A function most businesses take for granted still shackles medical marijuana producers and dispensaries.
The hazy banking climate for Pennsylvania’s blazing new industry so far has kept major financial institutions out of the game and leaves most operators to find creative ways to manage revenue.
“There’s 15,000 licensees across the country,” said Nathaniel Gurien, a New York City-based financial consultant whose firm, FinCann, helps medical marijuana companies get legitimate banking services. “About 1,000 of them have real, legitimate, transparent, compliant bank accounts that they have a very high level of confidence that they’re not going to get closed.”
The U.S. Treasury’s Financial Crimes Enforcement Network, or FinCEN, in 2014 published guidance that encourages banks to work with companies in and around legal marijuana. Regardless, nearly all banks steer clear of it.
“Banking remains a challenge throughout the cannabis industry not only in Pennsylvania but beyond because of the conflict between federal and state law,” said Ari Hoffnung, chief operating officer with Pennsylvania Medical Solutions. The company owns a growing and production facility in Scranton and has access to banking, Hoffnung confirmed but declined to go into further detail.
The U.S. Drug Enforcement Administration still considers marijuana a Schedule I drug with no medical application and a high potential for abuse, so the federal government can still take enforcement action.
Beyond that, FinCEN’s guidance is not the law, and Hoffnung said pending legislation would make the process much simpler.
“Guidance can be changed at any time. That’s why the larger players — JPMorgan Chase, Citibank and Wells Fargo — don’t provide financial services to cannabis companies,” he said. “We believe that the solution for this challenge lies in congressional legislation.”
He hopes that a bill introduced last year in the U.S. House of Representatives will unlock the doors by protecting banks that service legitimate cannabis businesses.
Pennsylvania Rep. Ryan Costello, R-6, Chester County, is a co-sponsor on House Bill 2215. He believes regulators shouldn’t impede community banks that want to lend to legal medical marijuana, he said.
“Passing this bill will provide the certainty and clarity needed so that community banks and other financial institutions can provide the credit and capital needed to build and grow this business model,” he said in a written statement to the Sunday Times last week.
It’s unclear whether President Donald Trump would sign such a bill if it reached the White House. His administration has taken a rigid stance on marijuana, including for medicinal purposes.
Federal regulators, on the other hand, enthusiastically want to see banks open up to cannabis, Gurien said.
“What they’re gravely concerned about is billions of dollars in untracked cash flooding into communities.” he said. “It just creates a very dangerous and disorderly situation. The federal government is keenly aware of that and doing everything it can.”
But more than shaky rules, the stigma around medical marijuana, now legal and regulated in 30 states, still ekes in to the business world, and banks aren’t likely to open up until the DEA cuts it out of the drug schedule, Gurien said.
So for now, most licensed companies operate in a gray area, though he seemed hopeful for change soon.
“I believe that 2018 will be the year that this industry will no longer have issues with banking or merchant processes,” Gurien said.
Abbe Kruger began selling cannabis products at her Edwardsville shop only on Tuesday. The chief executive officer of Justice Grown Pennsylvania has already collected stories of suffering patients, including some with Parkinson’s disease and autism, yearning to calm their symptoms.
“Some of it’s heart-wrenching; some of it’s heartwarming,” she said. “There’s some really sick people out there, and it’s very rewarding to be able to give some alternative that they haven’t had up until now.”
For now, the industry remains almost entirely cash-based, though it’s no Scrooge McDuck, swimming-in-the-vault, scenario.
“I don’t want people, obviously, thinking that there’s this crazy stockpile of cash in my facility,” Kruger said. “We do have banking. We are able to bank. We just can’t use credit cards.”