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Where Pot Entrepreneurs Go When the Banks Say No
- CaliforniaKarl 9y agoI like how it’s a Credit Union taking the lead on this, while not charging profit-maximizing fees.
- theatraine 9y agoPot seems like a natural fit for cryptocurrency. There's several currencies which are designed specifically for this space (e.g. HempCoin - http://www.hempcoin.org/ http://www.hempcoin.org/ - THC). As far as I can tell the weed cryptos seem to be mostly speculative in nature as retailers are dealing in cash as the article states.
- koolba 9y agoThat would only work if you can get the customers to pay you in the crypto coin. The retail side of the weed business is lots of small dollar transactions done in cash. Converting that to crypto requires a full scale cash-to-crypto operation that is effectively the definition of money laundering (or at least solving the same problem).
- Turbots 9y agoGive it another six months... Cryptocurrencies are becoming a hype and the masses are picking it up... trading is through the roof, total market cap is going through the roof. Once more and more people know how to use a wallet or crypto apps to pay with, these things will be unstoppable! Adoption of cryptocurrency payments will be MUCH quicker than smartphone adoption in my opinion, and that took us less than 10 years
- apple_touchbar 9y agoPlus, would they want to wait 20+ hours for a transaction to process?
- PretzelPirate 9y agoThere isn't any reason why they would need to accept Bitcoin instead of a token with faster confirmation time.
- bufferoverflow 9y agoNo, converting cash to crypto is NOT money laundering. Money laundering is when you get dirty money and try to convert it into legal clean money. I'm this case there's no dirty money, it's just banks are scared of the feds, so they refuse to take it.
- vidarh 9y agoThey're scared of the feds because the money was the result of a violation of federal law. It's dirty money to anyone that has to deal with the feds.
- chrsstrm 9y agoExcept that it isn't. At some point your coins have to be converted to USD. You can't pay your employees in cryptocurrency, you can't pay your electric bill in cryptocurrency, you can't pay your rent/mortgage in cryptocurrency. If you think just because you did a USD -> coin -> USD flip that no one will consider it laundering or ask where the proceeds came from, guess again.
- spmurrayzzz 9y agoYou may not be able to directly pay entities, but you can easily do so through a liquidity aggregator. If that aggregation vehicle is through a privacy-focused coin like Monero or Zcash, or anything onion routed (e.g. Lightning network), how exactly do you demonstrate laundering? This really is no different than dealing in cash presently. Employees still need to report their income, even when paid in cash, so even in that event they'd still be subject to any laundering concerns of the federal government given the paper trail follows back to the dispensary entity. Same with any other entities they're paying in cash (unless they are dodging reporting requirements). Crypto solves the problem (partially) of where to store your revenue instead of a bank. Its just a better way than the alternative of paying security outfits to guard your heaps of cash— its judgment-resistant and reasonably easy to liquidate. The biggest problem with that use case right now is obviously price fluctuations. Not sure anyone is comfortable using a volatile asset class for that at present.
- subway 9y agoPosibit is how a number of rec pot shops in WA currently accept credit cards. The gist of it is that you as an individual are buying currency from Posibit, then your currency is transfered to the account of the shop (all off-chain). The shop then sells their BTC (often the moment they receive it) back to Posibit.
- Karrot_Kream 9y agoSure but doesn't this still necessitate having a bank to store the cash they sell the BTC for? Or do the pot shops store their cash in their Posabit account?
- subway 9y agoThe storage of cash situation is is a weird one nobody really talks about. It's unclear to me how Posabit gets USD back to the retailer, but my understanding is the funds moving from Posabit to retailers happens as USD. Due to the fact retailers have to move large sums of cash, and can't store it in a bank easily, they're pretty tight lipped about the situation (pot shops being robbed at the end of the night isn't unheard of).
- davidw 9y agoPot seems like a natural fit for the banking system that, say, microbreweries use. It's just that we have idiots like Jeff Sessions in the way.
- meddlepal 9y agoIt's hard to blame Jeff Session here... he's just enforcing the law as it is written. Congress needs to do its job.
- wolco 9y agoI think its easy to blame him because he is choosing to enforce a policy that was previously not enforced.
- Turing_Machine 9y agoLaws that aren't enforced should be repealed. Selective enforcement is a recipe for tyranny. Though I personally think that weed should be legal, I'm not going to fault Sessions here. The ball's in Congress's court.
- davidw 9y agoSessions was a Senator until recently, so, yeah, still on idiots like him. I don't consume the stuff, by the way, but it's just been a huge win for Oregon. Millions in tax revenue, and the whole industry is now above board, cutting out any actual criminal types, freeing law enforcement resources for real crimes.
- Turing_Machine 9y agoThen maybe you should be lobbying your idiot Senator to introduce a federal legalization bill, rather than complaining about laws that are on the books being enforced. The problem with laws that "aren't enforced" is that they often do wind up being enforced. Selectively. Against anyone the government doesn't like for whatever reason.
- InclinedPlane 9y agoCan't pay rent in cryptocurrency. No one is going to pay you directly in cryptocurrency so that's a problem. No cryptocurrency is stable enough to allow for ordinary small business levels of operating margins. It sounds pretty terrible actually.
- mstodd 9y agoHow is tether not stable?
- mulmen 9y agoWhat value does a cryptocurrency bring that cash does not?
- Mtinie 9y agoWhat was hard for pot entrepreneurs before appears to have taken on a whole different level of difficulty if the Feds are successful with their just-announced plan: "Trump administration targets recreational pot, placing thousands of marijuana businesses in California at risk" (L.A. Times, 04-Jan-2018)[0] ----- [0]http://www.latimes.com/politics/la-na-pol-pot-sessions-20180104-story.html http://www.latimes.com/politics/la-na-pol-pot-sessions-20180...
- loeg 9y agoPopehat thinks the impact of Sessions' latest announcement is pretty minimal without other changes: https://www.popehat.com/2018/01/04/lawsplainer-attorney-general-sessions-threatened-action-on-marijuana/ https://www.popehat.com/2018/01/04/lawsplainer-attorney-gene... In particular: > In 2014, in the Rohrabacher-Farr amendment to an appropriations bill, Congress prohibited the Department of Justice from using federal money to "prevent" states from implementing laws making medical use of marijuana legal. Courts have found that this amendment may prohibit federal prosecutions for medical marijuana activities that are legal under state law.
- apple_touchbar 9y agoWhat about 'recreational'?
- dragonwriter 9y agoYou can make an argument (though media typically characterizes it as “recreational”), that the states that have authorized pot withoit a physician recommendation have actually legalized it for OTC medical use like any of the wide range of drugs people are free to buy and use according to their own interpretation of their medical needs. OTOH, if the DoJ decides to push the limits of its authority, that's an argument that will potentially have to be made after they’ve seized your assets and charged you everyone in your business—and potentially outside business partners who knew what your business is—with major felonies some of which have 20-year mandatory sentences, and maybe offered you a chance to plea down to a few years. So, even pushing the argument will be a big risk.
- phil248 9y agoI still don't understand how or why, but I am able to pay for marijuana from a local medical dispensary in CA with a credit card. Anyone know what is up with that?
- whymsicalburito 9y agoMy experience with those dispensaries is that they don't last too long. The ones I've seen stay open for years are all cash. I'd be curious to know if yours is doing something special to be able to accept credit cards.
- dilyevsky 9y agoairfield supply has been around for a while and take cc. also eaze.
- chrsstrm 9y agoThere are IIRC two processors who will run those transactions. Was just discussing this with a colleague in the payments sector yesterday and we were going to finish the conversation today to learn more about where those funds go and how they are transferred. Lots of "clubs" sell memberships where the product is complimentary, you pay for the access to the "lounge" and premises. The big problem with most weed transactions is they can't be run through any org that is federally insured, which is why banks won't touch dispensary money.
- pbhjpbhj 9y agoDo I have this right: your State says your medicine is legal to buy, the Federal government says it's not illegal, but whoever controls "federal insurance" prevents normal use of the banking system for companies that are in the supply chain? Who decides on the rules for those using "federal insurance" and why do they override state law on what's legal to sell? Why can banks refuse your cash? Why do they?
- dragonwriter 9y ago
- 40acres 9y agoSimilarly, Stripe will not do any business with marijuana related internet companies. There is at least one marijuana delivery company in Oregon who claims that they can take credit/debit, I have not used the app but I assume if this claim is correct they've rolled their own infrastructure.
- CASHforGOLD 9y agoApparently these places use services that convert sales to cryptocurrency like BitCoin to accept payment / convert to cash. http://www.posabit.com/ http://www.posabit.com/ https://www.singlepoint.com/ https://www.singlepoint.com/
- cloudwalking 9y agoEaze.com takes credit card payment through a processor based in Europe.
- 40acres 9y agoDo you know the name of this processor?
- cloudwalking 9y agoIt's called "Bliss".
- hello_newman 9y agowould you happen to have a url for that? searching "bliss payments", "bliss payment processing" etc doesn't seem to bring it up. if you don't feel comfortable putting it here in the thread my email is in my profile.
- cloudwalking 9y agoI don't. I just see the name on my credit card statement. Sorry!
- chiph 9y agoA former coworker has a relative who became a CFO at a Colorado dispensary. This was in the early days, and it was the wild-wild-west. Turns out employees were transporting the daily deposits in their car, and the business was storing it in some file cabinets in the office. Obviously not ideal. So he talked to a couple of armored-car companies about setting up a pickup schedule, and they wouldn't touch the business because they didn't want to take the chance that any dispensary money would get intermingled with regular banking money when in the back of their trucks, and thus invoke the wrath of the feds. Looking at the pile of cash they had, he just said "Why don't we just buy our own trucks?" and they set up a subsidiary that provides armored car services to the cannabis industry.
- GuiA 9y agoThis is an amazing anecdote. Spinning up a side company to solve a need you have as a company that isn’t addressed by the market is the winning lottery ticket of entrepreneurship (you have validated the product/service because you need the product/service to conduct your original business, you are intimately familiar with what features you need to offer, how much you can afford to charge for it, etc)
- cabaalis 9y agoAlso, "scratching your own itch" is always the best startup method because you know intimately if your proposed solution really is a viable solution in the first place. It's then just a matter of pricing and cost, rinse and repeat.
- fineline 9y agoAnd execution. Knowing what you want doesn't guarantee you can deliver it. Otherwise your point (and parents) is a good one - certainly a good indicator that you might really be onto something.
- BookmarkSaver 9y agoThis is basically how Amazon thinks (e.g. AWS, FBA)
- Gargoyle 9y agoI have a relative who runs a set of independent ATMs, which obviously requires a lot of physical cash. He's been doing it for over 20 years now, but it's gotten harder and harder to find banks that will provide him with the cash. It's his money in his accounts, but many of them outright refuse to provide it in cash. It's not so much that they mind the competition in the ATM business, it's that the regulations on handling large amounts of cash have gotten more and more involved, to the point it's just not worth it to them to do it. He's had to change banks a number of times over the years, but now he's with a smaller local bank that he has a personal relationship with the management. Still a hassle, but at least he can run his cash-intense business.
- rebuilder 9y agoI'm actually surprised if it's legal for a bank to refuse to provide cash withdrawals. Unless it's a case of "we'll do this now, because we have to, but we're also closing your account since we're allowed to choose out customers and your business isn't worth the hassle for us."
- cvsh 9y ago>I'm actually surprised if it's legal for a bank to refuse to provide cash withdrawals There are online-only banks now like Simple and Ally; they obviously can't provide cash. If they can deny cash why can't other banks?
- digitalsushi 9y agoif they dont have a bank of cash available, are they really a bank? (yes, i believe it's a bank too, but to me it's a head scratcher)
- stephengillie 9y agoBECU (Boeing Employees Credit Union, WA State) only has tellers handle cash out of their main office, in Tukwila. Every single other "branch" is a Service Center with ATMs. They will help you get a loan or print a cashier's check, but send you to the ATM for any withdrawals.
- qwerty456127 9y agoI just wonder when will this nonsense ("banks saying no") end and when a financial system at least as free as cash and as quick and convenient as just using debit cards emerge. It seems that we have came to a point when we need to separate banking from state and police the way church has gotten separated from them earlier. That's a pity BitCoin has failed to do this. Hopefully Monero or something new will succeed once and set the people free...
- dx034 9y agoThe problem is not the banking system, it's that businesses can be legal in states while being illegal under federal law. Any company with business across states is at risk dealing with those companies. Banking is heavily regulated for a reason (terrorist financing, money laundering, fraud) and I doubt many would appreciate if you stop banking regulation altogether. The only solution I see here is to change federal law.
- uiri 9y agoAre local, state-chartered banks with no branches outside of their home state just as squeamish when it comes to marijuana businesses?
- UncleEntity 9y agoFeds don't care, all they have to do is find a single dollar bill printed outside the state and they have jurisdiction.
- asmithmd1 9y agoUntil the interstate banking act of 1994, all banks had branches only in their own state.
- Feniks 9y agoBanks will be blacklisted if they finance drugdealers. The US war on drugs is no joke and it is international. If your bank participates in the global financial system it can't ignore the US.
- mutagen 9y agoI'm curious about the timing of publishing this on the day that AG Sessions announces a return to previous DoJ practices in prosecuting violations of Federal marijuana law, specifically mentioning money laundering and money transmitting statutes. It can't be coincidence, can it? Am I missing something or does this paint a nice big bulls-eye for the feds on Safe Harbor Private Banking?
- fencepost 9y agoThere's a brief note in the article about the rescinding of the Cole memo noting that it happened after the article was written. Honestly it seems like this is exactly the kind of business that the Federal government would want involved in the pot business - one that's getting cash off the streets while aggressively making sure that all of it is accounted for both coming in and going out. On the other hand, the alternative of a return to a high-cash high-risk business might not be something that Sessions et al would object to - after all, if you weren't involved in criminal activities you wouldn't have risked being robbed or assaulted and robbed. Kind of like so many other things, don't listen to what they say, look at what they do and the impacts of those actions.
- grooling 9y agoCan I start a mini bank in these states and take their money then turn it into credit? It's not that straightforward but is it possible??
- patio11 9y agoWe’ve averaged 2 banking charters a year issued nationwide for the last five years, and none of them were to 420 Money Laundering Services, LLC.
- stephenitis 9y agoI read somewhere that there may be legislation in the works by Scott Wiener to start a state sponsored weed bank. This following link isn't where i heard it but it references said state law. http://www.sacbee.com/opinion/california-forum/article176972031.html http://www.sacbee.com/opinion/california-forum/article176972...
- therealmarv 9y agoThis is the big problem. Laws say yes, banks say no. This also applies to perfectly legal e.g. adult or bitcoin businesses. There is a huge opportunity for new fintech banks to address this problems.