Nevada officials are launching the nation’s first banking system for the booming cannabis industry, whose dispensaries increasingly are targeted for burglaries and robberies for the hundreds of thousands of dollars of cash they keep on hand to pay employees, taxes and rent.
Drawing inspiration from their gaming sector, state officials will allow marijuana businesses to deal in electronic tokens and chips.
“We really want to deal with the public safety issue. That much cash in the hands of that many people, it’s just dangerous. It’s an attractive target,” said Nevada state Treasurer Zach Conine, who pushed for the program.
Nevada cannabis businesses operate on a cash-only basis because banks and other financial institutions have refused to do business with them, citing federal laws against the sale, possession and distribution of the Schedule 1 drug.
Yet, with 33 states and the District of Columbia having legalized pot for medicinal and recreational use, the cannabis market is expected to see $12 billion in sales this year and eventually as much as $30 billion annually, according to industry estimates.
Meanwhile, thefts and robberies at marijuana businesses in Nevada, California, Colorado, Washington and other states have raised concerns among law enforcement.
In May, attorneys general from 33 states urged Congress to change federal banking laws so that the cannabis industry no longer need rely on cash.
“This is simple: not incorporating an $8.3 billion industry into our banking system is hurting our public safety and economy,” said Xavier Becerra, attorney general from California, the nation’s largest legal marijuana market.
In a letter to Congress, the attorneys general also argued that current federal laws make it harder for police to track financial crimes and that the marijuana industry has a much harder time paying taxes.
Nevada aims to have its voluntary electronic payment program up and running by July 1, 2020. Officials hope it attracts the marijuana industry and associated businesses such as landlords, payroll firms and garden supply companies.
It will be a downloadable app that will allow consumers and businesses to move money digitally. After consumers trade cash for digital tokens to buy pot at a dispensary, the dispensaries use those tokens to pay their bills and taxes. The state then converts the tokens back into dollars.
The cash problem is so widespread that other states are trying workarounds, including Hawaii, where officials have launched a similar cashless debit app for medical marijuana sales.
California lawmakers are considering legislation that would allow the state to create a special class of banks for the industry. Other states are debating how not to penalize or discourage banks and credit unions from serving cannabis businesses.
The federal government, meanwhile, has maintained its prohibitions on pot. Late last month, the U.S. Supreme Court declined to review a petition brought by a Colorado medical cannabis dispensary challenging IRS provisions that do not allow the marijuana industry to take tax deductions on normal business expenses such as salaries, rent and security.
IRS Section 280E, which came into effect during the height of the drug war in the 1980s, prohibits tax deductions for expenses paid or incurred in carrying out a business that “consists of trafficking in controlled substances.”
But last week, the House Judiciary subcommittee on crime discussed federal reforms, with lawmakers on both sides of the aisle expressing support. The leading industry advocacy group NORML called the hearing “historic.”
“Marijuana decriminalization may be one of the very few issues upon which bipartisan agreement can still be reached in this session,” said Rep. Tom McClintock, California Republican, adding that “it ought to be crystal clear to everyone that our laws have not accomplished their goals.”Nonetheless, lawmakers appeared divided over whether to remove marijuana from Schedule 1 of the Controlled Substances Act, which includes drugs such as heroin and LSD.
“Nevada is a dynamic state looking for solutions, but the digital token-based system is really just a temporary fix until cannabis is rescheduled and the industry is allowed to fully access the nation’s banking system,” Jason Sturtsman, a Las Vegas-based cannabis industry consultant, told The Washington Times. “Hopefully this can be solved in Washington.”