If money is a curse, there’s a powerful hex over Nevada’s fledgling cannabis industry.
Barely a year old and the legal weed business is smashing projections for sales ($433.5 million in the ten months reported so far) and tax revenue (projected at $50 million for the year, revenue has reached $55.5 million after ten reported months). But marijuana, with its federal prohibitions, is a cash business. Cash may be king, but it’s also cumbersome and dangerous.
“The cash is by far our biggest issue,” says a Las Vegas cultivator who doesn’t want to be identified. The Cultivator (as we’ll call him) took the Current on a tour of his facility, a nondescript, unmarked sprawling unit in a valley industrial complex.
“Security is a major concern,” says the Cultivator, seated in front of a screen where he can watch images of the entire facility. “The state doesn’t want any blind spots.”
Absent a bank that will do business with the federally prohibited industry, growers, testers, and dispensaries are forced to ply their trade with cash. Lots of cash.
“It’s not that the banks can’t do business with us,” the Cultivator says. “They just won’t because it requires an extra burden of compliance.”
“We’ve heard from almost everyone in the Nevada industry,” says Kendell Lang of Fusion Bank, an institution based in the Bahamas that is hoping to cash in on the green rush by supplying financial services to the burgeoning industry. “They are all averaging a million and a half dollars a month and that kind of cash creates a public safety issue.”
Fusion Bank belongs to something called the Sovereign Friendly Society. Its website says:
“The Sovereign Friendly Society is a legally registered friendly society located in the Bahamas that can provide insurance, investments, financial services and ancillary membership services to qualified MMJ members around the globe.”
Lang says he’s hoping to get an opinion from Nevada Banking Commissioner George Burns this week about Fusion’s effort to apply as a foreign credit union.
But Burns says in Nevada a foreign credit union means a credit union in another state, not another country. Given that, Burns says Fusion is unlikely to succeed.
“We have a lot of people come to us with solutions that are neither practical nor legally permitted. Since the legalization of medical as well as recreational marijuana, we have been seeking solutions to provide banking service,” Burns says. “There are a number of avenues we have pursued. We’ve had a number of organizing groups. One of the biggest issues they’ve had is finding an insurer who will cover a marijuana-funded depository institution. We’ve looked at having relationships with institutions in other states. It’s not like we put up a brick wall and say ‘no, no, no.’ We’re saying we have to bring something permitted by state and federal law.”
What alternative has the best chance?
“I would say there’s a good chance of a national bank that handles marijuana-related businesses opening a branch in the state,” says Burns. “The best chance is if Congress finally acts on some of the bills to deschedule marijuana as a class one drug or give safe harbor to banks that want to take on customers. It’s really a federal issue that is hard for states to overcome.”
Aside from keeping track of all that cash, the most challenging aspect of growing weed, says the Cultivator, is maintaining the conditions state inspectors demand to ensure the safety of consumers.
Layers of precautions are in place to prevent contamination of the plants, flower and trim.
“Nevada has the strictest testing standards in the nation and we’re still trying to figure out the best standards to allow the industry to operate while ensuring the products sold in dispensaries are safe and of the highest quality,” says Andrey Jolley, president of the Nevada Dispensaries Association and owner of The Source, a Las Vegas dispensary.
Those standards are about to become even more stringent on July 1 when the state adds four strains of aspergillus, a mold found on marijuana, to the testing mix.
Jolley says no other state has the requirement and he says cultivators are concerned it could lead to costly failed test results.
Unlike California, where allegations of ‘pay to play’ permeate the lab testing industry, growers and dispensary owners the Current spoke with say revisions implemented here last November help to eliminate the potential.
“Previously, we could send five different samples of a five-pound batch of flower to five different laboratories and cherry pick the results, from THC (tetrahydrocannabinol, the psychoactive ingredient in cannabis) to CBD (cannabinoid, the medicinal ingredients) content, to the presence of mold,” says the cultivator who doesn’t want to be identified. “Now it’s one sample from a five-pound batch.”
Despite the success of the cannabis industry, experts say the illegal market is thriving. The reason is simple. It’s cheaper. An ounce of quality “street” weed sells from $200 to $300. The legal stuff runs from $360 to $480, without tax.
“We are displacing the black market with the legal, regulated market but the transition isn’t going to happen overnight,” says Jolley. “Tax collections show it’s happening.”
Still, Jolley says he and other dispensary owners would like to see police focus their efforts on eradicating the black market.
“We’ve been told by law enforcement that they don’t have a lot of resources to go after small and medium-sized black market operators. Those of us in the industry would like to see more enforcement. If you had a small, illegal gaming operation, I don’t think it would be open very long. We would like to see the costs of purchasing, auditing and taxing applied fairly to everyone,” he says.
Speaking of police, a handful of former law enforcement officials, including former Henderson Chief of Police Richard Perkins, own or manage cannabis establishments, while the scores of people they put in prison for pot-related offenses are often prohibited from working in the industry.
“I’m a huge supporter of expunging criminal records for people who would qualify and in my opinion that would apply to people who had simple possession charges and other charges for offenses that are no longer illegal in the state and I think those people should be able to clean up records and not be penalized for something legal,” says Jolley. “It’s something that needs to happen to right the wrongs of the past in regards to marijuana policy and criminal justice reform.”