It’s the largest cash crop in the United States…
Bigger than corn, bigger than wheat, and bigger than cotton.
From 2013 to 2014, it experienced a growth rate of 77%, and an estimated 700% growth rate is anticipated by 2018.
I’m talking about cannabis, and if you’re a regular reader of these pages, you know I’m extremely bullish on the potential of this burgeoning market.
That being said, we’re still in the earliest stages, and right now there are a lot more pitfalls than profits — one of which is the direct result of the federal government’s labelling of marijuana as a schedule 1 substance.
As a schedule 1 substance, it is illegal for any person to manufacture, distribute, or dispense marijuana. As a result, almost every bank in the nation refuses to do business with the cannabis industry due to fear of being shut down by the feds.
So because of the federal government’s insistence on continuing the drug war and denying citizens the right to medicate and recreate as they wish, marijuana dispensaries and growers are unable to conduct business with commercial banks. All transactions must be done in cash, and security companies must be used to move and store this cash. This impediment alone is one of the biggest hurdles for the industry. But if and when that hurdle can be crossed, prepare to see the cannabis market get a major shot of steroids.
Sin is in!
A few months back, while attending a cannabis investment summit, groups of lawyers, accountants, and entrepreneurs devoted hours upon hours to discussing possible solutions to this problem. There was a lot of head scratching and a lot of frustration.
To be honest, after conducting a few interviews, I was at a loss as to how this problem could be rectified in the absence of the federal government re-scheduling marijuana.
But then, last week, a potential solution was found. And it was found in a place where out-of-the-box thinking spawned an oasis of wealth creation and greed.
I’m talking about Nevada, home of legalized gambling and legalized prostitution — two “sin” industries that have turned risk-taking entrepreneurs into multimillionaires. And now, it looks like the Silver State may be ready to facilitate the growth of the marijuana industry by creating new banks that could solve a lot of the banking issues dispensaries and growers face today.
Change the rules
Right now there’s an amendment to a mortgage lending bill that, according to Marijuana Business Daily, would change the rules so savings and loan companies wouldn’t have to obtain insurance from the Federal Deposit Insurance Corporation.
The legislation would also remove a provision from state law that limits the operation of savings and loan companies (called “thrifts” in the banking world) to those that received a license prior to 1997:
Thrifts could potentially become the go-to financial institutions for cannabis companies – and if the experiment works in Nevada, other states might adopt similar legislation.
Under the amendment, thrifts would be allowed to seek deposit insurance from private insurers rather than the FDIC, and more closely resemble credit unions than traditional banks.
To be sure, non-traditional banking hasn’t exactly been the saviour for cannabis companies, as some credit unions have failed at attempts to work within the industry. They must also have in place agreements with the U.S. Federal Reserve to take their cash, which can prove problematic.
Still, if they work as well as the amendment’s co-sponsors hope, savings and loan companies could potentially alleviate a very large problem for cannabis businesses that are about to open in the state since banks aren’t openly taking deposits from marijuana companies.
Mark my words: If this works out, other states will follow. And so, too, will savvy investors.
Source: THECHERRYCREEKNEWS.COM 10th June 2015