Rest assured that the cash that patients pay at local medical marijuana dispensaries doesn’t end up under a mattress.
“We do have a bank,” said Jimil Wilson, chief financial officer for Maitri Medicinals, which operates Fayette County’s only state-approved medical marijuana dispensary in Uniontown.
So does Washington County’s only medical marijuana dispensary, The Healing Center in Washington.
The leadership of both dispensaries is aware of the common misconception that they are cash-and-carry operations because marijuana is still illegal under federal law even in states that have legalized it for medical or recreational purposes.
But the banking services available to them come at a steep cost, in part because a single bank has cornered their market.
Both use a bank based in New Jersey for their cannabis banking.
“That’s because they’re the only ones that really want to take it on,” said Chris Kohan, cofounder of The Healing Center.
Kohan estimates that the same bank handles about 90% of all marijuana banking among Pennsylvania marijuana businesses.
Corinne Ogrodnik, CEO of Maitri Medicinals, said the bank has set up a separate department to work with the cannabis industry.
“(They) go through extensive compliance processes, and so, therefore, the fees for them to run the department with the compliance are passed on to us as a business,” Ogrodnik said.
“Charging each one of them $5,000 a month right off the top, it’s good business if you can get it,” Kohan said.
That means higher prices for those seeking relief at state-approved dispensaries as they endure serious medical conditions like cancer, multiple sclerosis, Parkinson’s disease and epilepsy.
“The prices that dispensaries set truly are not gouged prices,” Ogrodnik said. “They truly are prices that enable us as businesses to keep our doors open rather than some sort of run on patients’ money. It really is just prices that enable businesses to remain viable businesses because of all of the high costs.”
The costs are so high because other banking institutions are wary of granting bank accounts to marijuana businesses due to marijuana being federally illegal.
“(A)ny contact with money that can be traced back to state marijuana operations could be considered money laundering and expose a bank to significant legal, operational and regulatory risk,” the American Bankers Association states on its website.
“What we’re most concerned about is that the legalization by the states has some sort of legal consistency in terms of the ability for banks to bank marijuana,” said Robin L. Wiessmann, secretary of the Pennsylvania Department of Banking and Securities. “ … The single-best way to ensure that something is done in a realistic and effective manner, the primary solution, is through congressional action that creates a banking safe harbor.”
So on April 15, Wiessmann issued a letter signed by 25 state banking supervisors nationwide urging Congress to consider legislation to establish a safe harbor.
“It is incumbent on Congress to resolve the conflict between state cannabis programs and federal statutes that effectively create unnecessary risk for banks seeking to operate in this space,” the letter reads in part. “The looming threat of civil actions, forfeiture of assets, reputational risk, and criminal penalties is not conducive to a legal, regulated marketplace.”
Congress is getting closer to resolving that conflict with a move that would help smooth the transition should adult-use cannabis ever be legalized in Pennsylvania.
The House version of the Secure and Fair Enforcement (SAFE) Banking Act, which would provide a safe harbor for financial institutions from federal prosecution liability for serving cannabis-related businesses approved by state law, was approved by the House Financial Services Committee earlier this month.
The House version had 166 cosponsors as of last weekend, including 17 Republicans.
One of those Republicans is Rep. Guy Reschenthaler of Peters Township, who said he “vehemently” opposes legalization of recreational marijuana at the federal level but expects that the SAFE Banking Act would provide certainty for financial institutions and increase transparency and accountability for the 33 states that have legalized marijuana sales in some capacity.
“Local banks came to me to share the struggles they face in dealing with the commonwealth’s legalization of medical marijuana, and as a strong supporter of medical marijuana, I wanted to help,” Reschenthaler said.
Maitri Medicinals has had to get along without credit cards, lending and letters of credit, according to Ogrodnik.
“We would expect the SAFE Banking Act to really open up banking in its entirety to us,” Wilson said.
In a different approach, the proposed Strengthening the Tenth Amendment Through Entrusting States (STATES) Act, sponsored by Sen. Elizabeth Warren, D-Massachusetts, would make provisions in the Controlled Substances Act by which marijuana is classified as a Schedule I drug no longer applicable to any person acting in compliance with state laws regarding the manufacture, production, possession, distribution, dispensation, administration or delivery of marijuana.
The STATES Act would also end the financial burden created by Internal Revenue Code Section 280E, which forbids businesses from deducting normal business expenses from gross income associated with the “trafficking” of Schedule I or II substances. Maitri Medicinals and The Healing Center have found Section 280E to be especially onerous.
If approved, the legalization of adult-use marijuana in Pennsylvania would be a major inflection point for medical cannabis dispensaries that helped usher in cannabis across the state.
Kohan would like to see the medical cannabis industry protected if adult-use marijuana is legalized.
“Myself and anyone else who jumped into this industry aren’t making money, and (we) invested millions,” Kohan said. “Don’t just rip the carpet out from underneath (us) and destroy an industry.”
Ogrodnik and Wilson argued that current medical cannabis dispensaries should be able to serve adult-use customers as well if that market becomes legalized. Wilson added that they would like to see point-of-sale and check-in stations for medical patients so that they don’t have to wait in line with adult-use consumers.
“(W)e already have the educational (and) security infrastructure already built within our facilities, and we have the capacity and experience to handle both patient populations,” Wilson said.
Kohan wants to see how Pennsylvania legislators craft framework for adult-use legalization before he fully embraces the idea of an adult-use market in the state.
“From a business owner’s perspective in the medical field, how are we doing this? Are we converting and are we doing adult-use as well? Or is there going to be a separate permitting system? And if there’s a separate permitting system, how are you deciding that?”
Even as the federal illegality of cannabis seems like a gradually more solvable problem for reform advocates, the questions remain many, and the answers, few, as state legislators continue to weigh the issue.
“The devil’s in the details, as they say,” Kohan said. “And they’re not getting to them.”