By Paul Schneider
With the state of California set to hold what is arguably the most significant vote in the history of the marijuana industry in a mere 15 months, there seem to be more questions than answers:
How will recreational cannabis be taxed? Who is going to regulate what? Will there be a monolithic agency overseeing all aspects of business, or will several agencies take control of several aspects? What will be government-led? What, if anything, will be privatized? What about labor relations?
And perhaps the most important: What about the money? How are the revenues going to be handled? Which banks are willing to step out of the financial mainstream and start handling dispensary and other industry accounts, especially with marijuana still illegal at the federal level?
The California Marijuana Control, Legalization and Revenue Act, if it makes it onto the ballot—and all indications appear to lead to that conclusion—would be put to a vote in November 2016. The initiative needs 365,000 signatures to get on the ballot, and according to one estimate from ReformCA, 70,000 have already been collected.
If passed, California would become the fifth state to legalize the cultivation and sale of recreational marijuana. More significantly, it would also become the most populous state to do so. California already has over 1,000 dispensaries serving over 1 million medicinal users. Those numbers will likely increase by a staggering amount if the initiative becomes law.
Much of the bureaucracy needs to be established to handle the coming and goings of what could be the fastest-growing industry in the state. To that end, the state Board of Equalization, which handles taxation and revenue, has proposed a state-run bank to handle the fiduciary business.
At the present, marijuana is a cash-only business. Even fees and taxes locally and to the state are paid in cash only. For obvious reasons, that has to change.
“We lead in many first-in-the-nation initiatives,” Fiona Ma, a 2nd District Representative on the BOE, told a meeting she convened last week of industry leaders, banking and finance experts, and state and Federal Reserve officials. It’s the first of a series of meetings she will head up. “And I believe we could create some sort of state depository that could handle cash deposits and also be available for the industry to make electronic transfers to make their payments.
“As we move towards a paperless society, it is unfair for a whole class of citizens to live their lives using cash and manual transactions.”
Ma, the BOE and the cannabis industry have developed and maintained a friendly, non-adversarial relationship for several years. Last week’s meeting was part of an ongoing outreach program from the BOE to the industry, and included a tour of various cultivation sites throughout Northern California earlier in the month. The suggestion of a state-run bank is just another step in that progression.
“In general I’m really happy that the BOE is engaged in this process,” said Dan Grace, CEO of Dark Heart Enterprises, and a director of the California Cannabis Industry Association. “Fiona Ma, and (former BOE representative) Betty Yee before her have done a really great job with their outreach program, especially here in Northern California. We don’t have a regulatory system in place yet so I think it’s great of the BOE to want to be a regular player in setting this up. I applaud them for engaging in the issue.”
From the looks of it, Grace is anything but alone. California has a history and reputation for being national trendsetter. Perhaps with a state-run bank, it will be again.
