
Where Pot Entrepreneurs Go When the Banks Say No - deadbunny
https://www.nytimes.com/2018/01/04/magazine/where-pot-entrepreneurs-go-when-the-banks-just-say-no.html
======
chiph
A former coworker has a relative who became a CFO at a Colorado dispensary.
This was in the early days, and it was the wild-wild-west. Turns out employees
were transporting the daily deposits in their car, and the business was
storing it in some file cabinets in the office. Obviously not ideal.

So he talked to a couple of armored-car companies about setting up a pickup
schedule, and they wouldn't touch the business because they didn't want to
take the chance that any dispensary money would get intermingled with regular
banking money when in the back of their trucks, and thus invoke the wrath of
the feds.

Looking at the pile of cash they had, he just said "Why don't we just buy our
own trucks?" and they set up a subsidiary that provides armored car services
to the cannabis industry.

~~~
GuiA
This is an amazing anecdote. Spinning up a side company to solve a need you
have as a company that isn’t addressed by the market is the winning lottery
ticket of entrepreneurship (you have validated the product/service because you
need the product/service to conduct your original business, you are intimately
familiar with what features you need to offer, how much you can afford to
charge for it, etc)

~~~
cabaalis
Also, "scratching your own itch" is always the best startup method because you
know intimately if your proposed solution really is a viable solution in the
first place. It's then just a matter of pricing and cost, rinse and repeat.

~~~
fineline
And execution. Knowing what you want doesn't guarantee you can deliver it.

Otherwise your point (and parents) is a good one - certainly a good indicator
that you might really be onto something.

------
Gargoyle
I have a relative who runs a set of independent ATMs, which obviously requires
a lot of physical cash. He's been doing it for over 20 years now, but it's
gotten harder and harder to find banks that will provide him with the cash.
It's his money in his accounts, but many of them outright refuse to provide it
in cash.

It's not so much that they mind the competition in the ATM business, it's that
the regulations on handling large amounts of cash have gotten more and more
involved, to the point it's just not worth it to them to do it.

He's had to change banks a number of times over the years, but now he's with a
smaller local bank that he has a personal relationship with the management.
Still a hassle, but at least he can run his cash-intense business.

~~~
kolla
Can you make money out of running a set of independent ATM's? Do people use
ATM's?

~~~
Gargoyle
His net is similar to a San Francisco programmer, but he only really works one
day a week.

But as I said, he's been doing it for more than 20 years and his locations are
prime.

~~~
selllikesybok
Amortize the time he took figuring it out / getting his systems in place
across that weekly schedule, though. I bet even after 20 years that's still
closer to two days a week. ;)

------
qwerty456127
I just wonder when will this nonsense ("banks saying no") end and when a
financial system at least as free as cash and as quick and convenient as just
using debit cards emerge. It seems that we have came to a point when we need
to separate banking from state and police the way church has gotten separated
from them earlier. That's a pity BitCoin has failed to do this. Hopefully
Monero or something new will succeed once and set the people free...

~~~
dx034
The problem is not the banking system, it's that businesses can be legal in
states while being illegal under federal law. Any company with business across
states is at risk dealing with those companies. Banking is heavily regulated
for a reason (terrorist financing, money laundering, fraud) and I doubt many
would appreciate if you stop banking regulation altogether. The only solution
I see here is to change federal law.

~~~
uiri
Are local, state-chartered banks with no branches outside of their home state
just as squeamish when it comes to marijuana businesses?

~~~
Feniks
Banks will be blacklisted if they finance drugdealers. The US war on drugs is
no joke and it is international. If your bank participates in the global
financial system it can't ignore the US.

------
phil248
I still don't understand how or why, but I am able to pay for marijuana from a
local medical dispensary in CA with a credit card.

Anyone know what is up with that?

~~~
chrsstrm
There are IIRC two processors who will run those transactions. Was just
discussing this with a colleague in the payments sector yesterday and we were
going to finish the conversation today to learn more about where those funds
go and how they are transferred. Lots of "clubs" sell memberships where the
product is complimentary, you pay for the access to the "lounge" and premises.
The big problem with most weed transactions is they can't be run through any
org that is federally insured, which is why banks won't touch dispensary
money.

~~~
pbhjpbhj
Do I have this right: your State says your medicine is legal to buy, the
Federal government says it's not illegal, but whoever controls "federal
insurance" prevents normal use of the banking system for companies that are in
the supply chain?

Who decides on the rules for those using "federal insurance" and why do they
override state law on what's legal to sell?

Why can banks refuse your cash? Why do they?

~~~
cosmie
As far as I understand, your state says it’s legal but the federal government
says it’s illegal. However, there’s a standing directive from the Justice
department that they won’t prosecute individuals complying with state laws
(when those state laws legalize marijuana).

So it’s still illegal at a federal level, but the department that would
ostensibly enforce that simply let it be known that they would defer to state
law and not prosecute when state law legalized it.

But since it was never actually legalized at the federal level, it’s little
more than a gentleman’s agreement (which could be pointed to as a valid
defense if someone _was_ prosecuted federally). But since the directive came
from the executive branch, it can also revoke/revise that directive as it
wants, and begin enforcing those federal laws regardless of state level
legalization. Congress still has the power to pass actual laws that
decriminalize it federally, but they’ve conveniently been spared from that
politically charged topic by the Justice Department directive. Now they’ll be
forced to address it. And with hundreds of millions of dollars in state tax
revenue at stake, there will likely be more pressure to not white wash over it
than their has been previously.

~~~
lutorm
_it can also revoke /revise that directive as it wants_

Which Sessions just did.

~~~
dx034
Does that the DEA will start busting shops that are legal under state law?

~~~
phiskk
The state could just arrest the federal agents for breaking state law, and
throw them in with the drug dealers and stall the fed's efforts to spring them
with maximal paperwork.

Let the 'system' sort them out and see how keen they are.

~~~
greenleafjacob
Federal law preempts state law.

~~~
mindcrime
Only in regards to things where the federal government has authority to begin
with. There are very good reasons (the Enumerated Powers clause, the 9th and
10 amendments, etc.) to question if the federal government _actually_ has all
the authority it claims for itself.

~~~
greenleafjacob
That’s true, but it’s been squarely presented and decided in Reich v Gonzales,
relying on Wickard v Filburn that Congress does have this power. And through
application of stare decisis / precedent it will be difficult to undo that.

------
theatraine
Pot seems like a natural fit for cryptocurrency. There's several currencies
which are designed specifically for this space (e.g. HempCoin -
[http://www.hempcoin.org/](http://www.hempcoin.org/) \- THC). As far as I can
tell the weed cryptos seem to be mostly speculative in nature as retailers are
dealing in cash as the article states.

~~~
koolba
That would only work if you can get the customers to pay you in the crypto
coin. The retail side of the weed business is lots of small dollar
transactions done in cash. Converting that to crypto requires a full scale
cash-to-crypto operation that is effectively the definition of money
laundering (or at least solving the same problem).

~~~
bufferoverflow
No, converting cash to crypto is NOT money laundering.

Money laundering is when you get dirty money and try to convert it into legal
clean money.

I'm this case there's no dirty money, it's just banks are scared of the feds,
so they refuse to take it.

~~~
vidarh
They're scared of the feds because the money was the result of a violation of
federal law. It's dirty money to anyone that has to deal with the feds.

------
CaliforniaKarl
I like how it’s a Credit Union taking the lead on this, while not charging
profit-maximizing fees.

------
Mtinie
What was hard for pot entrepreneurs before appears to have taken on a whole
different level of difficulty if the Feds are successful with their just-
announced plan:

"Trump administration targets recreational pot, placing thousands of marijuana
businesses in California at risk" (L.A. Times, 04-Jan-2018)[0]

\-----

[0][http://www.latimes.com/politics/la-na-pol-pot-
sessions-20180...](http://www.latimes.com/politics/la-na-pol-pot-
sessions-20180104-story.html)

~~~
loeg
Popehat thinks the impact of Sessions' latest announcement is pretty minimal
without other changes: [https://www.popehat.com/2018/01/04/lawsplainer-
attorney-gene...](https://www.popehat.com/2018/01/04/lawsplainer-attorney-
general-sessions-threatened-action-on-marijuana/)

In particular:

> In 2014, in the Rohrabacher-Farr amendment to an appropriations bill,
> Congress prohibited the Department of Justice from using federal money to
> "prevent" states from implementing laws making medical use of marijuana
> legal. Courts have found that this amendment may prohibit federal
> prosecutions for medical marijuana activities that are legal under state
> law.

~~~
dragonwriter
Rohrabacher-Farr has to be passed anew with each spending authorization and
the current one expires later this month. If the administration decided they
_really_ don't want it, they can go hard line on that, though there's
political risk involved.

It explicitly also applies only to _medical_ marijuana laws even as previously
drafted; even if they don't go hardline against it they could either seek to
have Congress revise it slightly to provide a clearer delineation of the
medical boundary, or just go full-out against non-medical operations in
recreational-use states and let the courts sort out the boundary; start a few
RICO and/or Continuing Criminal Enterprise prosecutions with the associated
broad forfeiture that can come with those (and the 20-year, or if your
business is more successful, _life_ ) mandatory prison sentences available
under the latter, and you'll drive lots of people that aren't yet being
prosecuted out of “legal” pot and supporting businesses even before any legal
challenges are resolved.

I respect Popehat a lot, but I think that while the minimization of the legal
risk to individual users is _accurate_ , it misses the real risk, which is to
trade as a whole through selective targeting of major operations and
supporting businesses. Individual users lose out because the “legal” industry
goes away from legal risk, not because they are individually targeted for
prosecution.

~~~
anigbrowl
_If the administration decided they really don 't want it, they can go hard
line on that, though there's political risk involved._

It's not like the administration has a whole lot of political capital to play
with right now. Vetoing their own appropriations bill doesn't seem like a
winning strategy, though obviously rational political calculus doesn't count
for much in the White House these days.

~~~
dragonwriter
> It's not like the administration has a whole lot of political capital to
> play with right now.

Sure, and if this administration showed any sign not of conserving political
capital based on consistent coherent priorities rather than burning it on a
whim, that'd play a bigger role in my assessment of the risk of them deciding
to stand and fight on this.

Then again, if they had been doing that, they'd also probably have a lot more
political capital pright now.

> Vetoing their own appropriations bill doesn't seem like a winning strategy

OTOH, threatening to over Rohrabacher-Farr might be—at least in the immediate
term; it's quite possible that Congress isn't willing to shutdown the
government over it but would believe the President might be.

------
40acres
Similarly, Stripe will not do any business with marijuana related internet
companies.

There is at least one marijuana delivery company in Oregon who claims that
they can take credit/debit, I have not used the app but I assume if this claim
is correct they've rolled their own infrastructure.

~~~
cloudwalking
Eaze.com takes credit card payment through a processor based in Europe.

~~~
40acres
Do you know the name of this processor?

~~~
cloudwalking
It's called "Bliss".

~~~
hello_newman
would you happen to have a url for that? searching "bliss payments", "bliss
payment processing" etc doesn't seem to bring it up. if you don't feel
comfortable putting it here in the thread my email is in my profile.

~~~
cloudwalking
I don't. I just see the name on my credit card statement. Sorry!

------
therealmarv
This is the big problem. Laws say yes, banks say no. This also applies to
perfectly legal e.g. adult or bitcoin businesses.

There is a huge opportunity for new fintech banks to address this problems.

------
mutagen
I'm curious about the timing of publishing this on the day that AG Sessions
announces a return to previous DoJ practices in prosecuting violations of
Federal marijuana law, specifically mentioning money laundering and money
transmitting statutes. It can't be coincidence, can it? Am I missing something
or does this paint a nice big bulls-eye for the feds on Safe Harbor Private
Banking?

~~~
fencepost
There's a brief note in the article about the rescinding of the Cole memo
noting that it happened after the article was written.

Honestly it seems like this is exactly the kind of business that the Federal
government would want involved in the pot business - one that's getting cash
off the streets while aggressively making sure that all of it is accounted for
both coming in and going out.

On the other hand, the alternative of a return to a high-cash high-risk
business might not be something that Sessions et al would object to - after
all, if you weren't involved in criminal activities you wouldn't have risked
being robbed or assaulted and robbed. Kind of like so many other things, don't
listen to what they _say_ , look at what they _do_ and the impacts of those
actions.

------
grooling
Can I start a mini bank in these states and take their money then turn it into
credit? It's not that straightforward but is it possible??

~~~
stephenitis
I read somewhere that there may be legislation in the works by Scott Wiener to
start a state sponsored weed bank.

This following link isn't where i heard it but it references said state law.
[http://www.sacbee.com/opinion/california-
forum/article176972...](http://www.sacbee.com/opinion/california-
forum/article176972031.html)

