California’s Cannabis Conservation

A group of six California legislators, led by Assemblyman Reggie Jones-Sawyer, have drafted new legislation in response to the Trump Administration’s statements on marijuana. The bill, which has drawn disapproval from local law enforcement officials, aims to block local police and sheriffs’ departments from assisting federal investigations and arrests of state licensed marijuana businesses unless compelled by a court order. According to Assemblyman Jones-Sawyer, “[p]rohibiting [California’s] state and local law enforcement agencies from expending resources to assist federal intrusion of California-compliant cannabis activity reinforces…the will of [the] state’s voters who overwhelmingly supported proposition 64.”

Those opposed to the bill, like Kern County Sheriff Donny Youngblood, believe directing law enforcement’s cooperation with the federal government is “really quite offensive.” Youngblood further argues “[growing and selling marijuana] is still a federal felony and we are still in the United States of America and the state of California cannot take over the United States.”

In response, the bill’s proponents assert pot protective legislation is necessary because marijuana businesses pursuing state licenses need assurance that licensure will not make them more susceptible to arrest and prosecution under federal law. Accordingly, the bill seeks to prohibit local law enforcement agencies from using any resources to assist a federal agency to “investigate, detain, report or arrest” licensees unless served with a court order. The bill would also ban California authorities from giving licensees’ personal information to federal agencies. According to the bill’s co-author, Assemblyman Rob Bonta, protecting licensees’ personal information ensures they are willing to share it with state regulators. Currently, California’s Bureau of Medical Cannabis Regulation treats all requests for personal information as a formal request and determines, pursuant to the information sought, what it may release and what is exempt from disclosure.

This bill reiterates that when it comes to cannabis, California law makers are on the side of the compliant. To ensure their compliance and its accompanying protections, California marijuana businesses should take advantage of compliance platforms like PayQwick, whose comprehensive compliance assessment programs incorporate all applicable federal and state laws, regulations and guidelines. By making compliance a priority, these businesses can worry less about federal prosecution and focus more on profits.

K Berke

Cashing in on Cannabis; CannaCon’s Banking Panel

Marijuana’s profitability is no secret. Since Washington legalized recreational marijuana in 2014, recreational marijuana sales in the state have totaled over $1 billion, translating to over $250 million collected in taxes. Such substantial sales, however, have also brought problems in the form of cash.

Because of marijuana’s federal status as a Schedule I substance, financial institutions continue to deny banking services to state licensed marijuana businesses. Consequently, these businesses have been forced to deal in cash and suffer the sometimes lethal consequences.

There are, however, licensed marijuana businesses who have broken free from cash with the help of third party platforms like PayQwick. Licensed marijuana businesses can now easily access regular businesses bank accounts, cash management and bill pay services and the ability to send and receive electronic payments. These businesses also enjoy the added benefit of compliance services, which keep them operating in line with all of the state’s regulations.

To learn how to break free from cash, marijuana business owners and those considering the marijuana industry can attend CannaCon’s banking panel, “Cashing In On Cannabis – Compliance, Banking and Cash Management” on Friday, February 17, 2017 at 11:30 am in seminar room two. Moderated by MJBA CEO and Co-Founder David Rheins, the panel consists of Kenneth Berke, Christine Masse and Myles Khan.

Ken is the Co-Founder and CEO of PayQwick, Inc., a compliance, cash management and electronic payment processing platform that has facilitated regular business bank accounts for over 200 licensed marijuana businesses throughout Washington. He is also an attorney with 29 years of experience and has advocated for the legal marijuana industry before regulators throughout the U.S.

Christine Masse is a partner at Miller Nash Graham & Dunn, where she leads the government and regulatory affairs practice group and specializes in representing businesses in highly regulated industries with their transactional, regulatory, and public policy needs. She also leads the firm’s tribal team, providing counsel to various Northwest Native American tribes and organizations on matters such as marijuana.

Myles is a legal officer at Foundry Law. His practice focuses on corporate, entertainment, intellectual property, business development, cannabis and regulatory matters. Myles also owns Buddy’s, one of Washington’s most prominent marijuana retailers.
The panel will focus on how businesses can reduce their cash use, secure bank accounts and remain compliant. Attendees will be able to ask questions of the panelists.

The New Administration – Won’t Trump Marijuana’s Momentum

2016 was the year of marijuana. After the November election’s sweeping victory, 28 states, along with Washington D.C., now allow medical or adult recreational marijuana use. The November 2016 election also established a conservative administration that some fear could reverse marijuana’s momentum. However, the Trump administration’s statements on marijuana, marijuana’s profitability and the ramifications of eliminating state legal marijuana industries all indicate that compliant marijuana businesses and the financial institutions that service them are safe.

Jeff Sessions

Though Jeff Sessions has long been a marijuana opponent, his responses to marijuana inquiries at his confirmation hearing reveal he will take a reasonable stance on marijuana. When asked about marijuana, Mr. Sessions stated that while the guidelines in Deputy Attorney General James M. Cole’s 2014 memorandum titled Guidance Regarding Marijuana Enforcement (the “Cole Memo”) are “truly valuable,” he “won’t commit to never enforcing federal law.” The Cole Memo seeks to preserve federal resources by protecting state licensed marijuana businesses that follow its eight enforcement priorities. Mr. Sessions reiterated this objective, stating enforcement is “a problem of resources for the federal government.”

Mr. Sessions’ reference to resources is especially significant, because marijuana’s current federal safeguards, such as the Rohrabacher-Farr Amendment, prohibit the Department of Justice (“DOJ”) from using its resources to “prevent any [state] from implementing [its] own laws that authorize the use, distribution, possession, or cultivation of medical marijuana.” Consolidated Appropriations Act, 2016, Pub. L. No. 114-113, § 542. In August 2016, the United States Court of Appeals for the Ninth Circuit further bolstered the Amendment, citing “at a minimum… [the Amendment] prohibits DOJ from spending funds…for the prosecution of individuals who engaged in conduct permitted by the State Medical Marijuana Laws and who fully complied with such laws.” United States v. McIntosh et al., Case No. 15-10117, –F.3d –, 2016 WL 4363168 (9th Cir. Aug. 16, 2016).

Mr. Sessions also indicated he will defer to the president on marijuana, stating “it is not the Attorney General’s job to decide what laws to enforce.” Such deference is encouraging, since President Trump believes marijuana is a states’ rights issue.

Profits

Marijuana’s profitability is no secret.  In 2016, the U.S. legal marijuana market was worth roughly $6.7 billion. That number is expected to rise to $21.8 billion by 2020, generating immense tax revenue.

Washington State, which legalized recreational marijuana in 2014, collected approximately $265 million in marijuana taxes in 2016. Colorado’s 2016 marijuana tax revenue totaled over $150 million from $1.1 Billion in sales. Oregon’s first year of legal recreational sales in 2016 generated over $60 million in taxes. By 2020, California is expected to collect $1.1 billion in marijuana taxes annually.

State regulators use marijuana taxes to fund education, law enforcement, drugged driving prevention programs and health and social services like mental health and drug counseling. Consequently, Mr. Sessions will be hard-pressed to eliminate an industry that generates such substantial tax revenue since this will severely harm state economies and impair social welfare.

Ramifications

Medical and adult recreational marijuana legalization has created strictly regulated industries dedicated to eviscerating the marijuana black market, keeping marijuana away from minors and deterring drugged driving and illegal transactions. Successful legal marijuana industries, like Washington’s, require all marijuana sales be tracked from seed to sale, making it nearly impossible for licensees to perform illicit transactions like money laundering and tax evasion. State regulations also mandate that retailers and dispensaries prominently label all marijuana products with warnings like “for use only by adults twenty-one and older. Keep out of reach of children” and “marijuana can impair concentration, coordination, and judgment. Do not operate a vehicle or machinery under the influence of this drug.” WAC 314-55-105 (11)(d)-(e). In turn, marijuana-related arrests “have plummeted…saving [states] millions of dollars.” Drug Policy Alliance, (2015) So Far, So Good, 4.

Financial institutions servicing these highly regulated businesses play a significant role in industry compliance and the public safety. To abide by FinCEN’s marijuana banking guidelines, financial institutions perform extensive “Know Your Customer” due diligence, ensuring their marijuana clients comply with state law and do not implicate any of the 8 enforcement priorities listed in the Cole Memo. Additionally, financial institutions promote public safety by reducing marijuana cash and its accompanying dangers.

If Mr. Session eliminates state regulated marijuana industries and seeks to prosecute legally operating marijuana businesses and the financial institutions that service them, it will detract from the federal government’s objective of destroying the marijuana black market, putting drug cartels out of business and promoting public safety.

Solutions

The Trump administration’s statements on the marijuana industry indicate meticulously compliant marijuana licensees will be safe and remain lucrative clients for the banks serving them. While it is unclear how, if at all, state legal marijuana industries will change, it is now more important than ever for marijuana businesses to strictly comply with all federal and state laws and regulations and for financial institutions to perform thorough and continuous due diligence. This includes ensuring marijuana business pre-package all marijuana before sale to consumers, track all marijuana sales using the state-mandated software system and do not use virtual currency, like Bitcoin. To make compliance easier marijuana businesses and the financial institutions that serve them can work with compliance platforms like PayQwick, which ensures licensed marijuana businesses follow all applicable federal and state laws and regulations.

 

Published in mgretailer.com March | 2017 By Kenneth J. Berke, PayQwick, Inc.’s Co-Founder and CEO, and Sahar Ayinehsazian, PayQwick, Inc.’s Director of Regulatory and Governmental Affairs