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The Complexities of Cannabis: Banks, Merchants, Consumers and More

Complexities of Cannabis

Cannabis—it’s no longer the verboten 800-pound pink elephant (though I think that might be a new strand). It’s about as mainstream as well…mainstream. And as we begin our latest Rantings Rant, it seems like the last time we (well, not you or I) experienced something like this, Al Capone and Elliot Ness were facing off during the time of Prohibition (if you’ve never seen the film The Untouchables, I highly recommend it!).

Mark, first things first, what do you think is actually more verboten among bankers, bitcoin or cannabis?
At the highest levels, I think bitcoin. And it feels odd to say, but there’s more darkness around the underpinnings of bitcoin than of the marijuana industry, which in recent years has moved into the bright lights of social acceptability. It feels weird to say/write that, especially given the market coverage and media frenzy around bitcoin, but we’ve been witnessing a pullback and public debate around the underpinnings of bitcoin from governments and financial institutions around the globe.

But we have seen some major forces in the banking industry publicly acknowledge bitcoin recently…so why are banks so apprehensive about endorsing this newly regulated and “high” flying industry.
I believe it is less about the topic itself and more around the fact that there are so many different layers of banking regulation we have to deal with in the US. For this industry in particular, getting every one of those regulatory bodies in line and in agreement, the ability to unstick the path for banking is messy. It’s definitely not for a lack of want from the bank side; it’s more based on a fear of inadvertent risk.

What do you mean by inadvertent risk? As is supporting a nascent industry that brings with it some negative connotations? Or is this something else?
The taboo aspect has more or less gone up in smoke. It’s the layers of the regulations and running afoul of them—that’s the issue. Being in line with one regulation and not with the other 20 you have to mind. It’s sort of like the children’s game of pick-up sticks; there isn’t a clean path to pick up the stick, yet.

So realistically, when will banks hop on board the cannabis train?
We’re starting to see a thaw, and there’s a push by different states at the local level to let loose and service this blooming market. That said, it’ll take time at the national level for banks to hop on. But I don’t think that wait will be a long one in banking years.

We’re not talking years then, right?
I think the time will be measured in months, not years, especially given the current size and continued growth of this multi-billion-dollar industry.

Given the aforementioned size, how big an opportunity is this (or could this be) for the banks?
This is almost unlike any other industry we’ve seen (since prohibition ended)… it really is not like when Uber first started and gave birth to the whole gig economy; this is a full scale industry being run by business-savvy entrepreneurs that has been let loose. We know it’s an industry that has a rapidly growing number of legal users—across the board—because they were already consumers—the procurement process just changed. And based on size of audience and known information (from the CDC), we know that many Americans have tried or are comfortable with it, and we know there’s even more demand, especially as more states come on board in the coming months and years.

Borrowing loosely from Spiderman, with great demand comes great opportunity (for the banks)?
That’s right, Peter Parker. Consider the wide spectrum of use cases—it’s not just a new merchant use category, but there are new corporate needs (for cash management products for the entire supply chain), payroll services for dispensaries, tax-based services for accountants, and, not to mention, a new consumer market to exploit (for items like rewards, credit offers, etc.). It’s a full new vertical!

I know there’s talk of kick starting the XFL. Instead of “He Hate Me,” maybe we’ll see more jerseys with the number “420” on their backs.
Poor Ricky Williams—he was a few years too early. It gives a new definition to performance-enhancing substances.


Since we’re talking months, instead of years, this will definitely be an interesting market to track…one without the financial ups and downs or bitcoin (though there might be figurative ups and downs).

And one very interesting tidbit, just as we went to print today with this post, we learned that the US Treasury Secretary appears to support pot companies storing their money in banks. Now that’s an interesting shakeup we’ll likely tackle in an upcoming Rantings Rant! Get out the popcorn!