Members of Congress Announce Bipartisan Cannabis Caucus
by Michelle Rutter, Government Relations Manager
On February 16th, the House of Representatives took another step towards recognizing the need for federal reform of cannabis laws. Representatives Earl Blumenauer (D-OR), Dana Rohrabacher (R-CA), Jared Polis (D-CO), and Don Young (R-AK) announced their newly formed Congressional Cannabis Caucus. The bipartisan coalition will focus on issues like medical research, access for veterans, and business needs — including banking and 280E reform.
The four co-chairs of the caucus were united in their support for states to be allowed to determine their own cannabis policies. In addition, the group noted that the growing momentum for reform across the country has finally reached the halls of Congress. With eight more states legalizing some form of cannabis just this past November, the caucus co-chairs say there has been a “tremendous increase” in interest for joining the caucus, including from Republicans. The caucus will also allow members to talk freely about cannabis legislation and give the opportunity to show that cannabis consumers and entrepreneurs are an important part of the American economy.
Prior to the announcement today, the House had started an informal marijuana working group, but decided that it’s now time for a more formal cannabis caucus that seeks to educate other Members of Congress on the discrepancy between state and federal law, the importance of making sure that cannabis businesses are treated fairly, and that states’ rights are protected. The Cannabis Caucus is also an opportunity for NCIA to educate Capitol Hill staffers and policymakers on the issues our members face on a regular basis.
NCIA’s Cannabis Industry Lobby Days provide the best opportunity to show our nation’s decision-makers what a responsible and legitimate cannabis industry looks like and to help raise awareness of issues like the unfair tax and banking policies hampering our industry’s potential to grow and be treated like any other U.S. business sector. Your $25/person registration fee includes a lobby training session with NCIA’s government relations staff and two days of coordinated meetings with congressional offices across Capitol Hill.
VIDEO: The Importance of Making Your Voice Heard in D.C.
NCIA Deputy Director Taylor West delivers this month’s video newsletter, encouraging you to get involved and make your voice heard to the new administration and new Congress. As NCIA prepares for our 7th Annual Cannabis Industry Lobby Days, there’s never been a more important time to speak up for your business and the industry we’re building together by engaging with our advocacy work on Capitol Hill in Washington, D.C.
Thank you to the co-chairs of NCIA’s Policy Council for their premier sponsorship of our 2017 Cannabis Industry Lobby Days:
Are you interested in sponsorship opportunities for your company at NCIA’s most important policy event of the year? Contact us at sponsorship@thecannabisindustry.org to find out more!
Member Spotlight: Cannabase
In this month’s NCIA Member Spotlight, we speak with Jennifer Beck, co-founder and Managing Director of Cannabase, a wholesale cannabis marketplace and technology dashboard. Cannabase is headquartered in Denver, serving more than 75% of marijuana licenses in Colorado, with plans to expand nationwide in 2017.
Cannabase
Cannabis Industry Sector:
Wholesale Distribution, Technology
NCIA Member Member Since:
2014
Tell me a bit about your background in cannabis and why you launched Cannabase?
Cannabase co-founders, Chase Beck and Jennifer Beck
When my husband, Chase Beck, and I co-founded Cannabase, we had a background in technology and a passion for cannabis. Not only were we amazed by the incredible science surrounding medical marijuana, but we also believed that cannabis was a much healthier alternative to alcohol for general adult-use purposes. The idea of being part of an emerging industry – helping to shape the framework while increasing its validity and chances of survival – was a really exciting idea to us.
What unique value does Cannabase offer to the cannabis industry?
Cannabase is the oldest and largest online wholesale marketplace in Colorado, providing a safe and compliant platform for businesses to connect over wholesale bud, trim, extracts, seeds, and edibles. We represent over 75% of the licensees in the state in our intuitive, automated platform, streamlining wholesale purchases and aggregating the powerful market data that drives our market statewide. Cannabase will be expanding nationwide in 2017, and is the exclusive wholesale partner of BioTrackTHC and MJ Freeway point-of-sale systems, which makes Cannabase the only firm to have direct, non-self-report access to virtually the entire Colorado market’s real-time inventory.
Cannabis companies have a unique responsibility to shape this growing industry to be socially responsible and advocate for it to be treated fairly. How does Cannabase help work toward that goal for the greater good of the cannabis industry?
Cannabase was founded on the principle that legal cannabis was a statewide experiment, and the health of the industry was critical to that experiment being considered a success. As a result, we’ve treated compliance, transparency, and integrity as non-negotiable cornerstones of our company’s evolution and product development. We’re disciplined in our vetting of licensed businesses and ensuring that anyone using our product has a valid license with their state and uses the site appropriately. Similarly, we’re passionate about supporting industry groups like NCIA that are doing amazing work for the future of our industry. We believe that investing in industry groups is as important as ever, especially in light of the changing political climate.
What kind of challenges do you face in the industry and what solutions would you like to see?
We still see the ramifications of the overarching federal limitations and restrictions – primarily 280E (which squeezes capital industry-wide) and lack of banking. These roadblocks impede progress for all cannabis businesses, and make it more difficult for ancillary businesses to solve the critical day-to-day challenges faced by our customers.
Why did you join NCIA? What’s the best part about being a member?
We love the work NCIA does to strengthen, connect, empower, and fight for the legal cannabis industry. In the three years we’ve been in the cannabis industry, we’ve never experienced anything short of total professionalism from the staff at NCIA. It’s a group that never under-delivers, and has been a pillar for community and our community’s future. We are proud to be a part of NCIA and look forward to seeing what 2017 brings!
Note: NCIA member profiles highlight members and stories within our cannabis industry community. They do not constitute an endorsement or recommendation of specific products or services by NCIA.
Member Post: Raising Money 101 – Introduction to U.S. Public Cannabis Stocks
Most readers are familiar with the two major U.S. stock exchanges – the New York Stock Exchange (NYSE) and NASDAQ. But in the world of cannabis, almost all publicly traded companies are not listed on a stock exchange. Instead they trade over-the-counter (OTC). In fact, as of the date of publication, only a handful of cannabis companies (or at least cannabis-touching companies, as for most of these companies, cannabis is only a small part of their overall business) are traded on a U.S. stock exchange. There are publicly traded cannabis companies outside of the U.S., but those are beyond the scope of this article.
These companies primarily trade on NASDAQ: GW Pharmaceuticals (GWPH), a UK-based pharmaceutical company best known for its drug Sativex, a cannabinoid-based treatment for multiple sclerosis spasticity; Insys Therapeutics (INSY), an Arizona-based pharmaceutical company that has a number of cannabinoid-based drugs in development; Cara Therapeutics (CARA), a Connecticut-based pharmaceutical company that has a cannabinoid product in preclinical development; Zynerba Pharmaceuticals (ZYNE), a Pennsylvania-based pharmaceutical company that has synthetic cannabinoids for transdermal delivery under development; and Arena Pharmaceuticals (ARNA), a California-based pharmaceutical company that has a pain relief cannabinoid drug in development. There is also a largely non-cannabis company, 22nd Century Group, Inc. (XXII), with a cannabis-focused subsidiary called Botanical Genetics, LLC, that trades on NYSE MKT, the NYSE’s emerging company marketplace for smaller-cap companies. NYSE MKT has lower listing requirements than the NYSE.
MassRoots (MSRT), a Denver-based social networking company for cannabis users, made headlines when it was denied approval to be listed on NASDAQ. According to MassRoots, the stock exchange justified the decision by claiming that the company was aiding and abetting the distribution of an illegal substance. Some speculate, however, that the decision considered the company’s low share price, although MassRoots stated it did meet the listing requirements with a market capitalization in excess of $40 million and more than 300 shareholders. NASDAQ did not publicly provide the grounds for its rejection.
As of the date of publication, the New York Stock Exchange has approved the listing of Innovative Industrial Properties, Inc. (IIPR), a newly-formed real estate investment trust focusing on the cannabis industry, though the SEC has not yet approved the offering prospectus of the company and no shares of Innovative Industrial Properties currently trade publicly. This seems to indicate that NASDAQ’s rejection of MassRoots may not have been entirely based on its alleged aiding and abetting.
The language of publicly traded cannabis companies
If these companies aren’t on stock exchanges but still trade publicly, where and how do they trade? It’s best to start with an introduction to the vocabulary of publicly traded cannabis companies. Here are several terms you will see discussed frequently in this area:
OTC: An acronym for “over-the-counter” and refers to securities (both debt and equity) that are traded in a context other than a formal exchange. It may refer to stocks, debt securities, or other financial instruments such as derivatives. In general, the reason why a stock is traded over-the-counter as opposed to on a stock exchange is because the company is too small to meet exchange requirements. The overwhelming majority of publicly traded cannabis companies trade OTC.
Pink Sheets: The National Quotation Bureau (now the OTC Markets Group) formerly published price quotations for stocks on pink-colored paper called the Pink Sheets. The National Quotation Bureau renamed itself Pink Sheets LLC in 2000 and subsequently Pink OTC Markets in 2008. In 2010, the name was again changed to its current one, OTC Markets Group. Because of this historical background, people will often refer to OTC stocks generally as trading on the Pink Sheets. Another synonym is Penny Stocks, based on the low price of some OTC stocks. There remains an official reference to the color pink – the OTC Pink® Open Market.
SEC: Shorthand for the Securities Enforcement Commission, a government commission created by Congress to regulate the securities markets and protect investors. Any public offering of stock is subject to review by the SEC.
Stock Exchange: A marketplace (which could be a physical location or an electronic platform) in which securities are traded. The core function of a stock exchange is to ensure fair and orderly trading, as well as efficient dissemination of price information for any securities trading on that exchange. Exchanges give companies, governments, and other groups a platform to sell securities to the investing public. Each stock exchange will have certain listing requirements – such as regular financial reports and audited earnings reports. The New York Stock Exchange (NYSE) is an example of a stock exchange.
OTC Markets Group (formerly known as the National Quotation Bureau, Pink Sheets LLC, and Pink OTC Markets): Operates an electronic quotation system called OTC Link that displays pricing for many over-the-counter securities not listed on a national stock exchange. All transactions are carried out between dealers. The companies listed on the OTC Market are broken into three tiers based on the quality and quantity of information the companies have made available. These tiers, starting with the designation for the most established companies, are as follows: OTCQX® The Best Market, OTCQB® The Venture Market, and OTC Pink® The Open Market.
OTC Bulletin Board or OTCBB: A system run by FINRA (Financial Industry Regulatory Authority). Broker-dealers who subscribe to the non-electronic system can buy and sell OTC stocks. Companies on the OTCBB must make all required SEC filings, but there are no other size or corporate governance requirements. Most OTCBB companies are quoted on both the OTCBB and one of the OTC Markets Group marketplaces.
Gray Market: Refers to securities that are not listed on any stock exchange or on the OTCQX, OTCQB or OTC Pink marketplaces. There is likely little investor interest in or information available about such securities.
Liquidity: Refers to how easy it is to buy or sell a security. This is a function both of the market for the security and of the legal restrictions on resale.
Bid-Ask Spread: The difference between the highest price that a buyer is willing to pay for a share of stock or another asset (the highest bid price) and the lowest price that a seller is willing to accept to sell it (the lowest ask price).
Broker-Dealer: An individual or firm who is engaged in the business of buying and selling securities. When the individual or firm is executing orders on behalf of clients (i.e., acting as an agent), it is acting as a broker. And when the person or firm is acting as a principal (i.e., trading for its own account) it is acting as a dealer.
Reverse Merger: In the OTC context, this refers to a transaction whereby the stockholders of a private company acquire the majority of the shares of a public shell company, which is then merged into the purchasing entity. As a result of the merger, the private company exchanges shares with the public entity, making the purchaser a public company. Reverse mergers allow the private company to become public without raising capital, as opposed to a traditional initial public offering (or IPO) which combines going public via an S-1 and undertaking fundraising. A reverse merger is also quicker than a full-blown IPO or an S-1 filing. The full legal ramifications of a reverse merger versus an IPO or direct S-1 filing are beyond the scope of this article.
S-1: The traditional method for taking a company public is by filing an S-1, which is an offering prospectus for the shares to be listed publicly. This can be accomplished as part of an IPO, which also involves a fundraising process typically run by an investment bank, or it can be done by a company directly without the involvement of a bank. A company wishing to become publicly traded will file an S-1 with the SEC. Once filed, the company and the SEC will then go through a process of comments and revisions. When the SEC is satisfied with the revised S-1, it will declare the offering prospectus effective and the company can sell shares to the public.
Why cannabis companies trade OTC
Why would a company want to trade OTC? The simple fact is that it’s very difficult to trade on the NYSE or NASDAQ. In addition to limitations that apply specifically to cannabis companies, as may have been the case with MassRoots, though not with Innovative Industrial Properties, both NASDAQ and NYSE have high financial standards that most cannabis companies are too small or too unprofitable to meet. It’s also not free to list on these exchanges; while both exchanges have multiple revenue streams, one way they make money is by charging fees to the listed companies. There are other, smaller stock exchanges (note that NASDAQ, for example, has three different tiers domestically: The Nasdaq Global Select Market®, The Nasdaq Global Market®, and The Nasdaq Capital Market®, with different standards for each tier, and has other international markets beyond the scope of this article), but each will have requirements that companies need to meet to be listed. That leaves the OTC markets as the main alternative to a company that wants to be publicly listed, but has not yet achieved the size necessary to be listed on a stock exchange.
But why would a company want to be publicly listed in the first place? There are several reasons, most of which only apply to a company that is listed on a major stock exchange (e.g., the prestige of being a public company or additional liquidity), but the primary reason offered for becoming an OTC-traded company is that it allows the company a way to increase the amount of capital it can raise and offers existing equity-holders greater liquidity. With limited exceptions, a private company can only freely sell its securities to accredited investors (i.e., institutions or people who meet certain income or asset thresholds). And, prior to the JOBS Act, private companies were prevented from any kind of widespread public advertising (which they can now engage in, but only if they take steps to ensure only accredited investors purchase the equity for sale). A publicly registered company, in contrast, is largely free to offer and sell its stock to all interested parties, regardless of whether they are accredited. It is also far less restricted in its ability to advertise the fact that its stock is for sale.
Buying publicly traded stock is also far easier – investors don’t need to know anyone at the company in question. If a potential investor has access to a computer or phone, buying OTC stock is straightforward. In theory, this opens a far larger marketplace for a company’s stock, providing liquidity and allowing it to sell additional equity to finance growth and operations.
The risks of OTC cannabis stocks
There are other, less honorable reasons why a company might want to trade OTC. When a public stock is widely traded, it’s difficult to influence the price of the stock. Imagine trying to materially change the price of Google’s stock – it would require a vast sum of money. But when a company’s stock is infrequently traded and information about that stock is limited, it’s much easier for an individual or group to influence a stock’s price. And information does tend to be quite limited when it comes to OTC stocks. In contrast to stocks listed on the major exchanges, not all stocks that trade on the OTC Link are required to be registered with the SEC. As a result, the overall level of information available for OTC stocks is both less detailed and less up-to-date than that of stocks traded on the NYSE or NASDAQ. It is also not uncommon for an OTC stock to be deficient in providing the limited information that is required.
Several government agencies have sought to warn the public about the risks inherent in cannabis OTC stocks. On May 16, 2014, the SEC’s Office of Investor Education and Advocacy published a press release that specifically warned investors about the risks of cannabis-related stocks. The SEC highlighted the fact that five cannabis OTC stocks had recently been suspended from trading due to concerns about the accuracy of publicly available information about their operations. Two of these companies were also implicated in potentially illegal activity involving the sale of securities and market manipulation. And on November 12, 2015, the Colorado Division of Securities issued a warning to investors to be cautious when considering investments in marijuana-related companies, binary options, and digital currency. The Colorado Division of Securities noted that marijuana-related investments “could be particularly susceptible to scams, such as ‘pump-and-dump.’” A “pump-and-dump” scheme is an illegal scam where people holding equity in a company convince the market that the shares are worth far more than they are by spreading false or misleading information, a process made easier by the thinly traded nature of OTC stocks and the lack of good information about them. Before the public catches on, they sell all or a portion of their shares for a significant profit.
With some exceptions, most cannabis OTC stocks have minimal analyst coverage, if any coverage at all. Most major companies that are publicly traded, in contrast, are studied regularly by analysts, who frequently publish reports about the status and direction of the companies they cover. Academic literature has shown that analyst coverage can decrease informational gaps between investors and management of companies. But if no one is covering an OTC stock, then shareholders must either study the company themselves or risk being left in the dark about the condition of the company. In addition, many institutional investors do not invest in OTC stocks, so the investor base of an OTC company will have far fewer, if any, institutional investors, and more retail (i.e., ordinary individual) investors. This means that holders of OTC stocks, absent the benefits of analyst coverage, cannot count on their fellow shareholders to be sophisticated or committed to monitoring the company either. OTC investors must often do their own due diligence on the companies in question.
Finally, it is important to understand the liquidity issues of OTC stocks. To return to the example of Google mentioned earlier, it is very easy to dispose of Google stock (or to be more accurate, Alphabet Inc. Class A stock) since there is a very active trading market for those securities. It would not be difficult to sell all the Google stock you hold at, or very close to, the current publicly listed price – unless the stock was currently reacting to major news or you were trying to sell a material number of shares. For an OTC stock, however, an investor should not take any of these advantages for granted. OTC stocks typically have significant bid-ask spreads since they are typically far less liquid than stocks traded on public exchanges – meaning that they are not as actively traded. That means in the event you decide to sell your stock there may not be a buyer readily available. And even if you could find a buyer for your stock, there is also the risk that your sale of stock could impact the quoted price, forcing you to sell at a lower price. This is why, unless there is an active market for an OTC stock, the quoted price may not be the price at which you can liquidate your position.
This is not to suggest that all OTC stocks are scams or even poor investments. But investors need to be particularly careful when evaluating these types of stocks and should be aware that not all publicly traded stocks are the same.
Key takeaways
In short, when it comes to OTC stocks:
A publicly traded stock by any other name: Any investment in an OTC stock is inherently riskier than an investment in a blue-chip stock trading on a public stock exchange. If you want to sell an OTC stock, it may not be possible to find a buyer. And OTC stocks can be subject to high volatility and at greater risk of fraud. This doesn’t mean that buying stock in a cannabis company trading OTC is necessarily a bad idea. But these kinds of investments demand an understanding of the risks involved.
OTC company beware: Any company considering listing as an OTC stock, whether by way of a reverse merger or otherwise, should carefully evaluate the costs and benefits of being publicly registered. Consider drawing on the private equity markets instead of the public markets. Please bear in mind that as a cannabis company, you will likely face heighten scrutiny by the SEC.
Know your terms: Not all OTC stocks are alike. The OTC Link has three marketplaces which are tiered based on the quantity and quality of information provided by the companies:
OTCQX® The Best Market: This is the marketplace with the most stringent requirements. To qualify, companies must meet financial standards, demonstrate compliance with US securities laws, be current in their disclosure, and be sponsored by a third-party professional advisor.
OTCQB® The Venture Market: Entrepreneurial and development-stage companies that are unable to qualify for OTCQX trade on this marketplace. Companies must undergo an annual verification and management certification process and be current in their reporting to be eligible.
OTC Pink® The Open Market: Defaulting or distressed companies trade on this marketplace, although some companies trade on The Open Market by design. Companies are further sub-categorized into one of three tiers by the level of information they provide: Current Information, Limited Information, and No Information.
Other Designations: Caveat Emptor: A concern exists about the stock, company, or person(s) controlling the company. The quotes will be blocked on OTCBB while a stock is labeled Caveat Emptor. OTC, Other OTC or Grey Market: Securities not traded on the three OTC Link exchanges. Public quotes are not provided by Broker-Dealers.
This information is educational only and shall not be construed as legal advice. Please consult your attorney prior to relying on any information in this article.
Charlie Alovisetti, Vicente Sederberg LLC
Charles Alovisetti is a senior associate and co-chair of the corporate department at Vicente Sederberg LLC. Prior to joining Vicente Sederberg, Mr. Alovisetti worked as an associate in the New York offices of Latham & Watkins and Goodwin where his practice focused on representing private equity sponsors and their portfolio companies, as well as public companies, in a range of corporate transactions, including mergers, stock and asset acquisitions and divestitures, growth equity investments, venture capital investments, and debt financings. In addition, Mr. Alovisetti has experience counseling portfolio and emerging growth companies with respect to general corporate and commercial matters and all aspects of compensation arrangements, including executive employment and consulting agreements, stock option plans, restricted stock plans, bonus plans, and other management incentive arrangements. Mr. Alovisetti has experience in both U.S. and cross-border transactions, and has advised clients across a range of industries including cannabis, technology, manufacturing, software, digital media, energy and clean tech, healthcare, and biotech. He holds a Bachelor of Arts, with honors, from McGill University and a law degree from Columbia Law School, where he was a Harlan Fiske Stone Scholar. Mr. Alovisetti is admitted to practice in both Colorado and New York and is a Level One Interprener.
DEA Rescheduling Announcement: What It Means, And What You Can Do
“DEA’s decision flies in the face of objective science and overwhelming public opinion.”
“The reality is that half of U.S. states have already passed effective laws allowing patients legal access to medical cannabis, and it is changing lives,”
“Continuing marijuana prohibition forces critically ill people to suffer needlessly, leaves life-changing treatments undeveloped, and keeps patients and providers in limbo between state and federal laws.
“We appreciate the positive step – however small – of opening up a few additional avenues for medical marijuana research. But patients deserve more, and Congress should help them by removing marijuana from the Controlled Substance Act, allowing state programs and medical research to move forward without interference.”
NOW WHAT?
This DEA decision presents an opportunity to elevate the conversations we are having with both the public and Members of Congress. It’s important that we continue to tell our stories about the benefits of state-regulated marijuana industries and the need to end federal marijuana prohibition.
Now, more than ever, is a chance to raise our voices in unison to make our issues undeniably heard.
We encourage you to get involved with Congress at home by attending a town hall meeting, inviting Members of Congress or their staff on a tour of your business, and scheduling meetings with your Member’s district office.
For advice, help, or materials to assist you, please contact NCIA’s Washington, D.C. office by emailing michelle@thecannabisindustry.org.
If your business is not yet a part of the movement, please join NCIA today.
2016 Mid-Year Federal Policy Recap
Michelle Rutter, NCIA
by Michelle Rutter, NCIA Government Relations Coordinator
With 2016 being an election year, things seem to have been moving at an even slower than usual pace here in Washington, D.C. All House and some Senate members are in campaign mode, while others in Congress weigh in on the presidential candidates and give their endorsements (or voice their opposition). Even so, there has been promising movement on the cannabis issue in D.C. Let’s take a look at 2016 so far:
January
After the usual end-of-year budget negotiations and the holidays, 2016 was off to a quick start. At the beginning of January, a federal judge ruled to dismiss a lawsuit filed by the Fourth Corner Credit Union against the Federal Reserve in hopes of providing banking services to the legal cannabis industry. In his ruling, Judge R. Brooke Jackson said Congress must provide the answer, stating, “I regard the [cannabis banking] situation as untenable and hope that it will soon be addressed and resolved by Congress.”
Putting even more pressure on Congress to act, the White House also weighed in on marijuana in January. Press Secretary Josh Earnest stated that any action on re-scheduling or de-scheduling cannabis would need to come from the legislative branch.
February
In February, the U.S. House of Representatives Committee on Rules held a hearing on the Financial Institution Customer Protection Act of 2015 (H.R. 766). This bill prohibits federal agencies – including banking agencies – from terminating certain bank accounts simply due to the nature of their business. Longtime cannabis champion Rep. Ed Perlmutter (D-CO) used this hearing as an opportunity to offer an amendment to the legislation. His amendment would have allowed banks and credit unions to offer financial services and maintain relationships with state-legal, licensed cannabis businesses, without fear of federal prosecution. The committee ultimately voted Rep. Perlmutter’s amendment down: the 3-9 vote broke along party lines, with all Democrats voting in favor and all Republicans voting in opposition.
Presumptive Democratic nominee Hillary Clinton also gave her opinion on cannabis in February, stating, “Right now, a number of states are experimenting with marijuana laws. Seventeen states have decriminalized the possession of small amounts of marijuana; four states allow recreational use; and about half of all states allow medical use. These statewide experiments can help us point the way to national policy, so I’ll continue the Obama Administration’s enforcement guidelines that allow states to experiment.”
March
In March, federal banking agencies began having discussions with the Financial Crimes Enforcement Network (FinCEN) about guidance on how financial institutions can serve marijuana-related businesses. Many banks are concerned that FinCEN’s previous guidance on submitting marijuana-related Suspicious Activity Reports (SARs) is not sufficient to overcome the legal risks of serving marijuana businesses.
Reinforcing the urgency of the cannabis banking issue, Sen. Jeff Merkley (D-OR) and three other senators sent a letter to the Federal Reserve, Treasury Department, Office of the Comptroller of the Currency, Federal Deposit Insurance Corporation, Financial Crimes Enforcement Network (FinCEN) and National Credit Union Administration, requesting more guidance on what banks can do with marijuana-related businesses in states where cannabis is legal.
In addition, Congressmen Ed Perlmutter (D-CO) and Dana Rohrabacher (R-CA) circulated letters in Congress asking Appropriations Chairmen to include pro-cannabis amendments in future appropriations bills.
After considering the lawsuit filed by Nebraska and Oklahoma against Colorado’s legal cannabis industry, the Supreme Court declined to take up the case in March. Nebraska and Oklahoma claimed there was “a direct and significant detrimental impact — namely the diversion of limited manpower and resources to arrest and process suspected and convicted felons involved in the increased illegal marijuana trafficking or transportation.” The Obama administration had urged the Court not to take up the case late last year.
April
In April, longtime cannabis opponents Sens. Chuck Grassley (R-IA) and Dianne Feinstein (D-CA) (co-chairs of the Caucus on International Narcotics Control) held a drug caucus hearing entitled, “Is the Department of Justice Adequately Protecting the Public from the Impact of State Recreational Marijuana Legalization?” The hearing was prompted after a recent report that the senators requested from the Government Accountability Office (GAO) concluded that the Obama Administration has no written, documented plan to discourage issues like diversion, sale to minors, and adverse public health effects from states that have chosen to legalize cannabis. The witnesses were completely biased: all four have been openly against the legalization of cannabis. NCIA and other cannabis reform groups used this opportunity to call on the Senators to hold a hearing on the CARERS Act (S. 683), which they have not done – even though the bill has more than 15 bipartisan co-sponsors in the Senate.
Also in April, the Senate Appropriations Committee approved an amendment to the Military Construction and Veterans Affairs Appropriations bill that would ease access to medical cannabis for veterans suffering from post-traumatic stress disorder, serious injuries, and other debilitating conditions. The amendment was offered by Sens. Steve Daines (R-MT) and Jeff Merkley (D-OR) and would prohibit federal funds from being used to enforce a ban on V.A. doctors from recommending a patient medical cannabis in a state where it is legal.
May
In May, the U.S. State Department responded to a letter from Sen. Kirsten Gillibrand (D-NY) and said that the DEA’s monopoly on cannabis for research in the U.S. is wrong. The released document stated that a country issuing more than one cultivation license “would not be a sufficient basis to conclude that the party was acting in contravention” with international drug treaties.
There’s no doubt that cannabis was on Congress’s mind because NCIA held its sixth annual Cannabis Industry Lobby Days in May! More than 150 cannabis professionals convened in Washington, D.C., for two days of advocacy that included more than 200 scheduled meetings and approximately 175 more drop-in meetings, as well as a PAC reception that had almost a dozen members of Congress in attendance.
Just days after NCIA’s Lobby Days, the House of Representatives and the Senate voted in favor of an amendment that would allow Veterans Administration doctors to recommend medical marijuana for their patients in states where medical marijuana is legal.
June
Though we’re barely halfway through June, it could be a big month for cannabis policy in D.C. It’s appropriations season here in the nation’s capital, which means that there could potentially be multiple opportunities to include pro-cannabis language in the budget. Though it is still unclear if Congress will have ‘regular order’ during the appropriations process, NCIA will continue to lobby on your behalf and keep you updated as the appropriations process unfolds.
A new poll from Quinnipiac was released in June and concluded that slightly more than half of Americans (54 percent) believe the use of marijuana should be made legal across the country, while 41 percent said it should not. When asked whether people should be allowed to use medically prescribed marijuana, 89 percent of respondents overall said they would be in favor, while just 9 percent opposed.
Congress only has a handful of days left in session before they return home for the majority of the summer to campaign, attend their parties’ conventions, and enjoy the annual August recess, so be sure to keep an eye out for news from NCIA about the developing appropriations process and other news from your government affairs team in Washington, D.C.
Guest Post: Waiver Program Could Clear Path for State Legalization
(AS WITH ALL GUEST POSTS ON NCIA’S WEBSITE, THIS POST SOLELY REPRESENTS THE VIEWS AND OPINIONS OF ITS AUTHOR AND DOES NOT REPRESENT AN NCIA ENDORSEMENT OR OFFICIAL POSITION. ~ EDS.)
Congress is considering a potential waiver program where states will be given an exemption to federal prohibition of cannabis.
On April 17 and 18, NYU hosted the Cannabis Science & Policy Summit where a panel discussion took place titled “Federalism & Cannabis Policy: What Can & Should Washington Do?” The panel consisted of experts in law and drug policy, including Congressman Earl Blumenauer (D-OR) and Sarah Trumble, senior policy counsel at Third Way, a public policy think tank based in Washington, D.C. The panel discussion delved into the restrictions of the DEA’s power to reschedule cannabis by Congress and appropriate policy alternatives to clearing the path for state-by-state cannabis legalization.
According to Cody Stiffler, vice president of Government Affairs at BioTrackTHC, who was also present at the panel discussion, Congress has placed so many restrictions on the ability and powers of the DEA, that they can only reschedule cannabis to a Schedule II status. He believes there is almost no possible way that the DEA can de-schedule cannabis. The panel discussed Congress’s consideration of a waiver program for states with legalized cannabis in some form or another. “They [Congress] plan to give the U.S. Attorney General powers to offer waivers to state governments, exempting that state from federal law regarding cannabis, allowing banks and other institutions to take part in the industry without fear of federal backlash under the Controlled Substances Act,” says Stiffler. The waivers would have a duration of a number of years and a reporting and review process would follow the expiration of each waiver. “If the Attorney General decides that states are following the directives of the Cole Memo, then they will be able to continue, but if the data collected proves otherwise, those waivers would then be suspended or revoked,” adds Stiffler. It is important to note that the bill gives states the opportunity to correct any failures before those waivers are revoked.
According to Sarah Trumble, public opinion favors a policy move towards allowing states with cannabis legislation to operate freely. A poll conducted by Third Way found that 67% of voters would support Congress passing a bill giving states freedom from federal intervention with respect to cannabis policy as long as there is a robust regulatory framework in place. In October of last year, Congresswoman Suzan DelBene (D-WA) introduced the bill, H.R. 3746, The State Marihuana [sic] And Regulatory Tolerance (SMART) Enforcement Act. The bill outlines the waiver plan and would exempt states from the prohibition of cannabis as a result of The Controlled Substances Act. It also has measures in place to help prevent diversion of cannabis into the black market, protecting consumer safety and public health, eliminating criminal enterprise involvement and more.
According to Trumble, the SMART Enforcement Act would resolve many of the conflicts between federal law and state legalization measures. “It is the bridge that gets us from the broken system we have now to a future date when public opinion and Members’ positions may have shifted, while in the meantime fixing the problems people are experiencing on the ground,” says Trumble. She believes the bill provides for the protection of consumer safety through logical regulatory systems while eliminating federal prohibition of cannabis. “Every three years, a state will have to re-apply for the waiver and submit data showing that their regulations are working to keep Americans safe.” This would allow states to have the space they need to implement a sound regulatory framework.
One can speculate on a broad range of possible effects this bill could have. “It would allow banks to open accounts for and offer services to legal cannabis businesses so they no longer have to operate on an all-cash basis,” adds Trumble. Perhaps the most significant effect this bill could have on the cannabis industry is knocking down the burden of the 280E tax code on cannabis businesses primarily because it would exempt states from The Controlled Substances Act. “It would protect businesses owners and employees—as well as customers and patients—from federal prosecution and arbitrary DEA crackdowns, now or in the future,” says Trumble. This bill has the potential to be a panacea for so many ailments facing the cannabis industry. Participants in the cannabis marketplace should let their representatives know that they support this bill and show up at the polls in November to elect representatives that support this piece of legislation.
Aaron G. Biros is the editor-in-chief of CannabisIndustryjournal.com, an online trade journal focused on regulatory compliance, quality and safety in the cannabis industry. Hejoined Innovative Publishing, LLC full-time after graduating from Tulane University. Graduating with a B.A. in Environmental Studies, his coursework involved environmental sustainability, conservation policy, design thinking in collaboration, social innovation & entrepreneurship, food production & health, and environmental & health risk assessments. He has two years of experience working on staff as an associate editor for FoodSafetyTech.com, writing a series of articles focused on the intersection of food safety and environmental sustainability. Aaron is now the editor and publisher of CannabisIndustryJournal.com, a B2B digital trade publication that seeks to educate the global cannabis industry on everything seed-to-sale in both recreational and medical markets. CannabisIndustryJournal.com covers news, business trends, technology, regulatory compliance and other important areas, aiding in the advancement of a well-informed and safe market. Cannabis Industry Journal became a member of NCIA in May 2016.
On April 4th, Senator Schatz of Hawaii became the 12th Senate co-sponsor of the Marijuana Business Access to Banking Act (S 1726).
Ean’s overall sentiment about the experience? Hard work pays off.
Ean Seeb, Denver Relief Consulting:
It was a sense of accomplishment in that when you’re working with Congress, things are very slow-moving and we have been dealing with the banking and tax issues repeatedly since my first NCIA Lobby Days in 2013.
As far as the experience of going into a congressional office and telling them you’re working with cannabis and asking them to back or co-sponsor some legislation, back then, it was a foreign thought. Contrast that with now – to walk in and have the recognition, know what we’re doing, and three months later to see a Senator actually fulfilling the only request that we made to him, specifically, to co-sponsor this bill.
All of our efforts are not for naught. If you put your mind to it, you go to work, and you extend some effort on behalf of the industry, you can make powerful, meaningful change here. Having another Senate supporter, even harder to come by than on the House side – it’s an incredible accomplishment.
I was delighted. It’s not due to any one person individually. NCIA’s Michael Correia, Director of Government Relations, set up the meeting and put it all together. It made me feel better about working hard and diligently with a team and getting to the solution to the challenge we’re facing. Sen. Schatz can’t himself enact the banking bill, but this is one more step toward chipping away at cannabis prohibition as we know it.
Tae Darnell and Ean Seeb stand outside of Senator Schatz’s congressional office in D.C.
It was really helpful to have my fellow NCIA member Tae Darnell there. I didn’t know it at the time, but Tae wrote the draft legislation for Hawaii, so he was really well-informed on the issues we were discussing and was able to provide some good examples as to why it was important to get behind the bill.
Tae Darnell, Sensi Media:
I’ve been deeply involved with Hawaii since 2010, when I drafted the first version of the medical marijuana bill that just passed. Although much has shifted since the original version, I’ve developed close connections at the state level and have a particular affinity for Hawaii’s role in the advancement of cannabis regulation because of those relationships.
When Ean approached me about lobbying with Michael and speaking with the federal arm of Hawaii (one of those being Senator Schatz’s office), I jumped at the opportunity. I think it’s incredibly helpful to be able to share direct experience and engage conversation that personalizes the story at a federal level. I also think it helps to be able to diversify perspective. In that regard, Ean was able to share his NCIA experience as well as Denver Relief’s experience both as a dispensary and consultant. I was able to share my experience as an (almost) 10-year cannabis lawyer who assisted Colorado with HB 1284, SB 109, and A64, and also as a drafter of Hawaii’s legislation. As a co-founder of Surna and Sensi Media, I was also able to share my experience as an entrepreneur on the ancillary side.
In the end, and based on my experience as a cannabis lawyer and entrepreneur, I’m incredibly excited that the work of NCIA is able to facilitate such incredible accomplishments. The countless hours of effort, put in by so many, are rewarded when we, as an industry, are able to accomplish goals like gaining sponsorship for critical banking legislation. I think successes like these are further validation of how critical it is that we continue to aggressively support the work of NCIA. The time is now to effect change, and the nearly 1,000 member businesses of NCIA are a major catalyst for why it’s happening.
Want your voice heard in our nation’s capitol on issues affecting the cannabis industry? Join us for our 6th Annual NCIA Member Lobby Days in Washington, D.C., on May 12 & 13, 2016.
To make the most out of the Lobby Days experience, register early so that we can begin the process of setting up meetings for you on the Hill. Members who register before April 30th will be entered to win admission and travel expenses for two at NCIA’s Cannabis Business Summit & Expo, including airfare and lodging.
Breaking It Down: Appropriations
by Michelle Rutter, NCIA Government Relations Coordinator
CannApprops
Every year, Congress must pass appropriations legislation to fund federal government operations for the upcoming fiscal year. This annual funding bill has been one of the only avenues by which pro-cannabis reform language can be inserted into the federal budget, due to Congress’ inability to pass meaningful stand-alone legislation addressing the legal cannabis industry.
The Appropriations Committees have always been two of the most influential committees in Congress, since the Committees’ power is derived from its ability to disburse funds. The House Appropriations Committee is currently chaired by Rep. Hal Rogers (R-KY), with Rep. Nita Lowey (D-NY) as the highest-ranking Democratic member, and the Senate Appropriations Committee is chaired by Thad Cochran (R-MS) with Barbara Mikulski (D-MD) as the ranking Democrat.
Because it is unlikely that Congress will enact stand-alone pro-cannabis legislation this session, NCIA has decided to focus intensely on the appropriations process this year. In addition to making sure that the Rohrabacher-Farr medical cannabis amendment passes for the third year in a row, NCIA will be focusing on getting amendments included in the final budget bill that pertain to banking access and that protect all state-compliant cannabis businesses, not just medical ones. The continued inclusion of the Rohrabacher-Farr amendment in the final budget bill is crucial to cannabis policy moving forward into a new administration. We at NCIA want to ensure that this amendment is seen as non-controversial as we go into FY2017.
Over the years, the budget process in Washington, D.C. has become broken and it has become harder for Congress to perform basic functions. New Speaker of the House Paul Ryan (R-WI) has thrown his support behind returning to “regular order” in the budget process – meaning that Congress would return to the piece-by-piece appropriations process rather than passing large omnibus budget bills as has been the case in recent years. Although the Speaker has good intentions, small groups and caucuses in the House of Representatives are unhappy with the spending levels proposed in many of the new appropriations bills, making it more likely that an omnibus bill will again be passed, despite Speaker Ryan’s desire to return to regular order.
This “regular order” of the appropriations process usually starts in February as various pieces of legislation works its way through the Appropriations Committee and finally to the House/Senate Floor. Congress typically starts with less controversial bills in April and then works through the spring and summer months until all appropriations bills are completed. Legally, they need to be completed by September 30th (as October 1st is the start of the new fiscal year). Regular order gives NCIA multiple opportunities to insert pro-cannabis amendments into the legislation. With an omnibus or stopgap bill, it becomes much more difficult to include pro-cannabis amendments.
In Years Past
Last year, there were two pro-cannabis amendments included in the Commerce, Justice, and Science Appropriations bill that made it into the final budget: the Bonamici-Massie industrial hemp amendment and the Rohrabacher-Farr medical marijuana amendment. The Bonamici-Massie amendment blocks federal money from being used to prevent states from allowing the use, distribution, possession, or cultivation of industrial hemp. This means that the federal government cannot use federal funds to enforce federal law against state-compliant businesses dealing with hemp. This measure passed the House of Representatives overwhelmingly: the vote was 282-146, with 101 Republicans voting in favor.
The second pro-cannabis amendment in the FY2016 budget was the Rohrabacher-Farr medical marijuana amendment, which was included for the second year in a row. This amendment bans the Department of Justice from spending money to prevent the implementation of state-level medical cannabis programs, in addition to removing funding for federal medical cannabis raids, arrests and prosecutions in states where medical cannabis is legal. The vote count increased from 219-189 in 2014 to 242-186 this year, with 67 Republicans voting ‘Yes’. Just like the Bonamici-Massie hemp amendment, the Rohrabacher-Farr amendment prohibits the Department of Justice from enforcing federal law against state-legal medical cannabis businesses.
Remember…
It’s crucial to remember that these appropriations amendments only pertain to the current fiscal year and have to be voted on and renewed every year. The NCIA team and our lobbyists in Washington, D.C., are working intently with appropriators and other Members of Congress to ensure that pro-cannabis amendments and provisions are included in the federal budget this year – whether that be through “regular order” or otherwise.
Want your voice heard in our nation’s capitol on issues affecting the cannabis industry? Join us for our 6th Annual NCIA Member Lobby Days in Washington, D.C., on May 12 & 13, 2016.
To make the most out of the Lobby Days experience, register early so that we can begin the process of setting up meetings for you on the Hill. Members who register before April 30th will be entered to win admission and travel expenses for two at NCIA’s Cannabis Business Summit & Expo, including airfare and lodging.
Guest Post: Cash Management in the Cannabis Industry
Jeff Foster, Co-Founder, Jane, LLC
Interviewed by Vinnie Fiordelisi, Sr. Director of Corporate Communications, Jane, LLC
Jeff Foster, co-founder of Jane
For nearly two decades, Jeff Foster has worked with some of the world’s largest retailers and financial institutions to define, design, and implement e-commerce and retail payment processing and risk management solutions. Here he shares some advice and insights on cash management and financial services in the cannabis industry.
What is the state of cash management in the cannabis industry?
It’s a real mess. Employee theft is even higher than in bars and restaurants. Many of the dispensary owners we talk to say it’s as high as 10-15% of sales. Robberies are a real threat. The cash reconciliation process is time-consuming, costly, and susceptible to human error. But the biggest issue is it’s almost impossible to run a multi-million dollar business with all cash.
What are the common problems you hear from dispensary owners when it comes to them doing business effectively and simply?
The cannabis business has the most complicated legal and regulatory framework in the history of retail and many of the dispensary owners are first-time entrepreneurs. Combine these two things, further complicate it by a lack of banking and a business that is bustling seven days a week, and you find it extremely difficult to navigate this constantly evolving landscape.
What challenges do dispensaries face as it relates to financial services?
What challenges don’t they have? Very few have access even to depository banking, much less checking. Most cannot process credit or debit cards legitimately so they are on a strictly cash basis. So imagine having to make payroll, pay rent, or buy hundreds of thousands of dollars worth of product without the ability to write a check or send a wire. Most of the dispensary owners we talk to spend as much as 25% of their time simply managing this process. With full access to banking and financial services those same tasks would take almost no time at all.
Where do the federally regulated banks stand on working with cannabis businesses?
Marijuana is still a Schedule I drug, selling it is a felony, and the Bank Secrecy Act prevents banks from taking deposits known to be a result of a crime. This obviously makes the landscape particularly treacherous for a federally chartered bank.
I do believe more and more banks will get involved in the marijuana business. We are seeing it with the financial institutions we are working with in Colorado for our Triple Play program. There is too much momentum and popular acceptance to put the genie back in the bottle. So it is important for marijuana retailers to be prepared. Banks that do accept cannabis businesses are going to be very cautious and only accept clients that are unquestionably above board and fully transparent.
Any final advice for dispensary owners?
Yes, for dispensaries accepting Visa and MasterCard, my advice is to stop unless and until you have signed a contract that includes the name of the bank. I’ve been in payment processing for almost 20 years and our other company currently processes over $3 billion annually in Visa/MasterCard for some of the largest retailers in the world, so I have some knowledge on the subject. There are very few sponsor banks in the U.S. who will knowingly accept a merchant in the cannabis business and both Visa and MasterCard strictly prohibit utilizing a bank outside of the U.S. for domestic transactions.
Unfortunately some dispensary owners have been led to believe that if they have a terminal and their deposits show up in the bank that “it’s working.” Well that may be true, but I can nearly guarantee there is a break in the chain somewhere and that broken link can lead to fines in the hundreds of thousands of dollars and expulsion from the Visa/MasterCard network for life…just for a start.
Banking is coming. Credit card processing is coming. Dispensary owners need to focus on running their businesses within the framework established by the Department of Justice, the Financial Crimes Enforcement Network and their state and local laws regarding the sale of marijuana. If they do that, and remain patient, they will be first in line as legitimate financial services finally arrive.
Jeff Foster is co-founder of Jane, LLC, a Sponsoring level member of NCIA since July 2014. For nearly two decades, Jeff has worked with some of the world’s largest retailers and financial institutions to define, design and implement e-commerce and retail payment processing and risk management solutions. Jeff co-founded Jane after recognizing the overwhelming need for cash management and financial services solutions in the legal cannabis industry. As an innovator in financial services, Jeff is a sought-after expert and speaker. He has been quoted in numerous publications including; The Wall Street Journal, Business Week, The Financial Times, The Washington Post and The Washington Business Journal and has appeared on Bloomberg Television and ABC News. Jeff also speaks at countless financial services and cannabis trade shows globally, where he advocates and educates on everything from strategy and trends to best practices.
Member Spotlight: Palm Springs Safe Access
Every month, we zoom in on one of our members to hear their stories and learn more about their businesses in this ever-changing industry. For the month of April, we visit with Robert Van Roo of Palm Springs Safe Access in California. PSSA is a not-for-profit medical cannabis dispensary offering a modern, sophisticated environment for qualified patients to access affordable, high-quality, safety-tested medicine. PSSA strives to be a model corporate citizen, partnering with other organizations to help improve the community’s collective health.
Cannabis Industry Sector:
Medical Cannabis Provider
NCIA Sustaining Member Since:
October 2014
Tell us a bit about you and why you opened Palm Springs Safe Access (PSSA)?
My name is Robert Van Roo and I’m the co-founder and president of Palm Springs Safe Access. It’s been fifteen years since my first experience with cannabis. Spending most of my youth and adult life in Grass Valley and San Francisco, I’ve been exposed to a lot of friends working in the industry. I’ve seen this medicine change countless lives and it’s changed mine as well.
Throughout 2009, President Obama’s speeches struck a chord with me, with clear messages encouraging entrepreneurs to be bold and create new jobs and change. I took this calling very seriously – although I’m sure he wasn’t aiming at cannabis startups. To hone that entrepreneurial spirit, I knew I couldn’t stimulate job growth as a photographer. However, I saw the potential through cannabis. So began my journey working in the California cannabis industry, with the first iteration of Palm Springs Safe Access (PSSA) taking shape in late 2011.
CEO and Co-founder, Robert Van Roo, and VP & Chief Agricultural Officer, Cody Henderson
At PSSA we believe when entrepreneurs with the right intentions work with cannabis, it can better the communities in which they operate and someday change the world. The uses of this plant are endless. This industry has the capacity to change lives and create new economic growth not seen in the United States for generations. We understand this is a utopian view, but that’s why Cody Henderson and I opened Palm Springs Safe Access. We did it to create change.
Why should patients seeking medical cannabis come to Palm Springs Safe Access?
We believe that our patients deserve an exceptional experience that begins the moment they walk through the doors of our facility and continues when they return home and use their medicine. Steve DeAngelo said it the best: “Out of the shadows, into the light.” I took this statement literally, so we built a well-lit facility with sweeping views of the mountain range here in Palm Springs.
Cody and I are both artists by trade, so naturally we had to have a creative and visually stimulating space. We worked with an 8,000-square-foot blank slate, with just concrete floors and four walls with no power. Everything was done in-house, from the interior design to the layout, down to the manufacturing of light fixtures and the finish work.
We continued this trend with our in-house cultivation. This ensures best practices and quality control for our patients. When it comes to products we didn’t produce ourselves, we carefully vet sources and individuals, in many instances physically going throughout California to see for ourselves where the products provided to our patients are cultivated, manufactured, and branded.
Our patients deserve only the best. Absolutely all our medicine is lab-tested for safety and potency. Independent testing by the City of Palm Springs verifies that we have the cleanest products in the city. Our flowers are nitrogen-flushed and then sealed with Boveda packs inside. All the latest science points to the important roll terpenes play in the medicinal qualities of each specific strain. That makes this collaboration with Boveda, the leader in two-way humidity control, very exciting because early research is already showing that there is 15% retention of terpenes when the 62% moisture packs are present. The packs add moisture as well and since Palm Springs is located in low desert we have to compete with dry conditions.
We believe patients should seek out our facility for the exceptional experience and highest assurance of safety that Palm Springs Safe Access provides through the tireless efforts of our entire team.
The Palm Springs Safe Access team
As a business owner, you’re very involved in your community and in causes that you care about. Can you tell us more about what matters most to you, and how your business participates in pushing for progress?
When it comes to cannabis, education and knowledge is paramount; we tirelessly work to educate patients, politicians, physicians, and peers in the industry. Lab testing became a benchmark mainly because those seeking the benefits of this plant often have compromised immune systems. Late in 2012, I began educating and lobbying the City of Palm Springs in regard to the importance of lab testing. Last year Palm Springs became the first city to ever contract a cannabis lab and independently test medicine being dispensed in their city.
I stay as active as possible with politics on local, state, and federal levels, continuing the conversation with city council members, members of Congress, and senators. We regularly create education and policy reports and actively engage policy makers. On a state level, we participate on both the Legislative and Retail/Delivery Committees with the California Cannabis Industry Association (CCIA) and stay as active as possible with NCIA. In May, I’ll be going to Lobby Days in DC for my second year.
When it comes to community involvement, the support of local organizations is key, and PSSA does its part. We are regularly involved with charitable events and infuse local charities and political activism groups with significant donations, support, and sponsorships. We believe it’s our responsibility to be involved in creating change locally. We strive to represent an accurate picture of our industry as active community partners and show what the cannabis industry can do.
We contribute as much time as possible to the NCIA Minority Business Council, which aims to create an inclusive and diverse industry respectful of all persons and create unique opportunities to attend NCIA events. This is a huge undertaking and we believe with proper programs in place our industry can provide job opportunities for under-represented and disadvantaged groups and individuals to gain insight on opportunities that are available in the industry. That’s why we support the NCIA Minority Business Council scholarship program whenever possible.
Why did you join NCIA?
Robert Van Roo, CEO and Co-Founder of Palm Springs Safe Access
Joining NCIA was the first thing PSSA did when we received our local permit. While PSSA was successful in Palm Springs, the fight for fairness on a state and federal level was clearly the end game. It was the next logical step to take, and we believe it’s our responsibility as a legitimate and responsible member of the industry to support the important causes NCIA addresses.
When we joined, we were focused on helping advance causes like fair taxation, access to banking, and sensible policy on cannabis. Since then, NCIA has become so much more than that to us. It’s a community of like-minded cannabis entrepreneurs. We’ve developed relationships with industry peers throughout the country at NCIA events. We’ve expanded our breadth of best practices through the education received at the exemplary NCIA summits and symposiums and have managed to stay current with the ever-changing landscape of the cannabis industry.
To make the most out of the Lobby Days experience, register early so that we can begin the process of setting up meetings for you on the Hill. Members who register before April 30th will be entered to win admission and travel expenses for two at NCIA’s Cannabis Business Summit & Expo, including airfare and lodging.
Help Economists Determine the Cost of the Banking Crisis
Editor’s Note: From time to time, NCIA hears from researchers looking into an issue related to the cannabis industry. Recently, two Northwestern University economics Ph.D. candidates contacted us because they are studying the economic impact of the cannabis industry’s lack of banking access. In order to complete their research, they need real-world data from cannabis businesses like yours.
This blog post explains their research. We encourage our members to take part in their research, as the results can help support our case for an immediate banking solution. To get involved, contact them at bornstein@u.northwestern.edu or gaby@u.northwestern.edu.
A large number of banks in this country are not willing to work with businesses in the cannabis industry, even when those sales are legal under state law. This is causing major difficulties for thousands of business owners that are forced to operate on a cash-basis. But are they the only ones to suffer? Using straightforward economic analysis we ask who is losing due to these restrictions. The short answer is – almost everyone. Not only businesses are being hurt, but also consumers. In addition, such restrictions also decrease the revenues of the government.
While it is not difficult to argue, as we do below, why restricted access to banking services is bad for the economy, quantifying the different costs is a complicated task. It requires rich data on the costs incurred by businesses together with modern econometric techniques. In the next few months, we plan on collecting the required data to tackle such task. We believe that quantifying these costs is both of scientific interest and of that of the legal cannabis industry. If you are in the legal cannabis industry and would like to get more information about our study, we encourage you to contact us! Our contact information is listed at the top of the page.
In economics, when we want to analyze the effects of a government policy on market participants (consumers and producers) a first and simple approach is to look at the changes in consumer surplus (CS) and producer surplus (PS). These two measures represent what consumers and producers win by participating in the market.
FIGURE 1
As reference, Figure 1 shows what market equilibrium, CS and PS would be in the market for marijuana products if everyone had access to banking. If we think of the market demand function as representing how much consumers benefit from each transacted quantity, CS can be computed as the shadowed area in Figure 1 below the demand curve. Similarly, if we think of the market supply function as representing how much it costs to sellers to produce each transacted quantity, PS is the shadowed area in Figure 1 above the supply function.
FIGURE 2
What is the effect of banking restrictions on market equilibrium, CS and PS? Not having access to banking implies that producers have to take additional measures in order to be able to sell: install ATMs, hire security companies, allocate extra time to counting and moving cash, etc. This means that for each quantity transacted, the cost of doing so is higher than before. For the sake of simplicity, let’s think that these extra costs can be measured in dollars and correspond to a linear cost of $T per unit. In this case, such increase would shift the market supply curve as shown in Figure 2. Market equilibrium would feature a higher price and lower quantity.
We can decompose the effect on CS and PS as shown in Figure 3. There are two factors that reduce both CS and PS. First, consumers and producers share the burden of the extra cost generated by the lack of access to banking, this is represented by area X in Figure 3 that reduces both surpluses. Second, since the quantity transacted is now lower than before, there is an irrecoverable loss for both consumers and producers represented by area D in figure 3.
FIGURE 3
What is the difference between areas X and D? Well, area X is not entirely a loss to society as a whole: it includes payments to security companies, so it is a transfer from one sector to another, but it also includes the cost of the extra time needed to process cash payments, which could be better allocated to leisure or working in something else. Area D, on the other hand, is entirely a loss to society: if the market had access to banking, costs would be lower and quantity transacted would be greater and at a lower equilibrium price. New consumers would be incorporated into the market, and existing consumers would pay less.
Gideon Bornstein and Gabriela Cugat are two economics PhD candidates from Northwestern University in Evanston, Illinois, who are studying the costs incurred by businesses transacting only with cash.
Editor’s Note: In January, Ean Seeb, who serves on the Board of Directors for NCIA and is co-founder of Denver Relief and Denver Relief Consulting, coordinated with NCIA’s Director of Government Relations Michael Correia to arrange personal meetings with congressional offices in Washington, D.C.
Ean Seeb speaks at NCIA’s Policy Symposium in 2015
In December, while planning for a January business trip to Washington, D.C., I realized that I should take the opportunity to use some downtime to lobby Capitol Hill offices on issues affecting the cannabis industry. I reached out to NCIA’s Executive Director Aaron Smith and Director of Government Relations Michael Correia and announced my intention. I was amazed at their responsiveness and support for my idea.
The whole planning process was quite easy. I let them know the date I was available and the focus of my trip and let the D.C. office coordinate logistics. Denver Relief Consulting has business interests in Hawaii and I wanted to focus on that state’s Congressional delegation. My goals were to update offices on medical marijuana implementation in Hawaii and ask these offices to co-sponsor The Small Business Tax Equity Act of 2015 (S. 987 & H.R. 1855), which amends Internal Revenue Code Section 280E to allow cannabis businesses in compliance with state law to take standard tax deductions and credits relating to business expenses.
The trip went very smoothly. I met up with Michael the evening before our meetings to discuss issues and logistics. Although I am well-versed on issues affecting our industry, it was really informative for me to sit down with him and discuss our focus, strategy, and talking points. We were joined by NCIA Member Tae Darnell, CEO of Sensi Media, whose background on cannabis reform in Hawaii goes back many years and was a great asset to our meetings.
We visited offices in both the Senate and House of Representatives, and each office was very informed about cannabis issues, was responsive to our concerns, and asked insightful questions. I remember back in 2013 when NCIA held its 3rd annual member lobby days. During those meetings, staffers would drop their jaws and say “You’re here to talk about what?” It was almost humorous because, back then, staffers were still in shock that cannabis issues were being brought to them. This time, one of our meetings lasted a full hour! The reception from congressional offices has evolved significantly over the past five years, and that can be attributed to the work NCIA has done on the ground.
The National Cannabis Industry Association’s 5th Annual Lobby Days in Washington, D.C.
Although our meetings were with Democratic offices, who tend to be supportive of our issues, they were still not co-sponsors of legislation that would solve our 280E tax problems. The offices really appreciated tying the issue to Hawaii and answering questions specifically related to the state and how 280E will negatively affect their constituents. Each of the offices will discuss co-sponsoring legislation in the future, and our D.C. office will continue working with them to gain their support.
I did my homework with information provided by NCIA through newsletters, packets, and the website. An hour’s worth of studying on the front end made for some really powerful and effective meetings. As an NCIA member, it was personally and professionally fulfilling to be able to leave the Capitol thinking, “Today, I made some good progress on our issues, and for our industry, through the work done with these folks.”
We love nothing more than getting our members in front of lawmakers. That’s where change happens. https://t.co/kcdYFf6oJT
I wholeheartedly encourage other NCIA members not only to go to NCIA’s 6th annual Member Lobby Days in May — but also to go to D.C. on your own. The NCIA Government Relations team will be there with you every step of the way.
As I was leaving, Michael said, “Please tell other members who happen to be traveling to D.C. that we are available for any NCIA member, at any time, who wants us to coordinate personal meetings with congressional offices.”
If you are interested in contacting NCIA’s Government Relations department to schedule meetings with Members of Congress in Washington, D.C., please email Government Relations Coordinator Michelle Rutter at michelle@thecannabisindustry for more information.
NCIA’s High-Impact Quarterly Cannabis Caucuses – Q1 Photos and Feedback
Last week we wrapped up the first quarter of our newly established event series, the Quarterly Cannabis Caucuses. Thanks so much to the nearly 500 members, speakers, supporters, and volunteers that engaged with NCIA’s federal advocacy work at caucuses in twelve cities across the country!
“Last night we attended the National Cannabis Industry Association meeting and were reminded about the crucial importance of advocacy in this election year. The continued reform of our drug laws and the nation’s growing access to cannabis is not a given.”– Kiva Confections
“I had the pleasure of attending both the Denver and Las Vegas NCIA caucuses and can’t begin to say enough good things. The content, location, and format were on point. I got to catch up with lots of colleagues, who were able to introduce me to prospective customers, and I was also able to meet several new entrants to the industry. I made amazing business connections and was able to set up 5 meetings for the following day.” – Amanda Ostrowitz, Co-Founder & Chief Strategy Officer, CannaReg§
“Last night at NCIA’s Quarterly Cannabis Caucus, I opened it up by expressing the importance of national advocacy. We all know the importance of local and state advocacy but the biggest threat to my business is 280E. This is the IRS tax code that does not allow dispensaries to write off ANY expenses. We just want to be treated like every other small business in America. This tax theft will happen every year until the tax code changes. Simply put, the IRS has robbed me and my patients. This is just one reason why federal law MUST CHANGE. Get involved, get active, and join the National Cannabis Industry Association.”– Aaron Justis, Buds & Roses
Looking for downloadable versions of the information we provided at the first round of Cannabis Caucuses? Check out our Cannabis Caucus Resources page.
The next events in the Quarterly Cannabis Caucus series will come to you in April. So check out the dates below, mark your calendar, and register online now by visiting the NCIA Events page!
Have any feedback from an event you attended? Want to suggest a particular topic you would like covered at our next Cannabis Caucus in your area? Fill out our short attendee survey to provide us with valuable feedback we’ll use to improve future events.
Interested in sponsoring an upcoming Cannabis Caucus in your area or a series of events across the country? Check out our Cannabis Caucus sponsorship guide which outlines pricing and benefits, as well as discounts on packages for our third annual Cannabis Business Summit & Expo taking place this year in Oakland, June 20-22.
See you at the next Caucus!
New Cannabis Banking Action in the House
On Tuesday, February 2, the U.S. House of Representatives Committee on Rules held a hearing on the Financial Institution Customer Protection Act of 2015 (H.R. 766). This bill prohibits federal agencies – including banking agencies – from terminating certain bank accounts simply due to the nature of their business. The bill was introduced by Rep. Blaine Luetkemeyer (R-MO), as a response to the Department of Justice’s Operation Choke Point, which puts banks under scrutiny for their work with businesses the DOJ considers at risk for fraud or illegal activities, even when the businesses themselves are operating legally. Rep. Luetkemeyer’s bill would limit law enforcement’s ability to restrict access to the banking system.
Longtime cannabis champion Rep. Ed Perlmutter (D-CO) used this hearing as an opportunity to offer an amendment to the legislation. His amendment would have allowed banks and credit unions to offer financial services and maintain relationships with state-legal, licensed cannabis businesses, without fear of federal prosecution. In addition to Congressman Perlmutter’s testimony, Representatives Jared Polis (D-CO) and Alcee Hastings (D-FL) spoke in favor of the amendment.
When NCIA first learned of the hearing last week, our Government Relations office coordinated with Rep. Perlmutter’s staff and advocated for the amendment with Rules Committee Members and staff. Although our cannabis champions on Capitol Hill spoke eloquently on behalf of the amendment, the committee ultimately voted it down. The 3-9 vote broke along party lines, with all Democrats voting in favor and all Republicans voting in opposition.
NCIA salutes all our Capitol Hill advocates who continually stand up for the cannabis industry, and especially Rep. Perlmutter for taking the lead on banking reform. Although this effort fell short in the end, it served as a powerful message to Members of Congress that NCIA and its allies will look for every opportunity to fight for the fairness and respect our industry deserves.
This year will be truly historic for cannabis reform and it’s time for Congress to clarify the conflict between the federal government and the states on cannabis and address this vital issue. NCIA continues to advocate on your behalf every day so that all legal, state-sanctioned cannabis businesses may eventually access financial services and stop being discriminated against.
2016: What’s Next?
by Michelle Rutter, Government Relations Coordinator
This year is arguably the most crucial yet for the burgeoning cannabis industry, especially as it relates to policy. Although NCIA primarily advocates for cannabis reform at the federal level, what happens in each individual state is vital to the stances Members of Congress take on our issues.
Members of Congress care deeply about issues that directly affect their specific state or district. It’s imperative that more states enact cannabis reform legislation so that more Members have a vested interest in protecting their constituents. While cannabis reform is sweeping the nation at an almost unprecedented rate, it takes time for politicians in Washington, D.C., to catch up with public opinion back home. If all of the federal lawmakers representing just the 15 states mentioned below were to vote positively on pro-cannabis legislation, it would add up to more than 180 Representatives and nearly 30 Senators.
Take a look below and see what’s coming up next in 2016. Remember that by becoming a member of NCIA, you are adding your voice to the coordinated and unified campaign at the federal level to allow cannabis businesses access to financial services, fix tax section 280E, and ultimately end federal cannabis prohibition.
The United States of Cannabis
Arizona activists remain ahead of schedule and have nearly gathered the 150,000 signatures needed to put the state’s Campaign to Regulate Marijuana Like Alcohol initiative on the November 2016 ballot. (The campaign ultimately aims to collect 230,000 in order to insure against signature drop-off.) It’s estimated that Arizona’s adult-use market could be worth up to $480 million.
With a multi-billion-dollar cannabis industry in California alone, passing an adult-use legalization initiative in the state is vital to ending federal prohibition. The most prominent full retail initiative gathering signatures for the November 2016 election is the Adult Use of Marijuana Act, which is backed by billionaire Sean Parker and the Marijuana Policy Project.
Legalize Maine and the Marijuana Policy Project have joined forces to legalize adult-use cannabis in 2016. Legalize Maine has already collected 80,000 signatures. Only 61,000 signatures are necessary to place the measure on a statewide ballot, but the organization’s goal is 95,000, to insure against drop-off. The deadline to submit signatures is February 1st.
Last August, a pair of cannabis advocacy groups separately filed paperwork to get adult-use legalization on the 2016 ballot in Massachusetts. The state recently confirmed that a measure to legalize recreational cannabis next year has enough valid signatures to force the legislature to consider the measure. If the legislature decides to pass, then the campaign will have to collect another 10,792 signatures to formally make the November ballot.
There’s no question that adult-use legalization will be on the ballot this year in Nevada. Initiative Petition 1, which would tax and regulate marijuana similarly to alcohol, has been certified for the 2016 ballot. Backers had previously collected nearly 200,000 signatures to either force legislators to enact their initiative or put it on the ballot. When state lawmakers abstained from voting on the issue, the measure was automatically forwarded to this year’s ballot for a popular vote.
In Florida, the group United for Care received clearance from the state Supreme Court for a 2016 ballot measure that would legalize medical marijuana. The group nearly succeeded in legalizing medical marijuana in 2014, garnering 58% of the vote but falling barely short of the state’s constitutionally mandated 60% margin needed to pass,
The nation’s capital continues to debate cannabis. In December’s federal budget bill, the taxation and regulation of marijuana in Washington, D.C., was blocked by Congress again, though possessing and gifting cannabis remains legal in the city.
This month, Hawaii will begin accepting applications for medical cannabis businesses. The bill signed into law last summer opens the door for up to 16 dispensaries on the islands.
It was recently announced that Illinois saw approximately $1.7 million in medical cannabis sales during November and December of 2015. There are already petitions being circulated in the state that would expand the law’s qualifying conditions.
Maryland will award cannabis cultivation, processing, and dispensary licenses this summer. Industry advocates were pleased with the amount of interest the state’s program garnered: more than 1,000 applications were submitted.
Officials in Michigan have approved language for three different adult-use cannabis legalization initiatives for the 2016 ballot. In order to have the best chance of passing, it’s important for these groups to coalesce behind one initiative.
At the end of 2015, New Hampshire began issuing medical marijuana cards to qualifying patients. It’s expected that the state will open medical dispensaries in 2016.
After a long and arduous journey, New York’s medical cannabis program became operational this month. The cannabis industry expects the program and the law’s qualifying conditions to expand this year.
In the first week of 2016, Oregon began accepting adult-use cannabis business license applications. The state has no limit on how many licenses they will decide to award.
Vermont may become the first state to legalize adult-use cannabis through the legislative process in 2016. The proposed bill would allow for up to 86 storefronts and five different business license types.
Bonus: Election 2016 – Yes, We Canna
As we all know, a new president will be elected this November, and with that a new administration will assume power next January. It is very crucial that Congress pass more pro-cannabis legislation before then.
It’s probable that Attorney General Loretta Lynch will be replaced in 2016 or early 2017. This is important because it is the Department of Justice that enforces and prosecutes federal marijuana laws.
Another possibility for 2016 is that the acting head of the Drug Enforcement Administration, Chuck Rosenberg, could be replaced as well. Rosenberg is notorious for his gaffe last year when he called marijuana “probably” less dangerous than heroin.
On New Year’s Eve, officials from the Substance Abuse and Mental Health Services Administration posted a notice on the Federal Register that calls for a report “presenting the state of the science on substance use, addiction and health” to be released in 2016. Industry advocates are hopeful that this report could be the first sign of re- or de-scheduling cannabis from the Controlled Substances Act.
During 2016, NCIA will continue working with D.C.-based public affairs firms Heather Podesta + Partners, and Jochum Shore & Trossevin PC to magnify our efforts to address the industry’s top federal priorities: access to basic banking services and fair federal taxation.
In addition to NCIA’s lobbying and advocacy efforts, NCIA exists to connect and educate our members on all facets of the cannabis industry. Our industry supports tens of thousands of jobs, tens of millions in tax revenue, and billions in economic activity in the United States.Our core mission is to ensure that our members are treated like businesses in any other American industry. Join NCIA today to get involved and be a part of the cannabis revolution!
Video Newsletter: The Fourth Corner Credit Union Ruling and What You Can Do
We’re back with NCIA’s first video newsletter of 2016!
Earlier this month, a federal judge dismissed a lawsuit filed against the Federal Reserve by the Fourth Corner Credit Union, which had planned to provide banking services to the cannabis industry, but was denied a master account by the Fed.
Watch this month’s video to find out how the ruling affects NCIA’s work to pass a banking solution in Congress and how you can help by pressuring Members of Congress to pass the Marijuana Business Access to Banking Act.
Want your voice heard in our nation’s capitol on issues affecting the cannabis industry? Join us for our 6th Annual NCIA Member Lobby Days in Washington, D.C., on May 12 & 13, 2016.
Timeline: 2015 Legislative Year in Review
by Michelle Rutter, Government Relations Coordinator
As we look forward to 2016, there’s much on the horizon for the cannabis industry. NCIA remains dedicated in its effort to pass banking and tax legislation through Congress that would provide immediate relief to cannabis-related businesses all over the country.
In addition to the federal advocacy that NCIA engages in every day, there will be at least five states seeking to legalize and regulate adult-use cannabis via the ballot initiative process: Arizona, California, Maine, Massachusetts, and Nevada. It’s also likely that Florida will have another ballot initiative relating to medical cannabis, and it’s possible that other states will move forward with cannabis reform through ballot initiatives or legislative processes. What happens over the next twelve months will be crucial in shaping the future of the legitimate and responsible cannabis industry.
While 2015 was a milestone year for cannabis reform, that same momentum will be necessary in order to continue moving the conversation forward with Congress in Washington, D.C. The Rohrabacher-Farr medical cannabis amendment earned more that 60 Republicans votes. For the first time ever, there are multiple pro-cannabis bills that have been introduced in the U.S. Senate. Continued progress is vital in garnering more national support for cannabis reform, so make sure your interests are heard through national advocacy, education, and community with NCIA.
The timeline below lays out some of the highlights from a busy year in cannabis industry advocacy. We look forward to more exciting milestones with your help in 2016!
*Click on the “Full Screen” button (with the four arrows) at the bottom of the image to expand its size.
Member Spotlight: Hypur
For December’s member spotlight, we zoom in on Arizona-based Hypur, an NCIA member business who is committed to “innovation with purpose” by providing solutions for one of our industry’s major hurdles: financial compliance. Navigating the various layers of regulations with mastery is an important aspect of being transparent, legitimate, and compliant, and is an essential cornerstone of NCIA’s mission and values.
Our solution is a technology platform that provides unprecedented transparency and accountability for banks and regulators, and legitimacy, safety, and convenience for businesses and their customers. With many banks and credit unions wanting to bank these booming industries, and government bodies wanting banking services available to them, we knew the demand for our platform would be robust. Hypur represents the future of commerce for cash-intensive businesses and high-risk challenging industries. Hypur’s technology provides financial institutions with a state-of-the-art compliance platform that enables them to profitably bank these businesses – revolutionizing the businesses and the communities they operate in.
What kind of banking and payment solutions does Hypur provide?
The Hypur payment network is available to clients of our financial institutions. It gives retail locations the ability to accept cashless payments from their consumers via their mobile devices. Additionally, businesses that have accounts at Hypur partner financial institutions have the ability to conduct business-to-business transfers electronically without cash.
Can you give us some insight into the unique regulations that affect cannabis business owners in your sector?
Hypur serves financial institutions, which must comply with FinCEN guidance and all BSA/AML laws that govern their institutions. They must also comply with regulatory expectations from the FDIC (Federal Deposit Insurance Corporation), OCC (Office of the Comptroller of the Currency), or NCUA (National Credit Union Association).
Why did you join NCIA?
Hypur always seeks to support leading organizations that intersect with industries of interest. We have taken note of the many important ways that NCIA is advocating for fairness, education, and awareness for the legal cannabis market, and are delighted to be a part of the NCIA community.
Video Newsletter: 5 Years of Advocacy, Education, and Community
Even if you couldn’t attend NCIA’s 5th Anniversary Banquet held in Las Vegas on November 11th, you can still reflect on five years of industry advocacy, education, and community with a few of our founding members in this video presentation.
We are proud of the nearly 1,000 member-businesses that have come together as the unified voice of the cannabis industry.
Not yet a member of NCIA? It’s never too late to get involved in paving a prosperous future for the cannabis industry — join today!
Special Thanks to: Christie Lunsford, Jay and Diane Czarkowski, Brian Vicente, Ean Seeb, Erich Pearson, Étienne Fontán, Julianna Carella, Jill Lamoureux, Rob Kampia, and Steve DeAngelo.
The 5 Critical Pieces of Cannabis Legislation You Need to Know About
by Michelle Rutter, Government Relations Coordinator
As the cannabis industry has continued to thrive and expand, the number of bills in Congress dealing with the issue has done the same. Between the House of Representatives and the Senate, there are well over a dozen bills that address the conflicts between state and federal cannabis policy. NCIA’s lobbying efforts focus primarily on banking access and the unfair taxation caused by Section 280E, but we also advocate for other bills that are crucial for the industry. Below are my choices for “The 5 Critical Pieces of Cannabis Legislation You Need to Know About”:
BANKING H.R.2076: Marijuana Businesses Access to Banking Act of 2015 Introduced by: Rep. Ed Perlmutter (D-CO, 7th District) Last Action: Referred to House Subcommittee on Crime, Terrorism, Homeland Security, and Investigations on June 1, 2015. Summary: This bill would provide a safe harbor for depository institutions providing financial services to a cannabis-related business insofar as it prohibits a federal banking regulator from: (1) terminating or limiting the deposit or share insurance of a depository institution solely because it provides financial services to a marijuana-related legitimate business; or (2) prohibiting, penalizing, or otherwise discouraging a depository institution from offering such services.
S.1726: Marijuana Businesses Access to Banking Act of 2015 Introduced by: Sen. Jeff Merkley (D-OR) Last Action: Read twice and referred to the Committee on Banking, Housing, and Urban Affairs on July 9, 2015. Summary: Although the House and Senate cannabis banking bills are companions, the bill introduced by Sen. Merkley is slightly more detailed in its language.
The Senate bill would prevent federal banking regulators from: prohibiting, penalizing or discouraging a bank from providing financial services to a legitimate state-sanctioned and regulated marijuana business; terminating or limiting a bank’s federal deposit insurance solely because the bank is providing services to a state-sanctioned marijuana business; recommending or incentivizing a bank to halt or downgrade providing any kind of banking services to these businesses; or taking any action on a loan to an owner or operator of a marijuana-related business.
The bill also creates a safe harbor from criminal prosecution and liability and asset forfeiture for banks and their officers and employees who provide financial services to legitimate, state-sanctioned marijuana businesses, while maintaining banks’ right to choose not to offer those services. It would also require banks to comply with current Financial Crimes Enforcement Network (FinCEN) guidance, while at the same time allowing FinCEN guidance to be streamlined over time as states and the federal government adapt to legalized medicinal and recreational marijuana policies.
280E H.R.1855: Small Business Tax Equity Act of 2015 Introduced by: Rep. Earl Blumenauer (D-OR, 3rd District) Last Action: Referred to House Committee on Ways and Means on April 16, 2015. Summary: Amends the Internal Revenue Code by adding language at the end of Section 280E that would exempt a trade or business that conducts marijuana sales in compliance with state law from the prohibition against allowing business-related tax credits or deductions for expenditures in connection with trafficking in controlled substances.
S.987: Small Business Tax Equity Act of 2015 Introduced by: Sen. Ron Wyden (D-OR) Last Action: Referred to Senate Committee on Finance on April 16, 2015. Summary: This Senate bill is the companion to the H.R. 1855 described above. As such, the summary is the same.
STATES’ RIGHTS AND RESPONSIBILITIES H.R.1940: Respect State Marijuana Laws Act of 2015 Introduced by: Rep. Dana Rohrabacher (R-CA, 48th District) Last Action: Referred to the House Subcommittee on Crime, Terrorism, Homeland Security, and Investigations on May 15, 2015. Summary: Amends the Controlled Substances Act to provide that the provisions of the Act related to cannabis shall not apply to any person acting in compliance with state laws relating to the production, possession, distribution, dispensation, administration, or delivery of marijuana
CIVIL ASSET FORFEITURE H.R.3518: Stop Civil Asset Forfeiture Funding for Marijuana Suppression Act of 2015 Introduced by: Rep. Ted Lieu (D-CA, 33rd District) Last Action: Referred to the House Subcommittee on Crime, Terrorism, Homeland Security, and Investigations on October 5, 2015. Summary: This bill would prevent the Drug Enforcement Administration (DEA) from using federal forfeiture funds to pay for its Domestic Cannabis Eradication/Suppression Program. Additionally, the bill would ban transferring property to federal, state or local agencies if that property “is used for any purpose pertaining to” the DEA’s marijuana eradication program.
MEDICAL CANNABIS S.683: Compassionate Access, Research Expansion, and Respect States (CARERS) Act of 2015 Introduced by: Sen. Cory Booker (D-NJ) Last Action: Referred to Senate Committee on the Judiciary on March 10, 2015. Summary: Amends the Controlled Substances Act (CSA) to provide that control and enforcement provisions of such Act relating to marijuana shall not apply to any person acting in compliance with state law relating to the production, possession, distribution, dispensation, administration, laboratory testing, or delivery of medical marijuana.
Transfers marijuana from schedule I to schedule II of the CSA.
Excludes “cannabidiol” from the definition of “marijuana” and defines it separately as the substance cannabidiol, as derived from marijuana or the synthetic formulation, that contains not greater than 0.3% delta-9-tetrahydrocannabinol on a dry weight basis.
Prohibits a federal banking regulator from: (1) terminating or limiting the deposit insurance of a depository institution solely because it provides or has provided financial services to a marijuana-related legitimate business; or (2) prohibiting, penalizing, or otherwise discouraging a depository institution from providing financial services to a marijuana-related legitimate business.
Provides depository institutions that provide financial services to a marijuana-related legitimate business protection under federal law from federal criminal prosecution or investigation, criminal penalties, and forfeiture of legal interest in collateral solely for providing financial services to such a business.
Directs The Department of Health and Human Services to terminate the Public Health Service interdisciplinary review process described in the guidance entitled “Guidance on Procedures for the Provision of marijuana for Medical Research” (issued on May 21, 1999), and also demands the Drug Enforcement Administration to issue at least three licenses under CSA registration requirements to manufacture marijuana and marijuana-derivatives for research approved by the Food and Drug Administration. Also directs the Department of Veterans Affairs (VA) to authorize VA health care providers to provide veterans with recommendations and opinions regarding participation in state marijuana programs.
H.R.1538: Compassionate Access, Research Expansion, and Respect States (CARERS) Act of 2015 Introduced by: Rep. Steve Cohen (D, TN-9) Last Action: Referred to the House Subcommittee on Crime, Terrorism, Homeland Security, and Investigations on April 21, 2015. Summary: This House bill is the companion to S. 683 described above. As such, the summary is the same.
In addition to these crucial pieces of legislation, there are other bills relating to cannabis that have been introduced to Congress on issues like CBD, a federal excise tax on cannabis, veterans’ access, and hemp. Cannabis advocates and NCIA members should continue to participate in NCIA’s events and lobbying efforts in addition to contacting their elected officials in order to see cannabis continue to progress in Washington, D.C. and on Capitol Hill.
Policy Update: Success in the Senate
by Michelle Rutter, Government Relations Coordinator
In the first week of June, the cannabis industry was celebrating its victories in the House of Representatives. At the end of last week, we were celebrating a victory in the US Senate, too.
At the beginning of the month, the U.S. House of Representatives debated the Commerce, Justice, and Science (CJS) Appropriations bill (HR 2578), which funds applicable government agencies for the upcoming FY2016. This year, there were four cannabis-related amendments under consideration in the House: the Rohrabacher-Farr medical marijuana amendment, the McClintock-Polis adult-use marijuana amendment, the Bonamici-Massie industrial hemp amendment, and the Perry CBD oil amendment. You can read about the results of the House votes in this NCIA blog post.
On June 11, two cannabis-related amendments were brought before the Senate Appropriations Committee. Cannabis champion Sen. Barbara Mikulski (D-MD) offered a medical cannabis amendment, which would ban the Department of Justice from interfering with state-compliant medical cannabis businesses. In addition, Sen. Jon Tester (D-MT) offered a hemp amendment that would protect state industrial hemp laws from the Department of Justice’s interference. These amendments are the Senate companions to the House’s Rohrabacher-Farr and Bonamici-Massie amendments, respectively.
The Senate Appropriations Committee voted with Sen. Mikulski to protect state medical marijuana laws 21-9. Senator Jerry Moran (R-KS) changed his original ‘No’ vote to a ‘Yes’, while presidential contender and Senator Lindsey Graham (R-SC) also attempted to change his ‘No’ vote to a ‘Yes’, but was too late. Sen. Tester’s industrial hemp amendment also passed through the committee via voice-vote.
Victory is sweet, but it’s important to remember that these appropriations amendments only protect states’ medical cannabis and hemp laws for the upcoming fiscal year. As encouraging as the appropriations season has been, it is still imperative that we pass comprehensive cannabis banking and 280E reform bills in order to be treated like every other American business.
Below is the detailed vote breakdown from the Senate committee’s vote on the Mikulski amendment:
Republicans
Democrats
Thad Cochran (R-MS): No
Barbara Mikulski (D-MD): Yes
Mitch McConnell (R-KY): No
Patrick Leahy (D-VT): Yes
Richard Shelby (R-AL): No
Patty Murray (D-WA): Yes
Lamar Alexander (R-TN): Yes
Dianne Feinstein (D-CA): No
Susan Collins (R-ME): Yes
Richard Durbin (D-IL): Yes
Lisa Murkowski (R-AK): Yes
Jack Reed (D-RI): Yes
Lindsey Graham (R-SC): No
Jon Tester (D-MT): Yes
Mark Kirk (R-IL): No
Tom Udall (D-NM): Yes
Roy Blunt (R-MO): Yes
Jean Shaheen (D-NH): Yes
Jerry Moran (R-KS): Yes
Jeff Merkley (D-OR): Yes
John Hoven (R-ND): No
Chris Coons (D-DE): Yes
John Boozman (R-AR): No
Brian Schatz (D-HI): Yes
Shelley Moore Capito (R-WV): Yes
Tammy Baldwin (D-WI): Yes
Bill Cassidy (R-LA): Yes
Chris Murphy (D-CT): Yes
James Lankford (R-OK): No
Steve Daines (R-MT): Yes
NCIA Member Profile: MBank
In the course of less than a week at the end of January, Oregon-based MBank went from announcing that they would be doing business with cannabis companies in Colorado to breaking the news that they would be retreating from Colorado for the time being, unable to support the infrastructure required to offer these services in the state. As NCIA’s first bank member, we sat down with CEO Jef Baker to ask a few questions and get to know them better.
Cannabis Industry Sector:
Financial Services
NCIA Sustaining Member Since:
December 2014
One of MBank’s brick and mortar locations in Lake Grove, Oregon.
How does MBank uniquely serve the cannabis industry?
One of MBank’s goals is to serve the underserved. We recognize that serving the cannabis industry very much meets that objective. With that mission in mind, we set about figuring out how to provide banking services. We’re a little unique in that way as a bank has to be creative and innovative in order to go about solving problems.
Why should cannabis industry professionals looking for financial services use MBank?
While we recognize there are very few banks legitimately operating in this space and therefore few good choices for cannabis industry professionals, our hope is people choose to bank with us for the same reason anyone does. That means they understand what we’re about and hopefully appreciate wanting to partner with someone that has a vision they agree with. Beyond wanting to change the status quo with regards to banking, we also take great pride in customer service through treating people with respect.
NCIA’s primary mission includes advocating for equal access to banking, but many banks in this country are reluctant or not willing to work with cannabis business owners. What are your thoughts on the future of banking in the cannabis industry? How will this situation improve for the industry going forward?
Smaller banks will most likely lead the way as they tend to embrace innovation a little more than larger institutions. As banks successfully demonstrate their ability to serve this industry, more banks will follow. If there are additional changes at the federal level, that most likely would generate more banks entering this space.
What are some of the challenges that banks have to deal with to do business with the cannabis industry?
CEO Jef Baker inside one of MBank’s Oregon locations.
Our challenge is to make sure we support and serve customers who understand that compliance is critical. We feel it is extremely important to ensure we implement strong policies and procedures, especially for new lines of business. The systems created are not designed to be intrusive or overbearing, but they are developed to help us manage risk, as we interpret it, as well as those that regulate us.
Do you still want to do business in Colorado, or other states?
The reason we are one of the first banks to so aggressively enter this space is part of our mission is to serve a completely underserved market. We very much want to serve customers in Colorado but have discovered we need to build our program to better handle the huge volume there.
How do you characterize your relationship with regulators on marijuana banking?
It is our belief that regulators do not object to their banks providing services to the cannabis industry. We believe they do have a high expectation of their banks developing strong compliance programs in this area. This is new and we are all learning together. It is critical for us to have a strong relationship with our regulators.
Why did you join NCIA?
MBank currently offers banking services for the cannabis industry in Oregon.
We believe this organization wants to see the cannabis industry be treated fairly by helping ensure that quality banking services are available. That is right in line with our mission of serving the underserved. Our position is not one that supports legalization or advocacy for legal matters (that is for others), but rather a focus on providing an industry banking services they deserve, which means both access to services as well as treating people with respect. We believe NCIA is an organization that will allow us to further and pursue that vision.
If you are a member of NCIA and would like to contribute to the NCIA blog, please contact development officer Bethany Moore by emailing bethany@thecannabisindustry.org.
Guest Post: Banking Access – The Struggle Is Real for CannaBusiness Owners
By Luke Ramirez, Walking Raven LLC
Bank accounts — normally, the most basic thing a business does when starting out is start a business checking account. Those of us in the cannabis industry, however, are very well aware of the struggle to get even basic banking while openly violating federal law. It has been an issue for cannabis companies for years; NCIA’s own Taylor West recently spoke about the banking challenges cannabis companies face in a Huffington Post article, stating, “It’s the biggest problem we have.”
Luke Ramirez, Walking Raven LLC Photo courtesy of Kim Sidwell
As an owner and operator of a retail marijuana center and cultivation warehouses, with a company, Walking Raven, which has been kicked out of more than seven banks in the last five years (including the loss of personal bank accounts), I can personally attest that this could be the most difficult part of running a cannabis company. Although there are pricey alternatives out there, the security risk of transferring and storing large amounts of cash invites crime from the criminal underworld, severely increasing your safety liability as a company. An additional burden comes with the very high cost of time it takes to manage all this cash and pay basic bills, such as power, water, and other utilities. In my company alone, we estimated a cost of over $13,000 in 2014 simply from the time it took to handle our cash.
NCIA has been an outstanding resource for myself and many other of my colleagues in tackling the banking issue. NCIA’s supportive network of other cannabis professionals has given me the advice and contacts I need to operate my business successfully, including banking. If you’re having issues with banking, I suggest that you reach out to your colleagues in NCIA for reputable ideas, or join NCIA if not already a member.
Thankfully, for the industry as a whole, the issue has been covered by the media and brought to light to the general public in much more depth in the last year since adult-use cannabis sales began on 1/1/2014; even Playboy Magazine covered the issue of banking in the cannabis industry last summer. In Colorado, Governor John Hickenlooper, who opposed the legalization of cannabis, asked the federal government to help Colorado with cannabis banking issues. In Washington State, the only other state to allow adult-use cannabis sales in 2014, the Liquor Control Board has also taken steps to help cannabis companies obtain banking, by making publicly available the sales activity of licensed growers, sellers, and processors.
Because of this exposure and the efforts of Colorado’s and Washington’s public officials, there have been major recent steps toward “above-table” banking for cannabis companies. On November 19th of last year, regulators in Colorado granted a charter to a credit union that hopes to work with cannabis companies; the union is now waiting upon an issuance of a master account number from the Federal Reserve to allow it to enter the country’s electronic banking system. In addition, there have recently been creditable solutions offered by one of NCIA’s own board members. While it is yet to be seen if these solutions are long-term, we are closer than we ever have been before to normalized banking.
A budtender at the Walking Raven shop
While we continue to wait for a mainstream solution for every cannabis company, dispensary owners and cultivators should:
Leverage their networks and gain contacts that can provide banking contacts. I recommend joining NCIA and taking advantage of the group’s reputable network if you have not done so already.
Avoid any kind of activity that could be construed as money laundering and therefore put your business in serious jeopardy. This kind of activity includes lying about the nature of your business to a bank, or using your personal accounts for a large amount of business activity.
Look into security companies that offer to handle your cash and eliminate the safety liability of using large amounts of cash. They are expensive, but may be well worth the cost for your business.
Once you obtain banking, avoid “obvious” cannabis transactions. Use cash to pay any vendor that has an obviously cannabis-related name that you must write a check out to.
When using cash, make sure to save all invoices, and get signed receipts from vendors and signed pay-stubs from employees; this will leave a much-needed paper trail in the event of an audit or investigation.
Luke Ramirez is owner and managing director of Walking Raven, LLC, a sustaining member of NCIA. Luke was also recently elected to NCIA’s Board of Directors. Luke has actively been in the cannabis industry since 2009. Since taking control of his company’s operations in 2011, he has changed the entire culture of the shop and successfully completed the process of converting all 3 licenses from medical to retail. Within his organization, he is responsible for all finance management, staffing, compliance reporting, marketing/inventory control, and public relations, among other things. Luke has been featured on many media outlets, such as CNBC, national CBS, and numerous local news stations. He is also actively involved in multiple cannabis trade organizations, lobbying efforts, and advocacy groups.
A Cannabis Credit Union May Offer Some Businesses Banking Relief, But It’s Not A Silver Bullet
Recently, the Fourth Corner Credit Union has made headlines by promising to be the first of its kind institution to serve the cannabis industry exclusively and provide the very types of banking services businesses sorely need.
We here at the Cannabis Business Summit recently caught up with Colorado’s Director of Marijuana Coordination and Cannabis Business Summit panelist to get his take on the recent developments.
CBS: Can you explain what is happening right now with the Fourth Corner Credit Union?
AF: They went through the same credit union process anybody else would go through, applied for a state charter, got a conditional state charter based on their business plan and the things that normally go into a state charter.
They went to NCUA with that. NCUA came back, according to Fourth Corner Credit Union, with “it will take us a year or two to process.” Four corners then went back to the regulations and saw that, to get a final state charter, it was only necessary that you apply for NCUA insurance.
And so upon review, The Department of Financial Services, which is a division inside the Department of Regulatory Affairs, gave them a final charter so they are now a state chartered credit union. The only step really left is not actually anything to do with deposit insurance, it’s to get a master account with the Federal Reserve. So they are now looking to get that master account which shouldn’t go to the board of directors. It should be an administrative procedure so they have some level of confidence that they can get a master account.
CBS: Why is this different that previous efforts to provide banking services that have failed?
AF: Well I’m not sure any efforts have failed, some things have come to fruition. But our entire strategy is, as many reasonable solutions that there are going forward we will do everything we can to see them continue on because we do believe this is a public safety issue. We’re hoping this is a good procedure forward but, again, we don’t see it as the final solution to this thing and we’ll continue with as many solutions to this problem as possible.
CBS: How closely do you work with the industry to find a solution to the banking problem?
AF: We meet pretty regularly with anybody who thinks they have some kind of possible solution. So we make ourselves incredibly available to industry on that.
CBS: Do you think this will work and at least provide some temporary relief to some of these businesses?
We’re hopeful but I can’t put odds on it. We’re monitoring it really closely. If they are able to set up a credit union, we’re hope that will provide some relief, even if it’s not a total fix.
When things change as fast as they do in the cannabis industry, it pays to stay ahead of the curve. Sign up today for the Cultivation Management Symposium on February 24-26 in Seattle to gain insight and network with leading industry experts and businesspeople.
D.C. UPDATE: The November Election, What Comes Next, and Welcoming a New Staffer
By Michael Correia, NCIA Director of Government Affairs
As we come up on Halloween, I can’t think of a more fitting holiday to give a DC update (as most things coming out of Congress tends to scare us all!)
The election is just around the corner and, in addition to determining the make-up of Congress, there are four very important marijuana ballot initiatives voters will be deciding on. Voters in Alaska, Oregon, and Washington, D.C. will be voting on some form of an adult-use, tax-and-regulate structure (similar to Colorado), and Florida voters will decide on legalizing medicinal marijuana. The passage of all four, in addition to being positive developments in the states, would certainly help our work in D.C. Members of Congress are self-interested and they care about their states and their districts. When more states legalize marijuana, it makes my job easier, as it forces more members of Congress to address the issue.
After the election, Congress will come back for a very short (two week) “lame-duck” session. In that time, they will vote on party leadership posts and determine committee chairs, in addition to funding the government. Because the two issues NCIA members care most about are 280E tax reform and resolving the banking issue, the committees of jurisdiction in the House are the Ways and Means Committee and the Financial Services Committee. In the House, it’s a near certainty Republicans will stay in control; so for Ways and Means, it’s looking like Congressman Paul Ryan of Wisconsin will be Chair, and for Financial Services, it’s looking like Congressman Jeb Hensarling of Texas will be Chair (although both will be challenged by other members). Neither of them have been supporters of marijuana policy reform in the past and have voted in opposition to our amendments when they were on the House Floor earlier this year.
Control of the Senate is still up in the air, and it will come down to 3 competitive seats. The results should be known soon after polling places close, but in Louisiana, if no candidate receives over 50%, then a run off election is held in December. So it is conceivable that control of the Senate may not be determined until December 7. Exciting times indeed! The committees of jurisdiction in the Senate are the Banking Committee and the Finance Committee, and Senate Chairmen are picked based on Committee seniority.
Halloween also happens to be my one-year anniversary with NCIA! And what a year it’s been. I feel as if so much has been done in the past year, but there is so much more to do. I look forward to the upcoming year and am even happier to say that our DC operation is expanding. NCIA has hired Michelle Rutter as our new government affairs coordinator. Having her on board will make me more efficient and effective in my job and will allow me to focus more on strategy, fundraising, advocacy, and taking NCIA to new levels.
Prior to working for NCIA, Michelle was a Research Analyst at a government affairs firm in Washington, DC, where she analyzed and tracked legislation on numerous issues. Michelle graduated from James Madison University in 2012, receiving her Bachelor of Arts degree in Political Science with a minor in History. During her studies, she held a year-long internship with Virginia House of Delegates member Tony Wilt. There, she communicated with constituents, businesses, and government officials alike, facilitating meaningful conversations. Michelle was also a member of a pre-law fraternity where she planned events and hosted social functions that sought to encourage long-lasting professional and personal relationships with members. A native Virginian, Michelle currently resides in the Washington, DC, suburb of Alexandria, VA.
Inside the Illinois Medical Marijuana Program with the Illinois Cannabis Industry Association
The number of licenses for cultivation centers and dispensaries are quite limited – only 22 available for cultivation centers and 60 for dispensaries. What are officials with the Illinois Department of Agriculture looking at in applications to determine who will be awarded a license? Is there a chance to earn bonus points in any category?
Dan: The Department of Agriculture will be grading on a number of different features but the grow plan and horticultural experience will be heavily weighted in the scoring. In the event of a tie between competing applications for a single license the application with the higher scored grow plan will be awarded the license.
Ali: The main required categories don’t have specific bonus points available, but each application has an entire Bonus Section of areas that are not required but available for applicants to gain additional points if the required sections meet a certain score threshold. The Bonus Section areas include Labor and Employment Practices, a Research Plan, a Community Benefits Plan, a Substance Abuse Prevention Plan, a Local Community/Neighborhood Report, an Environmental Plan as well as additional points for Illinois-based applicants and businesses that are minority-owned, female-owned, veteran-owned, or owned by a person with a disability.
Dan Linn, ILCIA
State officials are making security a high priority for all applications. What kind of standards must applicants meet in their business plan regarding security measures?
Dan: Applicants will need to have full seed-to-sale inventory tracking accessible in real time by the Illinois State Police. Security measures will need to include listings of where the bulletproof glass is on the floor diagram of the dispensary, the camera field of vision, the proper-sized televisions to monitor the cameras, as well as background checks on everyone involved in the program.
What is the climate regarding banking access in Illinois? Have any banks come out to say they will allow cannabis businesses to open bank accounts?
Dan: Some banks are just unwilling to work with the cannabis industry. None have publicly come out as being willing to engage this industry, but there are a number of smaller community banks that are handling accounts for cannabis businesses in Illinois.
September 22 is the deadline for submitting applications to open a cultivation center or dispensary. What does the timeline look like for when licenses will be awarded and when is it expected that dispensaries will actually be selling product?
Ali: Recent public reports indicate that licenses will likely be issued later in the fall, probably in November or December. Based on that timeline dispensaries should be open with product on the shelves for patients in late spring/early summer of 2015.
How many expected applications for cultivation centers and dispensaries will be submitted by the September 22 deadline?
Ali: It is likely that there will be an average of at least a few applicants for each of the 82 available licenses, with total applicants numbering anywhere from 250-600.
Applications also just opened for qualifying medical patients to apply for access to medical marijuana. What is the timeline for qualifying patients to apply and when will patients find out if they are accepted into the program?
Ali: Patients with last names beginning A-L can apply now through Oct 31. Patients with last names beginning M-Z can apply Nov. 1-Dec. 31 and beginning Jan. 1 there will be open year-round enrollment for all patients. The state has 30 days by law to process a patient application, plus 14 days to mail it. This means that patients should expect to receive their approval or denial within 45 days of submission.
What are some of the regulations regarding edibles and other infused products?
Ali Nagib, ILCIA
Ali: Edibles and other infused products can be produced, but only those that can be kept at room temperature safely; products that require hot-holding or refrigeration are prohibited. Otherwise a wide range of infused products can be produced, and the state regulations have some fairly specific guidelines on the some of the production processes (e.g. which solvents can be used to produce concentrates) in addition to robust testing and labeling requirements.
Dan: Additionally, edibles and infused products must be produced in a sanitary kitchen and cannot look like candy or any name-brand food items.
What is the anticipated cost per ounce once product starts becoming available?
Dan: $250-400 is the estimated initial expected cost per ounce.
Ali: The early stages of the Medical Cannabis Pilot Program are likely to see a wide range of prices and substantial fluctuations as early supply and demand features work themselves out. It is almost certain that initial prices will be above those currently found on the illegal market, if not substantially so, but how the industry will react to the patient demand is uncertain.
The Illinois program is a pilot program that currently expires in 2017, and lawmakers must renew or extend the program at that time. What do you think lawmakers will be considering when deciding to renew or extend the program when the time comes?
Dan: They will be examining any instances of diversion, shenanigans, positive health experiences for patients, jobs created, who is the next President of the United States, how much revenue the program is creating, and probably what the overall public opinion of the program is.
Ali: We expect that by early 2017 the local and national landscape on cannabis policy reform will have continued to progress to the point that we won’t be debating whether or not to extend the pilot program but rather how and when to transition to a full tax-and-regulate framework and how to incorporate medical cannabis patients into it.
D.C. Update: Congress Takes a Minimalist Approach on Marijuana (and Everything Else)
As Congress starts winding down what many pundits have described as the least effective Congress in history, marijuana proponents can still celebrate modest successes this year and look forward to carrying our positive momentum into 2015.
For the first time in history, the House of Representatives passed pro-marijuana legislation. Unfortunately, the Senate will not take up the legislation, due to inter-party bickering. And although lawmakers just returned from thirty-seven days of recess, they are expected to be in session for as little as seven legislative days before going home for the November midterm elections. In those few days, Congress is expected to pass a spending bill that will fund the government until December, but is not expected to vote on any issues related to marijuana legislation. They are expected to convene after the election for a “lame-duck” session in November, and depending on the schedule, NCIA is planning to hold events in D.C. at this time.
This midterm election is anticipated to have low voter turnout, and it is expected that the House of Representatives will stay in Republican control for the next two years, while it is highly likely that the Senate will change hands and become Republican-led as well. Although our policy positions tend to be supported more by Democrats, we have many members of both parties supporting our issues, and we continue to make inroads with Republican offices.
Now is the perfect time for our industry to lay the groundwork and start building goodwill into next year, as marijuana issues are on the ballot in Alaska, Oregon, and Florida. Marijuana policies have not traditionally been high on politicians’ radars, but this year has seen a tremendous spike in attention and recognition of our issues. That means it’s imperative for our industry to continue becoming more politically engaged. It also means that we must continue to be active in our communities and show our neighbors and leaders the positive public face of the industry.
With two months to go before the elections, many politicians will be back in their districts doing campaign events, and all NCIA members should use this link to find their Members of Congress and attend any local events they are hosting. If your elected officials are supportive of our issues, make donations to their campaigns and help them get re-elected by volunteering on their efforts. If they are opposed to our issues, work for their opponents. We are right on the policies, but the reality is politicians need to get re-elected, and the people who help make that happen are much more likely to get a positive response in D.C.
I plan to do the same thing here in D.C. In fact, once I finish writing these words, I’ll be off to attend a fundraiser for Senator Mark Udall of Colorado and Senator Mark Begich of Alaska.
Michael Correia is NCIA’s director of government relations, based in Washington, D.C. Find out more about NCIA’s federal policy objectives.
Guest Post: Plane-ly Legal – Carrying Large Sums of Cash on Commercial Airline Flights
By Luigi Zamarra, CPA
Due to the banking challenges facing our industry, many business owners are working with large sums of cash. Sometimes this cash must be transported: brought to the location where payment is agreed to be made. Sometimes this requires boarding a commercial airline flight with a large sum of cash in your carry-on baggage. (I do not recommend putting cash into your checked baggage.) You should not worry.
While working with a client to plan dividend distributions to their investors, the client expressed his concern that TSA would not allow anyone to board a domestic flight with large sums of cash. This did not seem correct to me for a variety of reasons, so I decided to look into the issue further. Please remember that U.S. currency is “legal tender for all debts, public and private” and there is no law that states that VISA, MasterCard, and the big banks must be in the middle – and get a piece of the action – of every transaction. We have the right to conduct all of our business in cash if we choose, and making such a choice should not subject us to suspicions. As an industry, we should be united in defending our rights to use cash, and we should reject any assertion that using cash implies criminal activity.
It is important to draw a distinction between domestic flights and international flights. On international flights, you must file FinCEN Form 105 with the U.S. Treasury if you are either entering or leaving the U.S. with more than $10,000 of cash currency. This rule does not apply to domestic flights, either intrastate or interstate. On domestic flights, there is no limit; you are legally entitled to fly with as much cash as you see fit, and you are not required to file any form with U.S. Treasury.
It is also very important to understand that TSA is not a law enforcement agency. TSA personnel are not trained in the legal procedures of collecting evidence or conducting investigations, so such actions must be conducted only by law enforcement. TSA’s mission is to “protect the transportation system to ensure freedom of movement of people and commerce.” According to TSA policy, (a) “screening may not be conducted to detect evidence of crimes unrelated to transportation security,” and (b) “traveling with large amounts of currency is not illegal.”
Unfortunately the TSA has engaged in mission-creep recently by searching for cash and engaging in interrogation when cash is found. If you find yourself being questioned by TSA about why you are carrying cash and where you got the cash, you are entitled to refuse to answer these questions. You should state, quietly but assertively, that such information is confidential and that such questions are outside of the TSA purpose and mission. You should also remind the TSA official that such questions are beyond TSA authority, since they are not permitted to investigate evidence of crimes unrelated to transportation security and since there is no danger to air safety from a briefcase of $100 dollar bills. Finally, remind the TSA official that traveling with large amounts of currency is not illegal.
Luigi Zamarra, CPA, has been a member of NCIA since 2013. Luigi CPA is an accounting firm located in Oakland, CA, that helps all types of businesses and individuals with tax planning, tax compliance, and tax dispute services. Luigi specializes in the medical marijuana industry. He helps these businesses comply with IRC Section 280E so as to balance tax cost against audit examination risk.
D.C. Update: Victories in House Show Momentum for Cannabis Legislation
As Washington State celebrates its first retail sales of marijuana, and one state after another continues lowering the burdens to accessing medicinal marijuana, across the country in the “other” Washington (D.C.), Congress continues to lag public opinion polls and is slow to embrace the marijuana movement sweeping the nation.
But even as stand-alone legislation to address issues like banking access and unfair taxation has remained bottled up in Congressional committees, two recent victories show that positive momentum is gathering and progress is being achieved.
Every year Congress appropriates funds for the government to operate in the upcoming fiscal year. This is usually accomplished in 13 separate appropriations bills, each of which affects different departments. Each appropriations bill has to pass the House and Senate before it’s signed by the President, and in some years Congress consolidates multiple appropriations bills into one large bill. Gridlock and partisanship have gotten so bad in recent years that the “normal” budget process has not worked and government has been shut down. But this year, the appropriations process has presented an opportunity to offer amendments affecting the marijuana movement.
The specific appropriations legislation funding the Department of Justice was debated on May 30 in the House of Representatives, and Congressmen Dana Rohrabacher (R-CA) and Sam Farr (D-CA) introduced an amendment that would forbid the Department of Justice from using federal funds to interfere with medical marijuana patients or caregivers who are compliant with state and local laws. A similar amendment has been proposed in Congress before but never met with success. This time, the amendment was approved by a 219-189 vote, including the support of 49 Republicans.
Although there are still several challenges to surmount before the amendment’s language can become law, the vote was nonetheless historic as the first time in history the House of Representatives passed pro-marijuana legislation and agreed that individual states should be allowed to determine its own marijuana laws.
In the Senate, a bipartisan amendment introduced by Senators Rand Paul (R-KY) and Cory Booker (D-NJ) would accomplish the same goals as the Rohrabacher-Farr amendment, but Republican and Democrat Senators can’t even agree on debate procedures, so the legislation languishes and we continue to wait until Senate leaders bring appropriations bills up for a vote.
This month, the House debated the Financial Services Appropriations bill, which funds the Department of the Treasury. During that debate, Representatives Denny Heck (D-WA), Ed Perlmutter (D-CO), Dana Rohrabacher (R-CA), and Barbara Lee (D-CA) offered an amendment that would forbid the use of federal funds to penalize financial institutions for serving cannabis businesses that are operating in compliance with state and local laws. In a vote that sent a strong message of support for opening up banking access to the legal industry, the House passed the amendment 231-192.
That amendment faces the same challenges of a gridlocked Senate that the Rohrabacher-Farr amendment does. But the combination of these two votes in the Republican-controlled House shows that the work of NCIA and our allied organizations to educate federal legislators about our issues is having a very real impact.
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MassRoots (MSRT), a Denver-based social networking company for cannabis users, made headlines when it was denied approval to be listed on NASDAQ. According to MassRoots, the stock exchange justified the decision by claiming that the company was aiding and abetting the distribution of an illegal substance. Some speculate, however, that the decision considered the company’s low share price, although MassRoots stated it did meet the listing requirements with a market capitalization in excess of $40 million and more than 300 shareholders. NASDAQ did not publicly provide the grounds for its rejection. 
There are other, less honorable reasons why a company might want to trade OTC. When a public stock is widely traded, it’s difficult to influence the price of the stock. Imagine trying to materially change the price of Google’s stock – it would require a vast sum of money. But when a company’s stock is infrequently traded and information about that stock is limited, it’s much easier for an individual or group to influence a stock’s price. And information does tend to be quite limited when it comes to OTC stocks. In contrast to stocks listed on the major exchanges, not all stocks that trade on the OTC Link are required to be registered with the SEC. As a result, the overall level of information available for OTC stocks is both less detailed and less up-to-date than that of stocks traded on the NYSE or NASDAQ. It is also not uncommon for an OTC stock to be deficient in providing the limited information that is required. 
“The reality is that half of U.S. states have already passed effective laws allowing patients legal access to medical cannabis, and it is changing lives,”
There’s no doubt that cannabis was on Congress’s mind because NCIA held its sixth annual Cannabis Industry Lobby Days in May! More than 150 cannabis professionals convened in Washington, D.C., for two days of advocacy that included more than 200 scheduled meetings and approximately 175 more drop-in meetings, as well as a 
According to Cody Stiffler, vice president of Government Affairs at BioTrackTHC, who was also present at the panel discussion, Congress has placed so many restrictions on the ability and powers of the DEA, that they can only reschedule cannabis to a Schedule II status. He believes there is almost no possible way that the DEA can de-schedule cannabis. The panel discussed Congress’s consideration of a waiver program for states with legalized cannabis in some form or another. “They [Congress] plan to give the U.S. Attorney General powers to offer waivers to state governments, exempting that state from federal law regarding cannabis, allowing banks and other institutions to take part in the industry without fear of federal backlash under the Controlled Substances Act,” says Stiffler. The waivers would have a duration of a number of years and a reporting and review process would follow the expiration of each waiver. “If the Attorney General decides that states are following the directives of the Cole Memo, then they will be able to continue, but if the data collected proves otherwise, those waivers would then be suspended or revoked,” adds Stiffler. It is important to note that the bill gives states the opportunity to correct any failures before those waivers are revoked.
ccording to Trumble, the SMART Enforcement Act would resolve many of the conflicts between federal law and state legalization measures. “It is the bridge that gets us from the broken system we have now to a future date when public opinion and Members’ positions may have shifted, while in the meantime fixing the problems people are experiencing on the ground,” says Trumble. She believes the bill provides for the protection of consumer safety through logical regulatory systems while eliminating federal prohibition of cannabis. “Every three years, a state will have to re-apply for the waiver and submit data showing that their regulations are working to keep Americans safe.” This would allow states to have the space they need to implement a sound regulatory framework.
Aaron G. Biros is the editor-in-chief of 
