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Our Los Angeles marijuana business lawyers know it’s not only companies selling cannabis that are being caught up in the regulatory quagmire of state and federal marijuana laws.
In recent months, there have been numerous reports of technology software companies servicing the cannabis industry facing financial consequences for that partnership. Firms have been dumped by payment processors, classified as “high risk” by credit card brands and banks (requiring higher fees to handle payments), and overall faced difficulty in the course of day-to-day businesses.
As the legalized cannabis market continues to mature, we’re seeing regulatory headaches continue for ancillary businesses like tech companies, particularly when it comes to handling banking and payment processing. This is true even for companies that never touch a single marijuana plant or product. Businesses working with cannabis growers, producers, and retailers at every leg of the supply chain have found themselves suddenly grappling with growing red tape.
The irony for some of these tech companies is that a primary part of the service they provide to the cannabis industry is the ability to more easily maintain and track regulatory compliance. Some of those who are working high up the compliance chain for these firms have literally helped to write the laws for cities across California. And even they are struggling to maintain operations and meet compliance standards.
Although there are many factors involved, it primarily comes down to one issue: The lack of decriminalization at the federal level. Marijuana remains a Schedule I narcotic per the U.S. government. As long as that is true, that puts every company in the cannabis supply chain in a legal bind, particularly in terms of finances. Banks and other financial institutions that work with cannabis companies could potentially be accused of breaking federal money laundering laws.
Last month, Senators blocked marijuana banking reform that was introduced as a part of a defense bill. The bill, Secure and Fair Enforcement (SAFE) Banking Act, divided some lawmakers and advocates. Although all share the goal of ending cannabis criminalization, there is some pressure to introduce truly bipartisan legislation in a way that’s more incremental. But in the meantime, that doesn’t help companies that are facing the very real – and expensive – consequences of little-to-no progress on this front.
They’re losing their banking and branded card relationships waiting for federal legality. It’s possible that cannabis or partnering tech companies may even be skating on thin ice where fraud laws are concerned if they’re running any type of branded credit card. It’s imperative to work with an experienced marijuana business lawyer who can review all company processes to ensure you’re taking all steps to meet the letter and spirit of the law as a legal cannabis company – or a firm that partners with one.
At the end of the day, every industry has its regulatory risks. For the cannabis industry and those whose work is ancillary to it, the question is what is the nature and degree of that risk relative to the potential opportunities and anticipated ROI. One can reduce the risk to the greatest extent possible by partnering with an experienced California cannabis business lawyer.
The Los Angeles CANNABIS LAW Group represents growers, dispensaries, ancillary companies, patients, doctors and those facing marijuana charges. Call us at 714-937-2050.
Additional Resources:
Cannabis Companies in California Have Lost Millions Due To Poor Regulations. California’s New Bill Could Change That, Jan. 3, 2022, Keerthi Vedantam, dot.LA
More Blog Entries:
California Cannabis Tax Compliance, Banking Continue to be Challenges in 2022, Dec. 29, 2021, Los Angeles Cannabis Business Lawyer Blog
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