The US House of Representatives voted 231-192 in favour of the Heck-Perlmutter-Lee-Rohrabacher amendment to H.R 5016 spending bill. The changes, known as ‘The Heck amendment’, was voted in on Wednesday July 16th
For those in the legal marijuana industry, the Heck amendment could potentially remove the problems they experience when dealing with banks and other financial service providers. Marijuana is a schedule 1 drug under federal law.
This means that profits made by licensed operators are considered ‘proceeds of crime’ under federal law. Banks fear that they can be prosecuted for dealing with anyone in the marijuana industry, even if they are operating legally on a state level.
Under the Heck amendment, the SEC and the Treasury Department will not be able to spend money prosecuting banks for ‘working with pot businesses that do not break state law’. Under these changes, pot will remain a schedule 1 drug, but when it comes to banking, the Federal Government is agreeing to turn a blind eye.
With banks refusing to deal with them, operators have been forced to run on a ‘cash only’ basis. Dispensaries are accumulating large sums of cash which can’t simply be deposited into a bank account. This means that licensed dispensaries, are being treated as financial criminals, and are effectively having to ‘launder’ their profits.
Most agriculturalists would dream of having a literal cash crop, but dealing only in cash does have its down side. Think about how you bought your car. You might have used check or a loan, but you probably didn’t show up with a bag full of small bills. If you did, hopefully the cash didn’t have the overwhelming and instantly recognizable smell of weed.
The cash problems don’t end with trouble spending the money. Everyone knows that dispensaries have large amounts of cash, including thieves. It’s like having a flashing light saying ‘come rob me’. As profits grow, so does the mound of cash. Protecting that cash, and those around it, is becoming a growing security problem.
The benefits of the Heck amendment aren’t limited to market participants. One of the biggest winners from the changes will be… the government. The Federal government may not be willing to legalize marijuana, but they are willing to tax it. Opening the doors to conventional banking, will make the industry easier to monitor and easier to tax.
The data on marijuana varies greatly, and depending who you speak to, Americans spend anywhere from $10 - $140 Billion per year on weed. Several states have legalized medicinal marijuana, and recreational pot has been legal in Colorado since January and in Washington State since July, yet economists are not sure how much is actually being spent on pot.
In the upcoming November elections, voters in both Oregon and Alaska will be able to choose their side in the legalization debate. Activists on both sides of the debate are using Colorado as an example of both the successes and failures of legalization.
Studies of the marijuana industry have produced varying and at times contradictory information. Legalization is less than a year old in Colorado, and in time we will see what effects it has had on usage, crime rates, tourism and tax revenue for the state.
Whether you are for or against legalization, there is no denying that there is serious money going up in smoke, and legal or not, people who want it, can find it fairly easily. It’s naturally occurring, does not require complex processing, and the plant can be grown in conditions where other crops would fail.
The demand for pot is very real and appears to be here to stay. As long as there is a demand, there will be a supply. Just like, as long as there is money to be made, someone will come and make it. The Heck amendment will allow states to experiment with legalization legislation without fear of federal interference. Hopefully this will cause money that is currently going toward criminal activity, to flow into the legitimate economy.
Americans spend $75 Billion per year on cigarettes, and $99 Billion on beer. Whether or not the market for marijuana will reach these levels is as uncertain as the legalization road itself. The future of marijuana may look hazy and confusing, but we will do our best to keep reporting on this