
As Marijuana Sales Grow, Startups Step in for Wary Banks - abruzzi
http://www.nytimes.com/2016/02/17/business/dealbook/as-marijuana-sales-grow-start-ups-step-in-for-wary-banks.html?hpw&rref=business&action=click&pgtype=Homepage&module=well-region&region=bottom-well&WT.nav=bottom-well
======
yolesaber
I love weed. I smoke it daily. It has helped me with depression and anxiety.
But something is troubling with the nascent marijuana industry: moneyed
interests are getting in on the ground floor while victims of the drug war rot
away in prisons. Despite the legality of weed in Colorado, those imprisoned
are still not free [0]. Latinos are incarcerated at 1.5x the rate of whites,
blacks 3x as much, despite drug use being equal across the board. Do we call
those who grew and sold pot to feed their families entrepreneurs, are they
idolized in think pieces? The entire industry has been whitewashed and is
still prey to the same racist fears that spurred its prohibition in the first
place. Legitimization by the banks isn't going to help end such injustices -
if anything, it will simply enable those with wealth.

0\. [http://www.huffingtonpost.com/2014/02/25/colorado-
releasing-...](http://www.huffingtonpost.com/2014/02/25/colorado-releasing-
marijuana-prisoners_n_4854244.html)

------
lobo_tuerto
"... the endless flow of dirty, dangerous, hard-to-track cash."

Wait what?

~~~
yolesaber
The NYT has a very schizophrenic view of marijuana. On one hand, the editorial
board stands behind legalization. Yet they will employ language like this and
try to reinforce seedy optics in readers. They also still drug test their
employees, one of the few media companies in NYC still doing so to my
knowledge.

------
CPLX
The blockchain element mentioned further down in the article seems intriguing,
but also looks a little like window dressing. Can someone more Bitcoin
literate than me explain from a practical standpoint what they are actually
doing and what actual benefit is provided by the blockchain integration?

~~~
roymurdock
I was skeptical at first, but I think it's actually a smart move.

Tokken is basically acting as an intermediary between dispensaries and banks,
so that banks do not have to shoulder the liability of potentially laundering
money. They let Tokken take on that liability instead, and absolve themselves
of much of the risk. Plus they only have to conduct due diligence on one
organization, rather than a bunch of disparate dispensaries. Tokken gets paid
some cut of the revenue that flows through them to the banks. Let's walk
through how this will probably work:

Tokken faces the problem of making sure that every transaction they pass on to
the banks is completely legal. They can only do this by verifying every Tokken
user to make sure they have possession of a current, legal marijuana card at
the time of each purchase. Only those with valid credentials will be allowed
to use the payments network, otherwise the transaction will be rejected and
will not be sent on to the ACH for bank settlement.

A verified patient will link their credit/debit card to their Tokken account,
which will track their purchasing behavior (rejecting any illegal purchases,
such as too many purchases in a month, or exceeding a certain purchasing
limit, etc.). They could also integrate some of the other double-checking
solutions mentioned in the article: GPS tracking of each purchase tied to each
user, kiosks to accept cash from Tokken card-holding users. The Tokken network
will pass valid purchases along to the ACH for bank/credit card account
settlement.

At this point, the transaction is verified and should be considered legal
enough to not trigger any money-laundering alarms. But banks still can't be
100% sure that Tokken is not simply dipping into its own database to combine
valid/invalid transactions, passing dirty money that looks clean up the chain.
If Tokken timestamps each transaction on the Blockchain (using some public
wallet and transaction ID scheme), this adds another (large) level of security
for the banks as they can verify the timestamps generated by each purchase of
a user on the Tokken network.

This is not foolproof either, as Tokken could claim the Bitcoin transactions
are generated automatically, but could theoretically go in and generate them
at will to match doctored accounting records - not likely at high levels of
transactions, but still possible.

Ultimately, timestamping each purchase is actually useful if Tokken can prove
that it is automatic and that the company does not interfere with the
mechanism in any way.

------
pmorici
Is it just me or do phrases like this from the article sound sleazy, "Mr.
Zarrad is confident he can stay on the good side of the banks because of his
experience as a regulator, and before that, in the financial industry." and "
He is planning to approach some of the banks he previously regulated and is
hoping that his background will convince them that he understands the
compliance issues they are facing."

~~~
chestervonwinch
Why do you say that?

I imagine the banks view dealing with this type of business as high risk. I
also imagine that there's a substantial amount of work to maintain legality in
this type of business, monetarily. I read the things you cited as merely
saying this guy has the background to be capable of putting in the work to
maintain legality, potentially lowering the risk of involvement for banks.
Maybe I'm misinterpreting.

~~~
pmorici
Because it has the under tone of, a kind of revolving door where you were once
fined for something and are now being offered a pass if only you hire this
company run by the guy that used to fine you.

------
throwaway217
I've only visited a marijuana dispensary once, in Oregon, but my coworker had
not problem using her credit card to pay for her recreational marijuana
purchase. I'm pretty sure they used Square.

~~~
deathhand
Debit cards can be accepted and is not the same as a credit card transaction.

~~~
throwaway217
She signed. Does that mean it was processed as a credit-card transaction?

~~~
dawnbreez
Retail worker here. If she signed on a pinpad, it was credit. However, if she
used debit _and didn 't use a PIN_, she would have had to sign a copy of the
reciept.

~~~
dawnbreez
...why is this downvoted? I explained the process.

~~~
dawnbreez
And now my question about being downvoted is being downvoted, because I'm
being upvoted now.

See, this is the weak point of voting systems on websites. You don't actually
know why you've bern ____voted, and asking is liable to backfire.

------
bobby_9x
"Latinos are incarcerated at 1.5x the rate of whites, blacks 3x as much,
despite drug use being equal across the board"

These studies are flawed. They are based on the person telling the truth about
their drug usage.

"Do we call those who grew and sold pot to feed their families entrepreneurs,
are they idolized in think pieces?"

What about the people that sell guns to feed their families?

"The entire industry has been whitewashed and is still prey to the same racist
fears that spurred its prohibition in the first place."

You must be smoking weed, because this is the most ridiculous thing I've ever
heard. Nobody is still attributing weed to only non-whites.

Look at how weed is characterized in movies and TV: white, dopey, college
kids.

~~~
yolesaber
>What about the people that sell guns to feed their families?

If someone sold guns when they were illegal and then jailed and then guns made
legal, I would say they were wronged by society and should be released from
their incarceration.

>Look at how weed is characterized in movies and TV: white, dopey, college
kids.

Exactly - whitewashing. Marijuana usage is marketed as fun and carefree while
ignoring the reality that many, many people are still in jail for crimes that
are now business plans.

My whole point is that a large amount of those who were essentially the
marijuana industry prior to its legalization are minorities who are
disproportionally jailed and the industry is now run by mostly white people
who get to reap the rewards. Legalization is seen as a win for personal
liberty yet there are still so many in jail.

I would like to see a startup / org that worked towards social justice for
these prisoners using the money earned from legalized weed sales.

~~~
slavik81
The logical conclusion of this line of thought is that Al Capone should have
walked free when prohibition ended. I can't support that.

Repealing mandatory minimums and revising sentences is something I could get
behind. Not because marijuana law has changed, but because they were given
unjust sentences in the first place.

~~~
dragonwriter
> The logical conclusion of this line of thought is that Al Capone should have
> walked free when prohibition ended.

The principle "if one in jail for an offense which is later legalized, one
should be released" would only lead to freeing Capone with the end of
prohibition if tax evasion were legalized at that time, which it was not.

If, instead, the principle "if one in jail because one was prosecuted for an
offense other than the one primarily motivating the government to seek to jail
you because they had insufficient evidence for the offense that is the prime
motive, and the offense that is the prime motive for the government seeking to
jail you -- even if it is not the one you were convicted of -- is legalized,
then you should be released for jail", well, then Capone would only be
released with the end of prohibition if _murder_ were legalized at that time.

I don't think any principal which would lead to Al Capone being released when
prohibition ended was either proposed or implied upthread.

~~~
slavik81
That seems more like a technicality of the example I chose than some deep-
seated principal of justice.

Besides, do most modern day drug dealers accurately report their earnings to
the IRS? Would you actually support prosecutors who aimed to convict drug
dealers on on tax fraud because they knew you were about to pardon all drug
offenses?

