Week in Review: Cutting the Cord on Dispensaries + Challenges for Bank Plan & Expertise From Israel

Just Released! Get realistic market forecasts, state-by-state insights and benchmarks with the new 2024 MJBiz Factbook member program, now with quarterly updates. Make informed decisions.

By Marijuana Business Media staff

A California city comes up with a novel way to shut down illegal dispensaries, a company explores how to open a cannabis-specific bank and a consultancy hires an expert on Israel’s medical marijuana program.

Here’s a closer look at several notable developments in the cannabis industry over the past week:

Turning the Lights Off

Numerous California cities are struggling to shut down medical marijuana dispensaries that ignore local regulations and bans, with one Los Angeles official comparing it to playing “whack-a-mole” because closed dispensaries pop up in new locations.

But one municipality has come up with a relatively straightforward solution: go for the jugular by severing their supply of power and water.

Officials in Anaheim have begun shutting off utilities to dispensaries, which were banned by the city after the state Supreme Court ruled last year that municipalities could prohibit MMJ businesses.

The approach has worked so far, with nine dispensaries closing down last month and another eight expected to shutter by Oct. 17. The city plans to use the same threat with another 11 dispensaries in coming weeks.

Which begs the question: Will this become a trend?

The strategy could theoretically work in other California cities trying to close down all or some dispensaries, including Los Angeles, San Diego, San Jose and San Bernadino. The key is whether the cities can identify dispensaries in the first place, something Los Angeles has struggled with because of the sheer size of the city and number of illegal businesses.

In smaller cities, though, that wouldn’t be a concern.

If the move to cut power and water does become more widespread, hundreds of illegal dispensaries could close – driving patients to legal MMJ businesses or to the black market.

Banking on Success

Is it possible to open a bank that caters solely to the marijuana industry?

A publicly traded cannabis company thinks it might be.

Earlier this week, we wrote about how Advanced Cannabis Solutions has signed a letter of intent to purchase a former bank building in Denver. The company hopes to eventually offer banking services exclusively to cannabis businesses in Colorado using the existing infrastructure – which includes a vault, teller windows and safe deposit boxes.

But the key word is “hopes.”

Opening a marijuana-specific bank seems all but impossible in the current climate. Very few traditional financial institutions work with the marijuana industry as it is, fearing repercussions from federal regulators. An institution devoted solely to the cannabis industry would need approval from these regulators to participate in the federal banking system.

Advanced Cannabis could try to take advantage of a new Colorado law that allows businesses to form banking cooperatives. The challenge is that these companies still need to get approval from the U.S. Federal Reserve. No companies have applied yet to start a co-op, so it’s an untested idea.

Executives with Advanced Cannabis recognize these challenges, saying there are still a lot of unknowns in the company’s plan.

“As far as establishing a bank, we have no idea when that will be done or how it will be done,” said Christopher Taylor, the chief financial officer of Advanced Cannabis. “It’s very free form – there’s no time frame and really no assurance that it will work at all. We intend to do this, but as everyone knows, there are no guarantees.”

For now, the company will focus mainly on transforming the building into a type of cannabis incubator and event center.

But it could have done that in any number of buildings. The fact that Advanced Cannabis chose a property with an existing banking infrastructure shows how serious the company is about its longer-term plans.

MMJ Expertise Crossing Borders

A California consulting firm’s move to hire an expert in Israel’s MMJ program shows the growing international dynamic of the medical marijuana industry.

MedMen announced this week that it has brought on Mimi Peleg to serve as its director of training. Peleg helped implement and run Israel’s medical marijuana program for more than five years, focusing on teaching patients how to consume cannabis.

Peleg told Marijuana Business Daily in an email that there’s a lot the U.S. and Israel can learn from each other when it comes to cannabis.

“America has more strain variety and more free-market competition driving interesting products into the market,” Peleg said. “Israel has a 40-plus-year lead on research largely funded by U.S. tax dollars. We have barely started doing research here in the U.S.A.”

She also noted that Israel has very low prices for MMJ “due to collective buying potential,” and said there are several pros and cons to a state-run system.

“We learned that growing, storing and distributing cannabis in Israel averages out to no more than $2 per gram. That even includes a reasonable profit,” Peleg said. “On the downside, after learning that the general average amount patients wanted per month was 20-30 grams (about an ounce), people that needed more started looking like outliers, and now it’s actually quite difficult to get more than 30 grams a month.”

Peleg was also quick to criticize what she sees as drawbacks in many state MMJ programs in the United States.

“I don’t understand how we can attempt to provide adequate medical assistance in a system where doctors aren’t allowed to prescribe strains or methodologies and budtenders aren’t supposed to play doctor,” Peleg said. “I assume this will improve as cannabis laws loosen.”

Peleg added that she’s “excited to see what the future holds” when it comes to evolving cannabis strains, such as those with different THC-to-CBD ratios.

John Schroyer and Chris Walsh contributed to this report