Week in Review: New York medical cannabis, the future of Colorado hemp & Maryland banking

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New York approves an expanded line of medical marijuana products, a Colorado hemp producer departs for Arkansas, and a Maryland credit union welcomes MMJ businesses.

Here’s a closer look at some notable developments in the marijuana industry over the past week.

New York blues

It’s bullish news that one of New York’s licensed medical marijuana businesses got the green light to offer flower for vaping and lozenges.

Pending approval, Etain also may be able to manufacture water-soluble cannabis powder.

But the expanded product line is not nearly enough to help the state’s struggling MMJ business, said one expert.

If the other four licensed MMJ businesses also choose to expand their product lines, they can.

But “it really doesn’t matter,” said Matt Karnes, founder of GreenWave Advisors, a New York cannabis research firm.

The state fumbled when it implemented the market, he added, because it’s too restrictive in terms of product offerings.

Until the state adds the products people really want to consume – namely smokable flower and edibles – it won’t compete with the black market, Karnes contended.

“The existing model in New York state right now is relatively failed,” he said.

Karnes predicted New York will eventually fall in line with Vermont and other nearby states that are marching toward legal adult-use programs.

The Empire State’s next-door neighbor, New Jersey, also is closing in on legalizing recreational marijuana.

But once the Garden State goes rec, New Yorkers who want legal cannabis will be able to take the bridge or the tunnel to get what they need, Karnes said.

“On top of that, the black market in New York City is really robust,” he added. “And it’s going to continue to challenge the legal market.”

He also said New York’s plan to double the number of MMJ businesses, to 10, isn’t the solution, either.

With slightly more than 40,000 patients signed up for the medical marijuana program, the planned expansion would only serve to exacerbate the lack of business opportunities, Karnes said.

Colorado hemp exodus?

Is the spread of hemp legalization driving Colorado hemp and CBD producers to other states?

News that Denver cannabidiol maker Tree of Life Seeds is decamping for a new market in Arkansas could be the tip of the iceberg as more states start revving up their hemp programs and allowing CBD extraction.

Tree of Life’s CEO said the company’s leaders came to Colorado to learn the hemp industry but now are headed home to rev up a brand-new market when Arkansas allows CBD extraction later this year.

But there’s no exodus – yet – from Colorado, the nation’s top hemp producer, said Samantha Walsh, a longtime Colorado hemp activist and CEO of Tetra Public Affairs, a cannabis consulting firm.

“Colorado still has one of the more progressive hemp and CBD laws,” giving entrepreneurs more options to monetize the plant, Walsh said.

She pointed out that Washington state and California, both giants in the marijuana industry, are backing off or mothballing their hemp programs, keeping Colorado at the forefront of the hemp industry.

“For every one person that starts (a hemp business) in Colorado and then leaves, there’s two more coming here to get into it,” she said.

Banking bright spot

Dave Barrett, president of the federally chartered Bulldog Federal Credit Union in Maryland, was days from publicizing that he was ready to start serving the state’s MMJ businesses – and then U.S. Attorney General Jeff Sessions revoked Obama-era protections for state-legal cannabis businesses.

Sessions’ decision, announced Jan. 4, fanned fears that even fewer banks would be willing to serve cannabis businesses.

Barrett – who spent nine months readying his institution to serve MMJ businesses – decided he “wasn’t turning back because of this announcement.”

But he was concerned, and he spent the weekend following the fallout from the AG’s announcement and talking with banking colleagues, lawyers and cannabis industry professionals.

His conclusion?

“I don’t think it’s going to go anywhere because (Sessions) doesn’t have the funding to do any enforcement. And that’s key,” Barrett said.

A related development didn’t factor into Bulldog’s decision to proceed.

But it’s noteworthy that the Financial Crimes Enforcement Network (FinCEN), a U.S. Treasury Department agency, confirmed to Reuters that a related Obama-era banking industry memo remained in force after the Sessions announcement.

That memo essentially allows banks to serve marijuana businesses.

Among other things, the FinCEN memo requires banks to file so-called suspicious activity reports, which includes transactions with marijuana businesses.

Bulldog, which has about $150 million in assets and almost 60 employees, has typically had to file 16-20 suspicious activity reports a year.

But Barrett expects that number to grow tenfold once he lines up MMJ business clients.

Bulldog started working on its MMJ banking effort in April 2017 and, in July, hired Deirdra O’Gorman, CEO of the canna-centric Fourth Corner Credit Union in Colorado, as a consultant.

Bulldog also hired a compliance specialist, who starts Tuesday, to handle the expected surge in MMJ business accounts. And the credit union drafted new compliance documents.

Barret reckons the effort cost north of six digits.

But since announcing its marijuana services this week, Bulldog has already been contacted by several Maryland MMJ businesses.

Bart Schaneman can be reached at barts@mjbizdaily.com

Kristen Nichols can be reached at kristenn@mjbizdaily.com

Omar Sacirbey can be reached at omars@mjbizdaily.com