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It Doesn’t Matter How Bougie Your Weed Dispensary Is—It’s Still Illegal for Them to Use Banks

Hopefully, that’s all about to change with bill SB930

In the world of legal weed — or at least in a state of legal weed here in California — many of the most successful dispensaries have adopted the aesthetics of high-end boutiques, ranging from warm and inviting apothecary vibes to chic and sleek techie moods a la MedMen. These spaces are designed for people who weren’t down to connect with random doctors issuing medical licenses on FaceTime, meaning they’re made for an emerging group of marijuana consumers who wouldn’t dare call themselves stoners. These are men and women who stack their THC tinctures next to their Le Labo perfumes, Aesop facial mists and reishi mushroom adaptogens. They love to luxuriate in how cared-for they feel while stoned.

Your average weed dispensary, however, has one unsightly element you won’t find at other boutiques: armed guards, the heat-packing watchmen who are not-so-subtle reminders that these stores still aren’t mainstream.

It’s sensible to assume the guards are on site to protect the store’s inventory, which is partly true. But in most cases, they’re protecting another kind of green — money.

The cannabis industry still operates almost entirely in cash, meaning these establishments are sitting on stacks of money (one of the reasons many such stores are still designed with a lobby and dual-entry system, which makes robbing them a little harder).

So where exactly does your cash go when you spend at a dispensary?

Most likely, to a big box or bag somewhere in the owner’s home or backyard, even when shopping at the most bougie of storefronts. Because the federal government still considers marijuana a Schedule 1 drug, it’s illegal for weed companies to use banks. So while the industry is legal in California, banking the industry isn’t.

This doesn’t mean that no weed companies use banks, it’s just that in doing so, they’re massively vulnerable to their accounts being frozen and their funds being seized at any given moment. Not to mention, dispensaries that accept credit and debit cards have to use merchant processors that have sprung up specifically for the cannabis industry, and which are known to take predatory percentages in comparison to your typical electronic card technologies.

So as the messaging of the cannabis industry emphasizes how “above-ground” it is in an attempt to attract new consumers, the money it’s generating is still kept underground, buried on properties in hopes of alleviating founders’ vulnerability.

It’s a Public Safety Issue

While I’m always in a rush to GTFO of a dispensary (to start smoking the products I’ve just bought), I’m now going to be dashing out with gratitude that an armed gunman didn’t come to collect while I was there. “Public safety is a major concern. There’s so much cash kept in people’s businesses, homes and backyards. Some folks, in order to spend the cash, are buying assets that aren’t being reported, so we’re also losing tax revenues,” says Fiona Ma, a member of the California Board of Equalization, a tax-collecting agency.

“We can’t audit cash,” Ma continues. “So when we go audit a dispensary and they say they don’t have any books or records because everything is in cash, we essentially sit outside the dispensary and count how many people come in over a three-day period. Then we extrapolate based on that data and then send them a bill going back three years, plus interest and penalties, and just hope that they pay.”

As of now, weed companies bring in big bags of cash to pay for their taxes, but this doesn’t give government agencies much of an ability to verify the accuracy of the amount owed. The Board of Equalization was approved to collect taxes from medical dispensaries as far back as 2006, which proved difficult for this exact reason. When Ma was appointed to the Board of Equalization in 2015, she made it her mission to not only find out just how much sales tax they were collecting from dispensaries, but also to understand why the whole process was so unorganized.

“Most notably, anybody who was in the business and anybody accepting money or clients from this industry could be liable for money laundering. So until recently, there weren’t many accountants, bookkeepers, payroll agencies or lawyers willing to work with cannabis companies that educated them on California law,” Ma explains. “Banking access was the big elephant in the room.”

For the past three years, Ma has attempted to figure out how to bank the industry in California, “whether that meant working with the federal government or working around the federal government.” And while federal agencies put the responsibility on Congress to change the laws, the attempts to change this at the congressional level have all failed.

A Much-Needed Legal Solution

Meanwhile, in just a matter of months after legalization, California has the biggest legal cannabis industry in the world. According to Business Insider, “the market is expected to hit $3.7 billion by the end 2018, and that number will increase to over $5 billion in 2019.” And while Colorado is the pioneer when it comes to statewide recreational weed programs, the California cannabis industry generated about a billion and a half more dollars in revenue than Colorado’s in just a few months. Basically, the businesses are smaller in Colorado, which has made the banking and tax-collecting issue less of a problem than in the Golden State.

Enter SB930, the California bill Ma co-sponsors alongside State Sen. Bob Hertzberg (D-Van Nuys). SB930 is the first bill of its kind in the country, and, if ratified, it would create a closed-loop state banking system that would allow state-chartered financial institutions to apply for a special cannabis license — allowing them to bank the industry. “It would be a limited-purpose account, meaning you could use it to pay your state taxes, other vendors and your landlord,” Ma says. “And if you want to earn some investment return on your money, you’d be able to buy California bonds.”

Since the SB930 legislation was introduced in February, it has been approved by multiple committees. The bill has bipartisan support and awaits final approval from the Assembly Appropriations Committee. Legislators involved expect this to happen during the first two weeks of August, after their summer recess. This is the last stop before the bill goes to the Assembly Floor, and if it passes both, its next stop will be the governor’s desk for signature. “The bill is moving. If the governor signs it, I believe at least 30 states will be proposing similar legislation this year, maybe even more depending on what cannabis initiatives end up on the ballot,” Ma says.

“It’s funny that there is much emphasis on wanting cannabis delivery drivers to be safe and limiting the amount of cannabis and cash they could carry on them,” Matthew Gerson, founder of Foria, an L.A.-based company that makes personal lubricants with both CBD and THC as well as a new line of CBD vaporizer pens. “The irony is that if they really wanted everyone to be safe, they would allow us to put the money in the bank.”