Interesting quandary in in California, and several other states that have legalized Cannabis at the state level and the implications that come with it are quite, hmmm different.. Now, this talk is neither whether I am for nor against the legalization and more about dispelling a few myths, and or challenges with the “Marijuana Business.”
Just over one week ago I had the please of hearing one of the best escrow attorneys in Southern California speak. Rose Pothier has arguably got to be one of the most respected, and referenced in her field, and to hear her take was extremely eye opening.
A few items we have been told about legalizing pot:
- It will bring in Tax Revenue
- It will lessen Crime & Related Industry
- It will be regulated, and more controlled as compared to backyard grow operations
Now as Rose started breaking it down and how the industry relates to our wonderful Real Estate Industry, it became glaringly apparent that there are some major issues to contend with for Cannabis related businesses. First, and probably the biggest is that Cannabis is only allowed legally on the State level, and NOT on the Federal level. What does that mean, well, let me break it down.
If you run a business and want to use a debit card, credit card, write checks, do accounting (Officially) and so forth, you need to be able to have a bank account. This is where the largest problem arises. You see banks are Federally chartered, are insured by the FDIC, and use a Federal Reserve wire system. If a business, (bank or escrow company for example) is breaking Federal laws, then the bank, can lose its charter, lose FDIC insurance, and ultimately be shut down.
Wow.. Do you see the dominos falling now? If you can’t have a bank account, then you become a 100% cash business. If you are a cash business, are you sharing your take to pay taxes? Also, if you are a cash business with large amounts of cash, at your place of business, or home, does this make you a target to get robbed?
Soooo, our California state officials spent a long period of time creating full blown report (which I am attaching, for your reading pleasure) which essentially, is one big circle. They identify that currently under the law, there really is NOT a good solution, and the only real solution starts with the Federal Government reclassifying Cannabus from being grouped with heroin, other opiates, to a lesser drug like alcohol.
Morale of the story: If a bank, escrow, title company gets wind that the transaction they are doing is a Cannabus Related business, the transaction (under current law) cannot be done.
- Do you think we are seeing significant Tax Revenue?
- Do you think this is lessening crime?
- Is it more controlled or less enforceable?