Banking giant Wells Fargo closes the account of a Florida candidate who supports medical marijuana, a class action suit is filed on behalf of cannabis growers in a California county, and Pennsylvania MMJ growers/processors are on pace for $5 million in sales in their first year.
Here’s a closer look at some notable developments in the cannabis industry over the past week.
Bank on it
Wells Fargo denied this week that a controversial decision to shut down the bank account of a political candidate in Florida who supports medical cannabis had anything to do with the company’s “presumed political viewpoint regarding medical marijuana.”
“That assertion is completely false,” Wells Fargo said in a news release.
Nikki Fried, who is running to become Florida’s agriculture commissioner, reported earlier in the week that the bank started asking questions after uncovering information that her campaign was advocating for expanded MMJ access.
“The company has no political position on (medical marijuana),” Wells Fargo said in its release.
“As a national bank that is federally regulated, Wells Fargo must comply with federal law on the topic of marijuana, even in instances where state laws may differ. Since federal law prohibits the sale and use of marijuana, national banks like Wells Fargo may not knowingly bank or provide services to marijuana businesses or for related activities.”
Nevertheless, the move raised the question of whether politicians, advocacy groups or other ancillary entities that accept contributions from cannabis businesses could face a similar fate.
“It’s become this growing problem that’s reaching into more and more areas,” said Mason Tvert, spokesman/media relations director at MPP.
“This is another sign that Congress needs to take action and make sure that businesses have access to banking and that we don’t see political speech being affected.”
Should politicians and other entities that take cannabis-related contributions worry? Not yet, Tvert said.
“Right now, this is an isolated incident and it’d be premature to say they should be worried,” he said. “Unless it’s a trend, it shouldn’t cause alarm.”
But, he added, “it does potentially chill the political speech of people associated with the cannabis industry.”
It could also inflame passions against Wells Fargo.
In Broward County, one county commissioner, Mark Bogen, wants fellow commissioners to drop Wells Fargo as the county’s bank and find another. He put the item on the county commission’s Sept. 13 meeting agenda, according to the South Florida Sun Sentinel.
Fight for your right to grow MJ
A class action lawsuit filed in a rural California county could have the potential to force local officials to reverse course and allow commercial cannabis grows.
The strategy of the suit in Calaveras County, two hours east of San Francisco, is to pressure the county financially so it opts to regulate and tax marijuana growers instead of sticking with a ban approved in January.
“The lawsuit, I think, will push the needle. Because they’re not going to have the money to pay us, if we prevail,” said Crystal Keesey, chief financial officer at Golden State Herb, one of the lead plaintiffs in the case.
“The lawsuit will force them to the negotiating table for some type of regulatory framework.”
Keesey said a county board of supervisors election in November could turn over enough seats on the five-member board so negotiations with cannabis farmers could begin anew.
The election outcome, combined with the lawsuit – which is seeking more than $16 million plus damages – could potentially make the board more amenable to future tax income from marijuana businesses, Keesey said.
That’s in part because the county is already running on a deficit and desperately needs more tax money, she added.
She’s also very optimistic about the chances of the lawsuit on its own merits – it has implications for more than 700 farmers that registered with the county to grow medical cannabis in 2017.
The lead attorneys – Henry Wykowski and William Panzer – took the case without requiring fees up front because they’re so confident of a win, Keesey noted.
“There are people contacting us every day that want to be part of the class,” she said.
Pennsylvania began selling medical marijuana in February, and – as in many new markets – supply couldn’t keep up with demand.
The market “is growing faster than most expectations,” said Charlie Bachtell, CEO of Illinois-based Cresco Labs, which was the first to market with product. Cresco has a cultivation facility and three dispensaries in Pennsylvania and plans to triple production capacity by the end of 2019.
Growers and processors sold $1.2 million worth of medical cannabis in the first three months after the industry launched.
The state didn’t release sales numbers at the retail level, but dispensary sales were likely higher given markups.
The Marijuana Business Factbook 2018 estimates that Pennsylvania medical marijuana dispensaries – as opposed to growers and processors – could sell between $50 million-$80 million in sales this year.
While that number may look large based on the first-quarter sales of growers and processors, it took time for producers to get up and running. Also, sales in a new market tend to be much stronger in subsequent months than in the initial startup phase.
And another big factor: Flower now is allowed for vaporization.
Pennsylvania is noteworthy in that its program launched within two years of the Legislature legalizing medical marijuana.
Bachtell gives a lot of credit to the state for setting up an “automated system from Day One.”
Pennsylvania is adding licensed growers and processors, which will bring the total to 25. But that’s OK with Bachtell, who indicated the market is plenty big enough.
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