Imagine if your neighborhood bank wouldn’t deal with you.
In fact, imagine if all banks refused your deposits.
Instead of depositing your paycheck at Main Street Community Bank or MegaFinance Corp., you’d have to stuff it in your mattress or keep it in a box in your closet.
That’s counterproductive – and extremely unsafe.
But many cannabis companies face that exact situation.
Thanks to the prohibition of cannabis at the federal level, most banks simply won’t deal with companies that “touch the plant” – even if marijuana is fully legal in their state. Those banks fear they could face money-laundering charges, or worse.
But something truly extraordinary, even unprecedented, could be about to unfold in California.
Some legislators in the Golden State – where cannabis went fully legal back on Jan. 1 – have put forward a proposal that would have the state creating its own special banks to handle the business of cannabis firms.
This is a huge development.
And if it passes, it could mean entirely new ways to invest in the high-profit weed sector.
Including one way I tell you about below.
You Can’t Bank on This – Yet
The situation has left many cannabis companies working with state-chartered banks and credit unions. Such banks have increased their services to the industry by some 29% over the last 18 months, according to New Frontier Data.
But things are far from perfect. The number of cannabis business bank account terminations doubled in the first quarter to 12,133 from a year prior, New Frontier Data said.
And several Denver-area cannabis leaders recently told The Denver Business Journal that some financial institutions won’t do business with them without having them sign nondisclosure agreements.
This situation which would be intolerable in just about any other industry -leaves legitimate cannabis companies handling their financial transactions entirely in cash. And that puts these businesses, their employees, and their customers at greater risk from the machinations of thieves and robbers.
Plus, it’s driving up operational costs, as these firms have to hire extra security to keep all that cash safe.
In San Diego, for example, police have responded to 54 burglaries, 16 armed robberies, and 10 batteries at dispensaries since 2016, according to a recent investigation by NBC 7 San Diego.
But recent moves by lawmakers at the state and federal levels could ease these firms’ banking burdens. And those moves could help them realize their true profit potential, just as any other aboveboard company in the United States is already free to do.
Here’s some of what I’m watching…
In California, State Sen. Robert Hertzberg decided he’d heard enough stories about criminals taking advantage of legitimate cannabis business owners who’ve been hamstrung by their banking woes.
That’s why he introduced in April a bill that would create special state banks to handle the business of cannabis firms.
SB 930 would allow for the creation of limited charter banks and credit unions to service cannabis businesses at the state level.
“Keeping the fewest moving parts and as simple as possible because we believe in a matter of years the federal government will change its course and ultimately regular banks will be able to bank this cash,” Hertzberg told NBC 7.
I hate to say it, but… I agree.
As a conservative libertarian, I’m no fan of state-run banks. But until we get this straightened out at the national level, we need some stop-gap measures in place until we figure out some private-sector solutions.
The state of New York is also working on this. Like I told you yesterday, the New York Department of Financial Services said it would stop imposing any regulatory action against banks that work with companies in the medical marijuana industry.
In her memo, Maria Vullo, the states superintendent of financial services, noted that some companies have to resort to paying their staff, and even their taxes, with envelopes of cash. “None of this is necessary,” she wrote. “Positions taken by the federal government are only exacerbating these problems, rather than remedying them. New York must act.”
So must the feds.
And this may lead to some of those actions…
A Green Light From President Trump
I’m talking about U.S. Sen. Cory Gardner of Colorado’s federal bill that would put cannabis’ legal status in the hands of the states.
President Donald Trump has said he would “probably” support the measure, known as the Strengthening the Tenth Amendment Through Entrusting States (STATES) Act, which would help ease these banking concerns for cannabis businesses in states with legalized cannabis.
If it passes Congress – and if President Trump signs it, as he’s suggested he will – any legitimate cannabis firm will be able to use the banking system that virtually all other U.S. companies now take for granted.
Those moves are only going to ramp up the already significant North American legal marijuana sales from $9.2 billion in 2017 – all the way up to $24.5 billion by 2021, according to Arcview Market Research.
Now, one savvy way to play this once-in-a-lifetime investment opportunity is to acquire a stake in a blockbuster company that could rise along with the market.
I’m talking here about tech giant Microsoft Corp. (Nasdaq: MSFT). The Redmond, Wash.-based tech icon has been partnering with a California startup called KIND Financial since 2016 to help cannabis firms stay in compliance with state (and, probably eventually, federal) regulations.
Microsoft isn’t touching the cannabis plant in any way – instead, the firm is working with KIND to provide software to firms involved in everything from “seed to sale” tracking of individual cannabis plants to those developing ATM-style kiosks that facilitate marijuana sales.
“Seed to sale has become a mandatory license requirement in basically all the states at this point,” KIND CEO David Dinenberg recently told SF Weekly. “What I’ve come to realize is that it’s the most important thing in this industry other than the product.”
And that means the profits Microsoft and KIND are generating will continue to soar as more states and jurisdictions come on line.
So, Microsoft is a good play here if you want to get started in marijuana investing without jumping all the way in.
But there’s so much more going on here.
President Trump’s support of ending the federal ban on marijuana sent shockwaves throughout the legal cannabis industry.
And with a record 16 states voting on legalizing marijuana this November, it’s clear that the industry is headed for historic heights.
But this news has the potential to spark even bigger profits than what we’ve seen already… and could help you turn a small stake into a $1.3 million fortune.
Cheers and good investing,
Michael A. Robinson