Kevin Hart, CEO at Green Check Verified
Federal legalization is possible with consumers becoming more open to cannabis and social stigmas decreasing. The SAFE Banking Act is a huge opportunity for both the cannabis industry and the financial services industry, but Senate approval has yet not been achieved.
The Senate has not yet adopted the SAFE Banking Act, but it continues to be a success in the House. It was added to the House version of the National Defense Authorization Act earlier this year, but it was ultimately deleted from the final version. Unfazed, Representative Perlmutter (D-CO), pushed to attach the document to the America COMPETES Act, which was approved by Congress. It remains to be seen if it will suffer the same fate as when it was attached to the NDAA. Some top lawmakers want to delay the banking provision until a larger marijuana bill can be passed. This highlights the importance of ensuring that the eventual marijuana policy addresses restorative justice concerns like decriminalization or expungement.
Although legislative gains seem closer than ever, there could still be some way to go. Emerging CRBs and cannabis entrepreneurs can’t afford to wait for DC to get its act together. They must now implement growth plans in anticipation of the passage of new legislation and establish relationships with reputable financial institution (FI) to help them grow. Here are three key growth tips that CRBs should consider:
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Find a bank relationship that goes beyond just depository services.It is difficult to grow if your bank is only a place to keep your cash. But as more and more banks and credit unions today expand their services to the industry, they are starting to go above and beyond to give CRBs the tools needed to grow like any other small business – lending, a business credit card, ACH transactions and wires, payroll services, cash transportation, etc.
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Get ready for the tidal wave in interstate commerce.There will be a lot of consolidation once interstate (and global) commerce opens up. The growth of multistate operators is strong right now, but it is still constrained because a company has to start all over again and become familiar with the rules and regulations in each new state. These limitations will disappear overnight, so you should consider forming partnerships with other states to prepare.
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To remain relevant, invest now in your brand. Once a customer truly has choice they’re going to be far more price-conscious then they can be today, considering the relative lack of options. The industry is changing rapidly and attracting new consumers and demographics. CRBs have two options to keep their business afloat: they can be a bargain-price retailer or they can become a household name. Think of a company like Cookies that’s already well known even outside of states where they can legally sell cannabis-related products.
How to prepare yourself for the forthcoming legislative shift
If the bill is approved, the number and quality of FIs that provide CRB services will increase dramatically. Small business owners and entrepreneurs must be prepared to meet the new requirements in an expanded regulatory environment. Complex compliance and regulatory challenges will continue to exist.
Headset.io, New Frontier Research and other research firms found that cannabis businesses needed to handle approximately $10 billion in cash by 2020. This is a serious management problem and security risk. CRBs are searching for methods to move away from ‘cash-based’ models and, generally, starting to get more comfortable working with banks and credit unions. As more states legalize or decriminalize cannabis, it will be a trend for larger FIs to start banking it.
It will be crucial to continue to know how to maintain compliance. While the The States Reform Act or the SAFE Banking Act will provide more banking options, it won’t solve everything and will likely create even more rules and regulations. It will still be important to have tech solutions that simplify compliance in order to adhere to the state-by–state cannabis regulations.
Moving into a Post-Prohibition World
Even if cannabis is legalized at the national level, there will be many details to work out. Complex topics such as how much federal, state, and excise taxes to be charged, interstate commerce restrictions, and how late cannabis businesses can remain open, will all be part of the larger discussion. And again, if they aren’t already, CRBs and cannabis entrepreneurs should focus on building relationships with each other and local officials who can advocate for their interests in the future.
Each state will face new regulatory challenges as they expand their legalization programs. These will be based on different levels of decriminalization. The industry will need the right types of tech-supported/analytics driven solutions to help facilitate broad growth. Even Colorado, a pioneer state in this space, has faced its challenges and continues face difficulties with available banking options.
Although the legalization environment is constantly changing, banks and credit unions are realizing they could lose valuable customers and new revenue streams if they do not establish cannabis banking programs. CRBs must assume that legislative changes are in place to grow and scale the business, keep compliance, and meet increased consumer demand once legalization opens.
