Inside America's Billion-Dollar Weed Business: The Grass is Greener By VICE News

Because financial institutions are regulated at the federal level. Most businesses in the industry are operating without a bank account. Typically, we try to have two banks, one we're with and one we're going to when they shut us down. You know it's just another fire drill that you kind of learn to go through in this industry. If you're investing in a business, that's dealing solely in cash, difficult, get that comfortable in a city with dispensaries as common as coffee shops. Denver is undoubtedly the epicenter of America's legal marijuana movement and, if you're in the business of Bud, it's a good place to be Colorado accounted for a third of the country's 2.7 billion dollar marijuana market last year, but with being America's fastest growing industry comes growing pains. Marijuana is still illegal on the federal level, which has led to conflicting state laws, restrictive regulations and endless problems for cash-only marijuana, business owners and operators.

However, market projections of over 11 billion in the next five years still have everyone coming to town for the Green Rush we're outside the cannabis cup in Denver, it's 4/20 today, it's basically like Christmas for anyone who spends marijuana. The cannabis cup looks like a giant pop party, but with legalization, this bleary-eyed consumer base represents a huge financial opportunity. Unlike any before high times. The sponsors of the cup and loud advocates for a legal market have seen this coming for a long time. Just think, there's no other holiday like it.

It's not a religious holiday. It's not a historical date like D-Day or December 7th. Furthermore, it is a holiday at the stoner community, made an international holiday I, can't think of another holiday like that. There everybody says this day. This is the day we celebrate cannabis.

After 40 years of cannabis commentary, High Times has stepped off the sidelines, with a multi-million dollar growth fund to invest directly in marijuana related businesses. These are the guys from Elemental seeds, Tony and Jason. I discovered these guys danced I did alright. In Montana there a couple farmers, wheat and alfalfa farmers in Montana. These guys are master growers.

Would you want to go back to farming? Alfalfa are you said with marijuana like that cannabis I. Think cannabis is, you know, I mean there's no medicinal benefits in, but even the most eager marijuana fans are aware of the difficult market conditions. The Colorado industry, I, say, has been incredibly patient with this bureaucracy. They have new rules thrown at them monthly, and it drives them crazy, and yet they continue to keep at it and continue to flourish. So it's dealing with lawmakers dealing with policy trying to make this a level playing field for this industry.

That's what the hurdle is with so much money to be made. Four-Twenty isn't just for stoners anymore meeting. The political and legal challenges of this emerging market is a new kind of marijuana, enthusiasts who's getting into the game for a different kind of green. We just checked into the marijuana investor summit, which has a completely different field of the cannabis cup, and we're just going to see the big players that are investing in this market today. The summit joins the growing list of conferences around the country dedicated to networking and investing in cannabis, but, most importantly, entrepreneurs are here to learn how to become successful from the few who got here first and to compete immediately.

You don't have the slow growth opportunity that we have here so well: organized funding that have a great team of professionals. A clear example of the shifting attitudes towards legal marijuana can be seen in the demand for industry experts to navigate new money to success. Aside from the marijuana plant itself, consulting was one of the most profitable sectors of the industry. Last year. Grant Willa Beck is the CEO o for American cannabis company, a consulting team that gives advice to businesses in the legal space and helps connect them with investors.

Yeah, it's cool to see the natural evolution of kind of what's been progressing over the last. You know 6 8, 12 18 months of the space, and it kind of all culminates here at this event for sure one of Trance, most successful clients, Andy Williams of medicine man, so we went to their largest operation where he both grows and sells marijuana. So this is the Green Mile Gary green, it's very green. So these are some of our mother plants. This is what we used to create new plants, and so when we look for genetics, we look for good, big and fast those three things and when we find it, we grow a big plant, and then we clone it, and we'll plant it, and it will be an exact genetic duplicate of this plant.

Let's go stand, let me make a little more room. Go back in there a little to be a marijuana. That's right! Now you all! This green is reflecting from even with an improved state licensed large-scale marijuana. Producers are under the microscope for every aspect of their operations meant to weed out any semblance of the black market, but constantly changing regulations have put many companies out of business. This is an RFID tag or radio frequency identification tag actually gets attached to the plant, so you can track it from when you sell it to where it came from.

That's right, it's totally traceable. The state knows exactly how many plants we have in our system. They know when they're harvested how much was harvested. They know everything about it. It's a manufacturing facility, we manufacture, marijuana.

The success of medicine. Man is due in large part to its family-run business model. We put a business plan together, and we went to my mom and somehow sold her on the idea sheet, even though my brother was growing, his house didn't even smoke and somehow she believed in us and gave us her seed money, and you know we've done pretty well, but for most businesses, access to capital is still severely restricted by state policies, as well as by the stigma surrounding the marijuana industry. Colorado has approved a credit union for marijuana businesses, but the future bank of Bud will not be able to take deposits or make loans without federal approval. Fighting to change both market policies and impressions is Taylor West.

There is no industry without the advocacy that creates it, but when you're talking about one that is currently federally illegal, it is that much more important that you have people advocating for the industry's position with lawmakers on a daily basis. Taylor west of the National cannabis Industry Association is an advocate for common-sense reform to the current marijuana laws at the federal level. What is the biggest issue when it comes to banking and cannabis businesses so because financial institutions are regulated at the federal level and marijuana at the federal level is still considered an illegal product, a lot of financial institutions, most of them are extremely hesitant to work with any business that is at all related to the cannabis industry. We are in an economy that assumes that as a business, if you have a legitimate and thriving business, you'll be able to get some kind of capital from small business loan from a bank, and that isn't the case in this industry. What that has meant in the past is typically that you are raising money from friends and family.

Can you talk to me a little through experiences that you've had with banking and formal banking services? We have had on and off again relationship with banks and that you know in this industry banks liked us as customers, especially early on, but they didn't want to know it was a don'tt-ask-don't-tell relationship and if they dug deeper, then we wouldn't get an account, and we'd try another Bank. So typically we tried to have two banks, one we're with and one we're going to when they shut us down and April 14th. We had you know: half a million dollars in checks, written out to the federal government for our taxes and whatnot, and the bank called something said: oh we're shutting your count-down effective. You know pretty much immediately, and so we had these hot checks heading towards the federal government, and so we had to stop the stop payment on the checks, and we really had to scramble to get our taxes into the government that year, you know it's just that another fire drill that you'd kind of learn to go through in this industry regularly, and we're fortunate enough right. Now to have a bank and we'll be happy and be content until we lose this one, and then we'll go from there again, but for investors who are turned off by these risks in the u.

s. , an increasingly stable market has emerged to our north Canada. What is the biggest difference between companies in Canada and in the U. S. I think, first and foremost, with banking, if being federally legal up there, they do have access to your traditional banking.

Is the U. S. missing out in any sort of way compared to the Canadian cannabis market? You know here in the United States you can't even cross state lines or state borders with product, and so you know that really kind of puts each separate market and its own little niche, and so that's really kind of why the Canadian market is advancing a little quicker. As far as scalability goes since 2001 medical marijuana has been legal in Canada, but two years ago the system shifted away from small local home growers to a federally regulated system with just 25 licensed large-scale marijuana producers in the country. We went to the east coast of Canada to check out one of these commercial operations ahead of torrent anagram in Moncton New Brunswick.

It's the only licensed medicinal marijuana grow east of Ottawa. We're going to go meet with the president and CEO and go on an investor tour of the facility. Marijuana is a recreational drug, and it's been for a lot of years, and it was legal up until the 1920s, and it's a medicine. Now behind me, there's an investor, so we're going on. We have people from the big banks of Canada and other analysts they're, basically looking at what our diagram is doing and see if they want to put their money in it.

There are many people currently that have. The prescription is still difficult to find a doctor. Yes, still have a way to us. We talk about when we look at her society in North America. There was prohibition, we understand what happened when prohibition ended in the opportunities that were presented in the liquor industry, so I see the industry is being similar, I'm not proposing that alcohol is a good thing for society, and they're not proposing that marijuana is a good thing for society, but the reality is, you can't stop them.

Obviously, governments are looking at this and saying well if we can regulate it, control the usage for our monitors and the almighty dollar in terms of Taxation that you know it's going to go there Cheryl listen, we have. We have probably a little over one-third at our us-based investors. You know you. Us market is very fragmented, with the fact that it's illegal at a federal level, a lot of the US investors are seeing what's happening in Canada, it's more of a friendly framework for regulation and in Canada we're able to create very large companies so as an u. s.

investor they're seeing that opportunity of size- and there are those tremendous interests as from the US investors, and what is your relationship with the banking systems in Canada started quite rocky. We have five large banks in Canada, but we can't borrow money from banks. Currently, our bank account was closed about a month after I got here. We received a notice saying that you know within 30 days. We appreciate your business, but please take it elsewhere.

Do they tell you why they closed your bank account at first, no, not nothing divulged at all whatsoever, quite shocking, considering that we are a legal business selling a legal product in Canada? So, even though banks, for example, the big banks in Canada still don't give you loans, you do have accounts and do have credit cards with them. Absolutely. Does that make you attractive to foreign investors? That kind of stability- yes, because what it does is it takes it out of the cash industry. So if you're an investor, you want to make sure every daughter finds its way into the bank account and back to its shareholders. So you know if you're, investing in a business, that's dealing solely in cash as an investor, difficult to get that comfort level.

While these companies in Canada are able to have bank accounts and credit cards, most legal marijuana businesses in the US are still cash, only a serious obstacle for the growth of the domestic marijuana market. What this means is that most businesses in the industry are operating without a bank account without a checking account. When that happens, you are forced to carry out all of your transactions in cash you're, also dealing entirely in cash on the back end of your business, paying your employees in cash, paying your utility bills, which can run in the tens of thousands of dollars a month if you're a cultivator, your taxes, you have to pay in cash. All of this creates a lot of problems. The most prominent one is safety.

If you are a business that is operating entirely in cash, paying your employees in cash, and it's publicly known that you're forced to operate in cash you're sitting duck for violent-crime without regulations that make it possible for marijuana companies to have banks. Security has become a booming sector of this industry, having lots of cash on hand and a product. That's not covered by insurance, makes dispensaries and grow operations. Easy targets for break-ins. This amateur breaking of a local dispensary occurred during our week in Colorado, adding the most complicated layer to legal marijuana's.

Financial problems is a little-known section in federal tax code. What is 280e, and why is it such a big deal for the industry? Section 280a of the Internal Revenue Code is a section that was put in the early 80s. After a convicted cocaine, dealer wrote off supplies that he used in his cocaine trafficking business on his federal taxes and the IRS tried to challenge it. It went to court and the court essentially said as the tax code currently stands. This is legitimate.

The business isn't, but the write-off is so then this provision was added to the tax code. That says, if you are in there, where it's trafficking in a controlled substance, that is either schedule 1 or schedule 2, then you cannot take the normal business expense deductions that any other business is able to take and because marijuana is still a schedule, 1 controlled substance in federal law. It is affected by this provision. The way this ends up playing out is that many of these businesses pay anywhere from sixty to eighty-five percent of their profit in taxes and that's just crippling for any business, but especially businesses in what is essentially a startup environment and that's all money that would get pumped into the local economy, but can't because it's being sucked away to the federal government. Recently, there's only been one significant attempt for marijuana reform at the federal level.

The cares Act can make it easier for legal marijuana businesses to access banks, but this bill likely won't even make it on the floor. Meaning states are still operating in a fractured way when it comes to marijuana laws. If change for the marijuana industry is dependent on Congress to take action, the next generation of pot barons and cannabis products may very well-read made in Canada. You.

Source : VICE News