Banking Archives - Green Market Report

Debra BorchardtDebra BorchardtApril 19, 2021
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Cannabis legalization advocates must be feeling a sense a deja vu. Today, the House of Representatives approved legislation (again) that would provide safe harbor for financial service providers to work with cannabis businesses that are in compliance with state laws. Called the SAFE ACT, (Secure and Fair Enforcement) Banking Act, or H.R. 1996, was reintroduced in March by Reps. Ed Perlmutter (D-CO), Steve Stivers (R-OH), Nydia Velazquez (D-NY), and Warren Davidson (R-OH), and had 177 total cosponsors by the time of the vote. The legislation was approved by a vote of 321-101, including a majority of voting Republicans.

Steve Hawkins, executive director at the Marijuana Policy Project said, “This vote marks a meaningful first step in establishing a more equitable cannabis industry and improves the likelihood that other cannabis legislation will advance at the federal level. Restricting cannabis businesses from accessing financial services creates an unnecessary burden for the industry and limits economic growth. If enacted into law, the SAFE Banking Act would strengthen efforts to increase the diversity of the cannabis industry by providing resources for those with limited access to capital and increasing the chances of success for state-level social equity initiatives. Further, it would protect the 321,000 employees directly affected by the cannabis industry’s lack of access to financial services.”

The SAFE Banking Act previously cleared the House in 2019. The language of the bill was also included in two rounds of COVID-19 relief packages that were approved by the House. This is the fourth time that the House has approved the language of the SAFE Banking Act, initially as the first standalone cannabis policy reform bill ever passed by either chamber of Congress in 2019 and two more times last year as part of pandemic relief packages that were not approved in the Senate.

“We are incredibly grateful to the bill sponsors who have been working with us for the last eight years to make this sensible legislation become law and have shepherded it through the House time and again,” said Aaron Smith, co-founder and chief executive officer of the National Cannabis Industry Association. “The SAFE Banking Act is vital for improving public safety and transparency and will improve the lives of the more than 300,000 people who work in the state-legal cannabis industry. It will also help level the playing field for small businesses and communities with limited access to capital. It is time for the Senate to start considering the companion legislation without delay.”

Advocates are hopeful that Senate Banking Committee Chair Sherrod Brown (D-OH) will take up the bill in the near future so that it can begin to move through the upper chamber as soon as possible and become law before the end of the year. The SAFE Banking Act would protect financial institutions from federal prosecution for providing banking and other services to cannabis businesses that are in compliance with state law, as well as help address serious public health and safety concerns caused by operating in predominantly cash-only environments. The legislation would improve the operational viability of small businesses by helping them reduce costs associated with lack of access to banking and increasing options for traditional lending that many small businesses in other fields rely upon. It would also mandate a study on diversity in the cannabis industry.

“For the first time since Joe Biden assumed the presidency, a supermajority of the House has voted affirmatively to recognize that the legalization and regulation of marijuana is a superior public policy to prohibition and criminalization,” said NORML Political Director Justin Strekal. “However, the SAFE Banking Act is only a first step at making sure that these state-legal markets operate safely and efficiently. The sad reality is that those who own or patronize the unbanked businesses are themselves criminals in the eyes of the federal government, which can only be addressed by removing marijuana from the list of controlled substances.”

Separate from advocacy groups, corporate cannabis was encouraged as well. Medical Marijuana, Inc. (MJNA) CEO Dr. Stuart Titus said, “Though the cannabis industry has been deemed ‘essential’ during the pandemic, it still mainly operates as a high-liability, cash-only business. We’ve been looking forward to the passage of the SAFE Banking Act for nearly a year but with Democrats now in control of the House, Senate and White House, it’s finally happened. While we have generally resolved the majority of our banking and merchant processing issues that we saw when we began selling CBD throughout the US in 2012, we have done so at tremendous ongoing legal expenses and efforts. We hope that this bill can help other leaders in the overall cannabis industry avoid such hurdles and that it leads to expanded access to cannabis, hemp and CBD across the nation. We’ve seen that the number of banks servicing cannabis businesses has decreased over the past few months and we hope that this bill encourages banks to rethink that decision.”


Debra BorchardtDebra BorchardtJanuary 19, 2021
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Cannabis software company Blackbird and payment processor company AeroPay announced a strategic partnership to bring cashless payments to cannabis businesses for online ordering. Blackbird was sold in November 2020 by its parent Tilt Holdings (OTC: TLLTF).  Tilt agreed to sell Yaris Acquisition, LLC better known as Blackbird to Slam Dunk, LLC, a Nevada limited liability corporation controlled by Tim Conder, TILT’s Chief Operating Officer and a member of the board of directors of the company. The company said the total valuation of the deal was $15 million and selling Blackbird resulted in a cut of $3 million in expenses quarterly.

The partnership includes the integration of AeroPay’s payments platform into Blackbird’s white-labeled dispensary menus and the BlackbirdGo cannabis marketplace. The two companies said they also have plans to bring greater efficiencies to other parts of the cannabis supply chain such as physical retail and B2B.

“Cash payments have dominated the cannabis retail consumer experience until now,” said Tim Conder, CEO & Co-Founder of Blackbird. “As licensed cannabis operators, we know the benefits of moving toward cashless payments but also understand the challenges with banking as a cannabis business. Our partnership with AeroPay and the integration of our platforms allows our retail partners and their customers to easily accept digital payments and remove the hurdles associated with being a cash-only business. Additionally, AeroPay’s banking relationships will help eliminate barriers for our retail partners.”

Through the integration, cannabis patients and customers using Blackbird will be able to pre-pay online at the time of check-out for delivery or curbside pick-up orders. Payments made with AeroPay will be facilitated through a secure bank-to-bank transfer between the patient or customer and the business.

AeroPay is a financial technology company providing alternative payment processing solutions to state-legal cannabis businesses.  AeroPay has been approved to work in every state where cannabis businesses can legally operate as well as Washington D.C. AeroPay’s compliant solution offers a safe, simple, and streamlined way for patients or customers to pay their favorite cannabis businesses.

“Our approach has always been to create a better payment experience for both businesses and their customers,” said Daniel Muller, CEO & Founder of AeroPay. “Blackbird is a premier end-to-end logistics and delivery company in the cannabis space and our partnership allows us to do just that for the cannabis industry.”

Dispensary patients and customers ordering through a Blackbird white-labeled menu or the BlackbirdGo marketplace will have the option to pay with AeroPay. For first time AeroPay users, the sign-up process is two easy steps and happens directly on the menu at the time of check-out — customers simply create an AeroPay account and link their bank. For repeat users, payments can be completed with a single click.

While the focus of this integration with Blackbird’s menus is to improve the retail and consumer experience, both Blackbird and AeroPay also provide B2B solutions for the cannabis industry. The companies have plans to streamline the cannabis experience in other parts of the supply chain and lower the volume of cash by implementing digital payments.

“We’re excited about the future of our partnership with AeroPay as both companies have the ability to service the entire value chain,” said Conder. “This is only the beginning of a long-term relationship that has the opportunity to change the way cannabis businesses operate.”

“Payments have been especially inconvenient for cannabis businesses and we are thrilled to work with the team at Blackbird to create a seamless cannabis shopping experience that is safer, faster, and cashless,” said Muller. “Ultimately, we want to give cannabis businesses the ability to operate in the same manner as any other business would.”


Debra BorchardtDebra BorchardtApril 1, 2020
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MPG Consulting has recently authored a report looking at the potential of Cannabis Municipal Bonds (CMB).  Adam Orens, Founder of MPG and Sal Barnes, Managing Director, MPG have conducted a theoretical analysis using Colorado showing how the state can translate its cannabis revenue into a short-term bond amount of $166 million and long-term bond issued in the amount of $591 million resulting in $123 million and $438 million available for educational initiatives and infrastructure, respectively.

States and municipalities already use revenue bonds as a way to pay for large projects. The investors of such bonds feel that the risk for these investments is lower since there is a captive source of revenue to pay the interest. The report gives Iowa as an example. That state allocates $55 million in gaming taxes every year to pay the debt on revenue bonds that were issued in 2009 and 2010. That money raised selling these bonds was then used for community revitalization, flood mitigation, and bridge improvement efforts.

Test Case: Colorado

MPG used Colorado as an example of how state and municipal governments could tap into this revenue stream as a way to fund large projects. Although the report stresses, that while Colorado makes a good test case because of its well-tracked tax revenue, it isn’t necessarily a good candidate for a CMB. Mostly because the state has already been able to capitalize on the growing tax revenue for various projects – mostly involving education. The authors believe it is a concept worth exploring for newly legalized states.

In Colorado’s case, Denver collected $46.8 million in tax and license revenue in 2018. The estimated amount for 2019 is $63.3 million. MPG suggests this revenue will grow 21.6% on an annual basis. Using these figures and calculating future growth, MPG thinks that Denver could offer three-year CMB’s at a 1.5% interest rate. The city could issue a $166 million three-year bond resulting in potentially giving $123 million to the education allocation. A 10-year bond issue of $591 million would result in $438 million for education and other purposes.

Since Denver’s education needs seem to be met with this new influx of cannabis tax revenue, a CMB would not have as much impact. However, a city that is new to legalization and has more pressing and expensive needs like housing – a CMB might be an attractive solution.

Minneapolis As An Example

MPG Consulting looked at Minneapolis Minnesota as a city that could benefit from CMB. The state has not legalized cannabis, but if it did it could a large city like Minneapolis use the money to address its housing problems. MPG calculated that if the state legalized adult-use cannabis its first-year sales could hit $64 million and eventually reach $182 million in the tenth year. MPG believes that the tax revenue in the first three years would be roughly $63million reaching $343 million in ten years.

The hypothetical case for Minneapolis is that the city could issue $49.4 million in three-year bonds raising $44 million for affordable housing in year one. The current balance for the Affordable Housing Trust Fund is $21 million, so an influx of $49 million would be substantial. A ten-year bond could generate $233 million in the first year. The report also looks at the state in the same hypothetical calculation where the state would reap $385 million from a three-year bond and $2 billion in a 10-year bond.

Banking

Of course, the cannabis industry is challenged with a lack of banking and most of the major debt underwriters want nothing to do with cannabis until it is federally legal. With the current pandemic crisis and an upcoming election, the possibility of any cannabis legislation getting enacted in the near term is remote. The authors though believe that CMB’s could still be issued in the current environment.

“When state and local governments collect cannabis tax revenue, the funds are commingled in the general fund with revenue from other sources. The funds then enter the Federal Reserve System,” said the report. “Capital raised from CMB’s would be no different than any other tax revenue and therefore, in our opinion, would not require any sort of special regulation.” The authors do concede that convincing the banks and underwriters to offer the products could still be difficult.

Potential CMB States

The report notes that demand for such a bond could grow as cities and states grapple with the economic fallout of the COVID19 virus. The report suggests that seven states could see the potential in CMB’s. These states hold the most promise of legalizing adult-use cannabis in the near term. Those states are Arizona, Connecticut, Montana, Missouri, New Jersey, New York, and Vermont. However, the report notes that only the major east coast markets, Missouri and Arizona could support the CMB. Vermont would not have the tax revenue to make it worthwhile.

“States looking to open adult-use cannabis markets should consider utilizing CMB’s to finance crucial infrastructure or strategic public initiatives,” read the report. “Strong and accurate estimation of cannabis demand, tax revenue, growth rates, and other market development factors are imperative to calculating proper bond issue size, yield and maturity dates. Finally, banks who sell CMB’s must develop diligence methods and models to effectively price these securities.”

MPG Consulting said that cannabis revenues are steadier than alcohol and tobacco and more like casino tax revenue. While the idea of Cannabis Municipal Bonds may be novel, it isn’t completely unfeasible. The question isn’t if they will happen, but when. MPG might be correct that COVID could push states and cities to issue CMB’s. Financial institutions may also ease their opposition as they too may need additional underwriting revenue. CMB’s could be the next step in legitimizing cannabis.

 


Debra BorchardtDebra BorchardtMarch 3, 2020
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Ceres Group Acquisition Sponsor and Ceres Acquisition Corp. closed on its initial public offering (IPO) of $120 million of Class A restricted voting units of Ceres. Ceres is a newly organized special purpose acquisition corporation (SPAC) incorporated under the laws of the Province of British Columbia for the purpose of acquiring one or more businesses or assets. The focus will be on cannabis companies, but it is not limited to that specific industry or any geographic location.

The shares will begin trading today on the Neo Exchange Inc. under the symbol “CERE.UN”, and are intended to separate into Class A Restricted Voting Shares and Warrants in 40 days (or, if such date is not an Exchange trading day, the next Exchange trading day), which will trade under the symbols “CERE.U” and “CERE.WT”, respectively.

Joe Crouthers, Chairman, Chief Executive Officer and Director at Ceres said, “Ceres Acquisition Corp. is excited to be partnering with fellow innovators at the NEO Exchange.  We will benefit greatly from their extensive experience and prior success as a senior exchange supporting SPACs and US-focused cannabis listings.  They’ve allowed us to target the most vital segments of an industry that is at a critical inflection point.  This forward-thinking approach sets the stage for companies and industries to flourish.”

Ceres’ board of directors is comprised of Joe Crouthers (Chairman), Jordan Cohen, Dr. Ervin Braun, Brian Goldberg, Jordan Toplitzky and Tahira Rehmatullah, and its management team is comprised of Joe Crouthers (Chief Executive Officer), Jordan Cohen (President, Chief Financial Officer, and Corporate Secretary) and Michael Vukmanovich (Chief Operating Officer).

Ceres said its strategy is to leverage its directors’ and officers’ and the Sponsor’s executive leadership and entrepreneurial expertise, strong marketing and brand capabilities, and investment experience and network in order to identify and execute attractive qualifying deals. Ceres’ management team and directors will undertake to identify potential investment targets, and use their relationships with strategic growth advisors and strategic marketing partners to continue to build relationships with company owners, executives, stakeholders, industry experts and financial intermediaries to uncover attractive acquisition opportunities.

Ceres has granted Canaccord Genuity Corp., the underwriter of the Offering, a 30-day non-transferable over-allotment option following the Closing to purchase up to an additional 1,800,000 Class A Restricted Voting Units, at a price of $10.00 each. The proceeds from the distribution of the Class A Restricted Voting Units (along with the proceeds from any exercise of the Over-Allotment Option) will be deposited into an escrow account and will only be released upon certain prescribed conditions, as further described in the final prospectus dated February 25, 2020.


StaffStaffMarch 2, 2020
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Not only do cannabis companies face banking challenges, but the employees also face the stigma of the big green leaf. Banks are notoriously conservative when it comes to cannabis and that hurts employees who just want a car loan or a mortgage. The founders of cannabis logistics company  Hardcar, saw first hand the struggles with banking and stepped up with a solution.

This new fintech company PAYZEL said it has secured banks to do home loans and other financial services for employees of cannabis companies. The company said that by shifting banks interest from just mortgages on buildings, which Payzel already does, to add homes was a natural evolution. The company arrived at this solution based on market demand from partners across the United States.

Payzel founder Todd Kleparis said, “Companies had called us a number of times telling us that employees just couldn’t get a loan at the banks they were using. Wanting to help, we went to our already established network of banks and offered up a way to expedite the loan process and have cannabis employees be able to get car loans and home loans all in one place. So now a company can get access to legal banking plus help to facilitate their employee’s needs as well. Most banks will not do home loans or offer other financial services but fortunately, we have forged fantastic relationships with many banks over the past four years. This is a major milestone for Payzel in its infancy and a major win for the cannabis space as a whole.” 

With capital becoming so tight these days, cannabis companies may be drawn to a provider that is willing to make loans not only to the businesses, but also to employees. Since the founders have been involved with the cannabis industry for some time in California, they do not stigma issues and recognize the industry’s problems. High operational costs that currently exist within the industry, including licensing and banking fees, drove the creation of Payzel – with a tag line “Forged out of Frustration”.

“With this new expansion of offerings, we believe we are still the one and only financial services platform with real banks accepting real cannabis companies without insane fees,” added Kleparis. “Most other services offering to get cannabis companies to banks are either some sort of wacky custodial account which you don’t even own or a looney scheme to get people paying a fee.  Payzel does none of that. We are the Trip Advisor and Lending Tree of Cannabis.”

Payzel says its accounts are insurance-backed and that credit card services will be coming soon.


Debra BorchardtDebra BorchardtDecember 4, 2019
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On Tuesday, The Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation (FDIC), the Financial Crimes Enforcement Network (FinCEN), and the Office of the Comptroller of the Currency issued a statement clarifying banking rules around hemp customers.

Key Takeaway

The key takeaway from the statement is that banks no longer need to file the onerous Suspicious Activity Report, known as SARS for hemp farmers.

The statement said, “Because hemp is no longer a Schedule I controlled substance under the Controlled Substances
Act, banks are not required to file a Suspicious Activity Report (SAR) on customers solely because they are engaged in the growth or cultivation of hemp in accordance with applicable laws and regulations. For hemp-related customers, banks are expected to follow standard SAR procedures, and file a SAR if indicia of suspicious activity warrants.”

Michael Weiner is a partner at the international law firm Dorsey & Whitney and the chair of its Cannabis Practice Group said, “This statement is limited to hemp growers and not to other businesses related to hemp or CBD from hemp.  For banks that are already providing banking services to hemp growers, the word “solely” may cause banks to hesitate to cease filing suspicious activity reports for these customers.  For banks that are reluctant to provide banking services to hemp growers, this statement is unlikely to provide sufficient comfort to enter the market.”

“Further, FinCEN stated that it would issue additional guidance following further review of the USDA interim final rule, perhaps following issuance of final rules from the USDA following the current public comment letter.  Banks may delay making any changes to their banking services until issuance of such additional guidance,” Weiner added.

The statement went on to add “When deciding to serve hemp-related businesses, banks must comply with
applicable regulatory requirements for customer identification, suspicious activity reporting, currency transaction reporting, and risk-based customer due diligence, including the collection of beneficial ownership information for legal entity customers.”

Many in the industry are not interpreting the language as starkly as Weiner. Most believe the statement gets all hemp customers off the hook with banks. However, banks tend to be very conservative and may opt to only apply the SARS guidelines to the growers and not the extended hemp family of CBD producers.


StaffStaffNovember 19, 2019
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The Flowr Corporation

The Flowr Corporation (TSXV: FLWR)(OTC: FLWPF) reported that it has closed its previously announced credit facility from a syndicate of lenders led by ATB Financial and including Farm Credit Canada. The $25 million facilities consist of a $24.5 million recapitalization term facility and a $500,000 revolving operating credit facility. Flowr will receive the first tranche of funding of approximately $20.05 million on closing with the remaining of the recapitalization term facility available subject to certain conditions.

“We are extremely pleased to strengthen our financial position through non-dilutive financing at attractive pricing,” commented Vinay Tolia, Flowr’s Chief Executive Officer.  “The reduced size of the ATB Credit Facilities compared to the initial commitment reflects our reduced capital needs as we focused on those investments with the greatest potential to generate cash flow in the near term.  With our third-quarter earnings release on November 26, 2019, we will provide our shareholders with a comprehensive business update.”

The company said it would release its third-quarter 2019 results after the close of the financial markets on Tuesday, November 26, 2019, which will be followed by a conference call and webcast to review these results at 5:30 p.m. Eastern Time.

Meta Growth

National Access Cannabis Corp (TSXV: META) d/b/a Meta Growth said that it has reached a new agreement to extend its $9,000,000 loan from Opaskwayak Cree Nation to December 31, 2022.

The original loan was set to mature on December 14, 2019.  As one of META’s largest shareholders, owning approximately 10.8 million shares, OCN has agreed to extend the maturity of the Loan until December 31, 2022, at an interest rate of 10% per annum, and an annual administration fee of $225,000.

“OCN sees the ongoing investment into META as a growth opportunity for both META and OCN.  The income that OCN generates from the interest on the Loan helps OCN with investing in our community infrastructure, such as housing,” said Christian Sinclair, Onekanew (Leader) of OCN and Board Member of META. “We hope to continue to capitalize on opportunities with META as the Ontario government is anticipated to issue additional licenses for cannabis retail locations.”


Debra BorchardtDebra BorchardtOctober 23, 2019
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Casa Verde, a venture firm that counts Snoop Dogg as a partner, led a $7 million financing round for cannabis short-term lender Bespoke Financial.  Bespoke Financial was launched in 2018 by co-founders Benjamin Dusastre, Pablo Borquez-Schwarzbeck and George Mancheril.

“While the US legal cannabis market is forecasted to grow over 20% annually, reaching $23B by 2022, the industry’s true growth potential is limited by long cash flow cycles throughout the supply chain and a lack of scalable and efficient capital sources,” says Bespoke Financial Co-Founder and CEO, George Mancheril. “Our approach will dramatically improve cash flow cycles across the supply chain and provide scalable working capital to fuel our clients’ growth.”

Borquez-Schwarzbeck and Dusastre are also the co-founders of ProducePay, a fintech platform focused on produce farmers across North and South America. Founded in 2014, ProducePay has financed $2+ billion in perishable commodities to date, operates in 13 countries, processes thousands of transactions monthly and has raised over $200M in funding from some of the largest and most prominent investors in the world.

Building off ProducePay’s successful business model to offer financing to a similarly underbanked industry, Bespoke provides unique financing options for the cannabis industry by incorporating ProducePay’s proven underwriting model, risk management controls and technological expertise in building a successful fintech platform.

In addition to Casa Verde, Greenhouse Capital Partners, and Outbound Ventures among others will be used to both enhance Bespoke’s existing online platform where borrowers can request funds on a real-time basis and to expand Bespoke’s team and marketing efforts. While currently focused on the California cannabis market, the company has plans to quickly expand into other legal US jurisdictions.

“Bespoke is filling a critical funding gap for US cannabis businesses that are rapidly scaling and need short-term working capital solutions. With the recent softening of the public markets, private financing is becoming more expensive. As such, Bespoke has created an efficient alternative for cannabis companies to access liquidity while managing their dilution,” says Karan Wadhera, Managing Partner of Casa Verde. “Given the Bespoke team’s previous success in building the leading agtech platform, coupled with their depth of fintech expertise, we are confident in leadership’s ability to execute.”

 


StaffStaffSeptember 26, 2019
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House Takes First Step Toward Federal Validation of the Marijuana Industry: Votes 321 to 103 to Pass the SAFE Banking Act

In a showing of bipartisan support, the House of Congress voted 321 to 103 to pass the SAFE Banking Act.  Of those voting yes, 229 were Democrats and 91 were Republicans.  Unity amongst Democrats was particularly strong with only one Democrat vote being in opposition.  Going forward, this overwhelming amount of party support should help assuage any fears as to whether the Democrats will continue to back the bill as it moves to Senate.

What the SAFE Act Means for the Industry

Currently, banks that provide services to the cannabis industry are at risk of being prosecuted under federal law.  The risk is the same for insurance companies and landlords that operate in, or provide services to, the cannabis industry.  Consequently, cannabis companies are often forced to horde cash and jump through hoops to make payment for items as simple as a utility bill; proper insurance coverage is often difficult to obtain; and options are limited for cannabis companies seeking to rent facilities for their operations.  The lack of federal legalization has not only created several operational obstacles and inefficiencies for companies involved in the cannabis ecosystem, but by forcing cannabis companies to operate only in cash it has created safety issues for employees by making them, and their places of work, targets of robbery.

Although approval of the SAFE Banking Act would not fully legalize cannabis, it would prevent the federal government from taking action against banks, insurers and landlords that provide services to cannabis companies that are operating in compliance with applicable state laws.  Not only would such legislation go a long way towards normalizing the industry, moving from a cash-only environment would significantly enhance public safety.

It should be noted that the bill does not contain provisions relating to capital markets access for cannabis companies.  Accordingly, approval of the SAFE Banking Act would not provide cannabis companies with access to the U.S. capital markets or exchanges.

Next Steps

The next step is for the Senate to consider and vote on the SAFE Banking Act.  This process is expected to occur later this year.  While some are skeptical of the SAFE Banking Act’s chances of receiving approval from a Republican-controlled Senate, there are provisions in the bill that should appeal to Republicans.  One provision addresses Operation Choke Point, a program put in place by the Obama administration that investigated banks for doing business with payday lenders, firearms dealers and other companies at higher risk for fraud and anti-money laundering.  Another provision addresses access to banking services for the hemp industry, which should be of particular importance to Senate Majority Leader Mitch McConnell and his home state of Kentucky.  If the bill is passed by Senate, it would then be submitted for Presidential approval.

Approval of the SAFE Banking Act will not fully legalize cannabis, but it would represent a significant milestone for the cannabis industry by providing access to banking services, and it could also lead to the approval of other cannabis-focused policies, and possibly, full federal legalization.

Jason Wilson
Global Cannabis Industry Expert with over 15 years of experience in the asset management, finance, and structured product space, Jason has a track record of bringing hard-to-access asset classes to market. Recently, Jason was Senior Vice President at INFOR Financial Inc., a boutique investment bank that acted as advisor to Canopy Growth Corporation in connection with entering into its strategic relationship with Constellation Brands.


Debra BorchardtDebra BorchardtAugust 6, 2019
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Last week Ohio Gov. Mike DeWine signed a bill that will allow credit unions and other financial institutions to service businesses that cultivate hemp and sell cannabidiol products as long as there is no more than 0.3% of THC. This week, NCUA (National Credit Union Association) Chairman Rodney Hood said that credit unions won’t be sanctioned for servicing cannabis-related accounts as long as they adhere to money laundering rules.

“It’s a business decision for the credit unions if they want to take the deposits,” Hood told the Credit Union Times. He added, “We don’t get involved with micro-managing credit unions.” Hood also told the CU Times that Congress could remove all ambiguity if it enacted legislation to declassify marijuana.

OHIO

“While the Ohio Credit Union League takes no stance on the legality of marijuana, we do stand by our credit unions and their ability to legally serve all of their members and their financial needs,” Ohio League President/CEO Paul Mercer said. “Today’s [Tuesday] signing of SB57 allows Ohio businesses to do that effectively, while also bringing our state into alignment with federal legislation.” In addition to addressing the banking, the legislation also directs the Ohio Department of Agriculture to come up with rules and regulations for the licensing and processing of hemp within the state.

The Ohio Credit Union League also said that the bill had an emergency clause that meant the credit unions could begin working with the businesses immediately. The Ohio League represents 262 credit unions in the state said it supported the new legislation to bring Ohio law in line with federal standards as a result of the passage of the 2018 Farm Bill.

Guns & Ganja

The CU Times also recently ran a story that suggested a correlation between guns and cannabis banking that could happen. The Safe Banking of 2019 legislation has 206 co-sponsors and is gaining support. However, the Senate which is controlled by Republicans hasn’t seemed inclined to move on the Bill. The article suggested that a compromise could happen in which Operation Choke Point was outlawed in order to cannabis banking approved.

Operation Choke Point was an Obama-era initiative by the Department of Justice that would investigate banks doing business with gun companies for potential money laundering. It was ended in 2017, but other forms of this program have surfaced like JP Morgan choosing not to work with private prison companies. The suggestion is that these types of programs would not be allowed and banks would have to work with gun companies even if they don’t want to. If that is added, then they will move the Safe Banking legislation forward.


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