• Cultivated
  • Posts
  • Cannabis cash continues to be a problem

Cannabis cash continues to be a problem

Plus, three years into New York’s legalization

Good morning.

Here’s what’s happening in cannabis-world today.

Public cannabis companies had a good trading day after news of Florida’s legalization vote. New York is three years into legalization, and it’s been a bumpy ride, to say the least. And sorry Hawaiians — you’ll have to wait even longer for legalization. 

Let’s get to it. 

- Jeremy Berke & Jay Rosenthal

💡What’s the big deal?

Banking issues persist in cannabis

What happened: It will come as no surprise to any of you reading this newsletter that cannabis is a cash-intensive business. 

A new Wall Street Journal report goes into just how difficult the status quo is for cannabis operators — and how helpful federal reform, like moving cannabis to Schedule III, or the Secure and Fair Enforcement Regulation Act (SAFER), could be to the industry. 

Federally-chartered banks, the JP Morgans and Bank of Americas of the world, are mostly locked out of doing business with the industry given that it’s considered a Schedule I controlled drug.

That leaves small credit unions and local banks who choose to take the risk — and cannabis companies often have their accounts shut down with little warning as directives change. 

What’s in the story: Only 10% of all banks in the US say they work with cannabis businesses, per data from the Treasury Department. 

The story discusses private security contractors who help cannabis companies move hundreds of thousands of dollars of cash around. Many companies are forced to pay their vendors, employees, and even their taxes in cash — which in some states, comes with a penalty — pushing the effective tax rate these companies pay way up.

And, for cannabis businesses, the story describes the difficulties they face in doing business day-to-day. 

What they’re saying: “For companies that are generating that much money, this is a caveman approach to finance,” Clayton Taylor, who runs a private security firm that works with cannabis companies, told WSJ.

And: “The existing system is a losing proposition on every single level. It makes no sense at all,” Sen. Jeff Merkley, an Oregon Democrat and the author of the SAFER Act said. 

An opposing view: Tyler Beuerlein, an executive at Safe Harbor Financial, a financial firm focused on the cannabis industry, took issue with the story’s reporting in a LinkedIn post

“The cannabis banking climate has gotten so competitive that many banks and credit unions have either exited the business or are in the process of doing so,” he said. 


💬 Quotable

“We never take anything for granted here in the state of Florida, but the polling is showing it’s a bipartisan issue that cuts across a lot of different demographics. We feel confident that Floridians are ready,” Trulieve CEO Kim Rivers told BNN Bloomberg in a televised interview, regarding the chances of the initiative her company spearheaded to legalize cannabis in Florida.

Floridians will vote on legalization in November, and polls show a majority support — but they’ll need to get at least 60% of the vote for the measure to take effect.

Three years into NY’s legalization, the outlook isn’t good

Driving the news: When New York passed the Marijuana Regulation and Taxation Act, legalizing cannabis in March of 2021, hopes were high that the state would be the center of the cannabis universe.

Three years later, there are only a few dozen shops open — and the state’s Office of Cannabis Management is mired in lawsuits and staff controversy. Meanwhile, consumers, and prospective business owners are left in the lurch. 

New York Cannabis Insider has a long, detailed look at the good, bad, and ugly three years into the Empire State’s legalization project. It’s worth reading the full thing

Zoom in: Cannabis legalization bills often reflect the political priorities of the state where it’s generated, and those who write the policy. 

When New York legalized cannabis, lawmakers put social equity front-and-center, unlike other states which opened their doors to corporate cannabis firms immediately.

But in an effort to avoid monopolies — and the economic windfall of legalization flowing to a few, mostly white and male executives — the state put up what some experts say are far too many roadblocks to actually getting stores open.

It’s a classic story of big government progressives and more free-enterprise business owners coming into conflict. But this time, it’s all about who has the right to sell weed to New Yorkers. 

The bad and ugly: NY Cannabis Insider goes into detail about predatory financing deals, which take advantage of the social equity laws. It also discusses staffing controversies at the various agencies responsible for the delayed rollout of legal cannabis.

And, the story discusses how zoning restrictions in some towns have made it all but impossible for cannabis businesses to open up shop, among other issues. 

There’s a lot that needs fixing. 

Our take: We’ve said it before, but we’ll say it again. Consumer access is the key that underpins these high-minded social equity goals. 

If consumers are unable to access legal cannabis easily, and entrepreneurs are unable to open stores, then the rest is just lip service — no matter how laudable the goals are. 


⚡Quick hits

Cannabis legalization won’t move forward in Hawaii, after disagreements over implementation killed the bill in the House Finance Committee. House Speaker Scott K. Saiki said that “overwhelming” testimony from the state’s law enforcement officials made lawmakers want to seek further consideration of legalization. The bill previously passed Hawaii’s Senate.

Friedrich Merz, the leader of Germany’s conservative Christian Democratic Union, told The Associated Press he would reverse the country’s legalization law which went into effect earlier this week if elected next year.

Ontario is cracking down on unlicensed cannabis shops — but one indigenous store owner says he’s simply exercising his right to do business in his tribal territory, reports The Toronto Star

Cannabis marketplace LeafLink launched its 2024 Wholesale Pricing Guide. Key takeaways include price declines across the US — though not as severe as 2022 — due to an oversupply in cannabis, as well as continued challenges from illicit market competition.  

Oregon Gov. Tina Kotek, a Democrat, officially signed a bill recriminalizing possession of small amounts of drugs, after the experiment was “hobbled by implementation issues,” The Associated Press reports.

💬 Deals, launches, partnerships

Canadian edibles company Indiva gave an update on its loan from SNDL, saying it plans to pay back $2 million of the principal and evaluate “strategic alternatives.” That can certainly mean a lot of things. 

B Real, of Cypress Hill fame, is opening a new Dr. Greenthumbdispensary location in Fresno, California.

😎 One cool thing

Dine-in movie theater chain (and Jeremy’s favorite) Alamo Drafthouse is hosting a 4/20 event hosted by Wana Brands called Alamo Dankhouse. The theater will show stoner classics, like Half Baked and The Big Lebowski, with a three-course “munchie-busting feast,” including mac’n’cheese, cool ranch popcorn, and more. 

We say yes to more movie theater/cannabis company tie-ins — it’s a great match (and marketing opportunity). See you there New York friends? 

📰 What we’re reading

What did you think of today's Cultivated Daily?

Login or Subscribe to participate in polls.