in cash, and even though I did no illegal activity, I’ve had to deposit so much cash every week and every so often … I felt like I was being stared at by the banks. It’s frightening,” she said.

Blackwood’s current firm also had banking problems. All the deposit accounts were closed because the word “cannabis” was in the name of the company, she said.

SHADY WORKAROUNDS

Workarounds exist but most are borderline unethical.

Medical Marijuana Inc0.17923

MJNA.PKOTC Markets Group – (Current Information)

+0.02(+15.48%)

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A widely-used practice is to create a shell or a holding company whose operations are acceptable to banks, and conduct financial transactions through the holding company.

“In many states that have legalized cannabis, pot companies deposit cash under a different description,” says Tim McGraw, CEO of Canna-Hub, a California-based real estate development and property management company for the cannabis industry.

“A lot of operators set up accounts as real estate management companies or call themselves ‘medical marijuana’ companies when they are anything but,” McGraw added.

Others use personal bank accounts to deposit cash earned from the sale of products, wire payments to employees and pay companies.

However, California’s state treasurer John Chiang wants the state to consider creating a public/government-owned bank that could serve cannabis companies.

Chiang’s office formed a group made up of representatives from law enforcement agencies, banks, taxing authorities, local government and the cannabis industry.

It held several meetings with owners to discuss ways to alleviate banking challenges and make information more available to banks for better transparency.

Talks have also begun to form a multi-state group to lobby Congress to ease federal regulations for marijuana companies and remove the Schedule I drug classification.

But it will be an uphill battle. In November, Attorney General Jeff Sessions at a congressional hearing said former President Barack Obama-era guidelines on cannabis will remain, meaning even though a state can legalize marijuana, it will continue to be illegal on the federal level.

To view a graphic on Legalization legislation jpg, click on this link: tmsnrt.rs/2AC91Hk

Reporting By Aparajita Saxena in Bengaluru; Editing by Bernard Orr

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For a very long time we have known all we need to know about marijuana, but we have strangely and stubbornly refused to act on that knowledge

Alain Miville de Chêne Entrepreneur, investor, student and lover of life.

During the last 125 years, governments all over the world have repeatedly appointed commissions to analyze the use of marijuana and provide recommendations. All major inquiries, among them the Indian Hemp Drugs Commission Report (1894), the Laguardia Committee (1939), and the Le Dain Commission of Inquiry into the Non-Medical Use of Drugs (1972), have come to essentially the same conclusion: as with any human activity, overuse is not good for you, but since pot is mostly used moderately, and the harmful consequences are rather minor, it is not worth making a big fuss. They especially agree that using the criminal justice system to limit its use is both futile and harmful to society.

For a very long time we have known all we need to know about marijuana, but we have strangely and stubbornly refused to act on that knowledge. Something is imprisoning our mind. Why do we persist in resisting reason?

A poster for Ray Test’s 1942 drama “Devil’s Harvest.”

Morality laws

Morality laws try to limit or eradicate permanent features of all societies: sex (adultery), sex (homosexuality), sex (sodomy), sex (prostitution), sex (pornography), sex (you get the idea!), gambling, and mind-altering substances (alcohol, marijuana and more.) Journalist H. L. Mencken summed it up nicely when he wrote: “Puritanism. The haunting fear that someone, somewhere, may be happy.”

Moralists latch on to some behaviour they fear or loathe, then hijack the criminal code in an attempt to magically will it out of existence, all the while blinded to the inefficacy of their solution and to the harms generated. When the behaviour doesn’t go away, because it has existed forever and there is no reason it should disappear now, the simplistic response is to squeeze harder.

Deep down, moralists know that their position is contrived. Therefore, to remain impervious to facts, they shun impartial studies. Instead of being guided by reason, they use it to justify their fixed beliefs and emotions. Their preferred method of communication is creating fear through propaganda.

Corbis via Getty Images “Marihuana: Weed with Roots in Hell” movie poster.

Harms in perspective

Since the 1920s we have been programmed to fear schizophrenia, car accidents, dropping out of school, cancer, gateway to other drugs and immorality in general. I took the time to survey the main purported harms, and it is always the same story: weak or non-existent consequences which are insignificant in proportion to other common life problems. For example, tobacco killed around 39,000 in 2002, alcohol killed around 4,200 in 2002, and more than 2,450 died from opioid overdoses in 2016. Nobody died from marijuana.

The real and grave harm comes not from the product itself but from passing through the criminal justice system. In 2013, Canada registered its millionth arrest for marijuana possession. What good did that do? Why all the suffering? A criminal record or even an arrest record can bar a person from many types of jobs and easily deny their entry into the United States, even 24 years later.

The prohibition of alcohol in the U.S. lasted from 1920 to 1933. It took the U.S. 13 years to learn the lesson that it doesn’t work. Our society still hasn’t learned this one after almost a century.

Legislating in the land of fools

The underlying hypothesis behind all this is that laws will make people behave as desired.

Countless articles discuss if pot should be sold to 18 or 21 year olds in order to protect youngsters. Currently, pot is not authorized at any age, yet anyone who wants it can get as much of it as they want. Why on earth would a number on a new statute book change this stubborn fact? Of course, it makes sense to limit sales in shops to persons of a certain age, but there’s no reason to expect setting an age limit in the law will “protect the young.”

Try to entertain the possibility that you might be enthralled by propaganda.

The spectre of high-strength marijuana is regularly brandished: today’s pot is not what was available in the sixties. It is way more dangerous, therefore its THC content should be legislated. Why do we forget that the high strength stuff has been available for centuries? It is called hashish. It was available in the sixties, and it still is.

By all means, let us establish lawful limits on all the parameters we want (age, THC concentration, number of plants grown at home, etc.) in order to make life easier for a lot of people, but we should stop thinking that everyone will from then on follow the new rules. They won’t.

Look at how it works with opioids. No laws were changed recently, yet the consumption of illegal opioids is rising and deaths from fentanyl are at an all time high. People will take or abandon drugs for reasons other than the laws on the books.

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“…the riskiest pot is coming from the black market—which could be an argument for expanding legalization”

Marijuana: Why Dangerously Potent Pot Is Making People Lose Their Minds and Memories

Homegrown2017

By Jessica Firger On 10/19/17 at 4:44 PM

High-potency pot is causing psychiatric issues, including addiction and memory problems. New strains of the recreational drug have higher levels of the active chemical and not enough of another compound that keeps the drug safe. And as a new study this week documents, the riskiest pot is coming from the black market—which could be an argument for expanding legalization. 

The new report, published this week by Manchester Metropolitan University in the U.K., tested 50 samples of cannabis in the city of Manchester. The study was conducted by Volteface, a London-based policy think tank seeking reform for marijuana laws to improve safety of the drug by making it legal, and thus limiting demand on the local black market. All of the samples had high levels of tetrahydrocannabinol (THC), the psychoactive component of the drug that produces the “high,” and inconsequential amounts of cannabidiols (CBDs), the protective compound of the drug that prevents marijuana from becoming unsafe.

Pot that is high in THC carries a greater risk of psychiatric problems, including psychosis, addiction and memory impairment. One study, for example, published in the British Journal of Psychiatry evaluated cannabis use in 280 people and compared them to a control group of 174 non-cannabis users. The study found that people who experienced their first psychotic episode were more likely to have used a higher THC potency form of the drug.

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Amir Englund, an expert in cannabinoid psychopharmacology at the Institute of Psychiatry, Psychology and Neuroscience at King’s College London, tells Newsweek that the low levels of CBDs exacerbate the issues caused by high levels of THC. Additionally, frequent users often become tolerant to cannabis and slowly need a stronger product to get as high as they used to, he says.

“Because both THC and CBD are made from the same material in the plant, more of one means less of the other,” he says. Some recent research, he says, has shown that people using strains of marijuana that are also high in CBD—not just THC—are less likely to have mental health problems than those who opt for strains that have low CBD but high THC content. Some experiments he’s conducted show that CBD can counter the negative effects of high doses of THC in healthy volunteers.

Growers, he says, are cross-breeding plants to favor THC production over CBD. But the decision isn’t influenced only by the market’s demand. In many instances, it’s determined by the grower’s bottom line. “Some of the reasons why these varieties are more popular include the fact that they are more cost-effective to produce (more total drug-yield per plant) and more popular among frequent users,” says Englund.

A number of other factors also affect the potency of pot. According to Leafly, there will always be some variation when multiple growers cultivate the same strain because environment, growing technique and genetics all impact the composition of the plants.

A report published in 2015 by the Colorado Department of Public Health and Environment found the problem isn’t only with illegal sales. Labeling on regulated cannabis is often misleading, and the strain purchased could have higher or lower levels of potency than the label leads a consumer to believe.

“High THC, low CBD cannabis dominates the UK’s illicit market as it has a rapid growth period up to maturity and can be grown indoors,” the researchers write. “This enables those selling cannabis to make the greatest profit and presents the lowest risk. While popularity of this product is undoubtedly high, this may well be due to the fact that no other product is easily available and consumers have neither the access to nor the experience of any alternative.”

In other words, pot purchasers should look beyond the name—as nice as Black Beauty and Northern Lights may sound—and find out more about what they’re smoking. 

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Queens of the Stoned Age

 

There are a thousand ways to buy weed in New York City, but the Green Angels devised a novel strategy for standing out: They hired models to be their dealers. In the eight years since the group was founded—by a blonde, blue-eyed Mormon ex-model—they’ve never been busted, and the business has grown into a multimillion-dollar operation. Suketu Mehta spent months embedded with them at their headquarters and out on their delivery routes to see where this great experiment in American entrepreneurship might lead.

A friend tells me about the Green Angels, a collective of about 30 models turned high-end-weed dealers, and he introduces me to the group’s leader, Honey. The first time we speak, in the spring of 2015, she comes to my house in Greenwich Village and we talk for six hours.

She is 27 and several months pregnant. Her belly is showing, a little, under her black top and over her black patterned stockings. But her face is still as fresh as hay, sunlight, the idea the rest of the world has about the American West, where she was born—she’s an excommunicated Mormon from the Rocky Mountains. Honey is not her real name; it’s a pseudonym she chose for this article. She is over six feet tall, blonde, and blue-eyed. Patrick Demarchelier took photos of her when she was a teenager. She still does some modeling. Now that she’s pregnant, I tell her, she should do maternity modeling.

“Why would I do that when I can make $6,000 a day just watching TV?” she asks.

Honey started the business in 2009. When she began dealing, she would get an ounce from a guy in Union Square, then take it to her apartment and divide it into smaller quantities for sale. She bought a vacuum sealer from Bed Bath & Beyond to make the little bags her product came in airtight. She tells me that part of her research was watching CNN specials on the drug war to find out how dealers got busted.

Today her total expenses average more than $300,000 a month for the product, plus around $30,000 for cabs, cell phones, rent for various safe houses, and other administrative costs. She makes a profit of $27,000 a week. “I like seeing a pile of cash in my living room,” she says.

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North Americans Spent $53.3 Billion On Marijuana Last Year, Most Of It Illegally

The industry “just needs to move demand for an already widely-popular product into legal channels,” a new report says.

01/17/2017 06:20 pm ET

Ryan Grenoble Reporter, The Huffington Post

A new report estimates consumers spent $53.3 billion on cannabis in North America last year.

The first-of-its-kind analysis, compiled by ArcView Market Research, spans legal, medical and illegal marijuana markets across both the United States and Canada. At around $46 billion, the illegal market constituted 87 percent of marijuana sales in 2016 (a decrease from 90 percent in 2015), dwarfing both medical and legal sales.

The marijuana investment and research firm provided a 25-page executive summary of its fifth annual State of Legal Marijuana Markets to The Huffington Post Tuesday, ahead of the full report’s release in February.

Arcview projects the legal marijuana market will expand from its current $6.9 billion to $21.6 billion by 2021, as California, Massachusetts and Canada expand their cannabis sales, and medical sales begin in Florida. The $6.9 billion figure is itself a 34 percent increase in just one year from 2015.

Assuming the projections hold, the five-year growth rate for legal marijuana from 2016 to 2021 would fall just short of that seen by broadband internet providers from 2002 through 2007, which expanded at around 29 percent per year, from around $7 billion to north of $25 billion.

Unlike most of the billion-dollar industries that preceded it, marijuana is in a unique position, ArcView argues, because the market doesn’t need to be created from scratch ― it just needs to transition from illicit to legal channels.

“The enormous amount of existing, if illicit, consumer spending sets cannabis apart from most other major consumer-market investment opportunities throughout history,” Arcview Market Research CEO Troy Dayton explained in an emailed statement.

“In contrast to comparable markets with fast growth from zero to tens of billions in recent decades such as organic foods, home video, mobile, or the internet, the cannabis industry doesn’t need to create demand for a new product or innovation ― it just needs to move demand for an already widely-popular product into legal channels.”

In states that have moved to tax and regulate the drug, the black market has decreased rapidly, the report found. Colorado’s black market, for instance, accounts for about one-third of all cannabis sales, with the majority having transitioned to legal marketplaces.

ArcView found the cashflow going to drug dealers and cartels has diminished accordingly, helped in part by the shrinking “illegality premium” for the product once demanded by the black market. 

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