Banking dangers throughout the 29 states that have legalized marijuana either for recreational or medical use are well documented and the information is not breaking news. However, some of the lengths that legal marijuana dispensary or outlet owners have had to go to in an attempt to make their money safe without breaking the law are extraordinary and also unreasonable.
Slip a fresh $20 bill under the bulletproof teller window of Donnie Anderson’s Medex marijuana dispensary on Century Boulevard – perhaps for a gram of cannabis or some THC-infused toffees – and the legal tender is transformed into something else: drug money.
Though the transaction is legal in California, under federal law that bill is not much different from the contents of a drug cartel’s safe – cash that most banks won’t touch.
So how is Anderson supposed to pay his employees, suppliers or business taxes? He deposits cash, in drips and drabs, into an account held by a limited liability company that his bank thinks is a property management firm.
“The bank doesn’t know what we do,” he said.
If this sounds like money laundering, you’re not far off.
Yet consider this: That same $20 exchanged at Canndescent, another cannabis company, takes a direct and transparent route into the financial system.
When the marijuana cultivator sells its product to a dispensary, one armored car drops off the pot and another picks up the cash payment – and then heads to a downtown Los Angeles branch of the Federal Reserve Bank.
There the cash is deposited into the account of a local credit union, one that’s eager to do business with Canndescent.
“After all the horror stories I’ve heard, it does seem like a little bit of magic,” said Tom DiGiovanni, Canndescent’s chief financial officer.
Indeed, though the same laws apply to Anderson’s dispensary and Canndescent’s Desert Hot Springs farm, the world of cannabis banking is so full of contradictions that one business can truck money to a federal facility while the other is left to play a high-stakes game of hide-and-seek with its cash.
“It’s the early stages of the Wild West,” said California Treasurer John Chiang, who is leading an effort to reform cannabis banking, a problem dating back to 1996 when California legalized medical marijuana.
With recreational use set to become legal next year under Proposition 64, cannabis sales in the state are expected to top $7.5 billion in 2020, up from about $3.3 billion last year, according to data provider New Frontier and cannabis investor network Arcview Group.
But while Proposition 64 broadened the legal use of pot, it did nothing to relax banking regulations.