How Can I Sign Kentucky Banking Agreement

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this week the Senate Banking Committee will hold its first hearing on the challenges the cannabis industry faces in accessing the traditional US banking system joining us now to discuss what is at stake for this growing multi-billion dollar industry is Cowan managing director Jared Seberg Jared good to talk to you here so what are the terms of this debate right now obviously remains kind of a federal criminal activity to bank with this industry it's mostly a cash business what's going to be discussed this week what might represent clarity for the industry well you know it's it's a quagmire of an industry I mean what other industry can you think of where you have the feds saying that's illegal and you have the state's you know saying go ahead and do it anyways and the banks find themselves in the middle and that's what the Senate Banking Committee is going to look at they're looking at legislation that would allow banks to service cannabis companies that are in compliance with state law it's seen as a simple way to try to get that cash off the street and to provide greater accounting and if the added benefit is that it's easier to collect taxes and keep track of all that I think governments are pretty happy with that as well yeah and that has been an issue even on a state basis hasn't it in terms of states dissenting to estimate how much tax revenue is going to come from this legal aboveboard activity and then maybe it's been somewhat disappointing yeah I think you have two things at play I mean certainly you know an all-cash business is it's difficult to pay your taxes you know there's always the anecdotes about armored cars pulling up but it's even really broader than that I mean think about it if you know you're going to go down to the local 7-eleven and buy a six-pack you can pull out your credit card your debit card but today if you want to go to one of these cannabis dispensaries in a state that's legalized it you know you got to hit the ATM first you got to bring a wad of cash and as you think about the competition between the illegal and the legal market you know getting this into the banking system really should give the legal side which is tax a big advantage now what do you think the prospects are for this bill for this safe banking act that would enable banks to to deal with the industry well I mean that's what all the fun is going to be about this week when you think about it the Senate Banking Committee is sort of the first step in the Senate to trying to see if you can get Majority Leader Mitch McConnell to even consider a cannabis bill while the majority leader is very supportive of the hemp side on cannabis itself he has not been an ally in fact he's been the major roadblock and what our hope is that and on our expectation is that if you can get some traction in the committee hearing this week that you're going to open the door for attaching the safe act to some broader bill whether it's the spending package that was discussed in the last segment or some other broader bill early next year now if it doesn't happen just how much of an impediment does that remain for the industry it seems like if you look at some of the cannabis stocks I mean they've been you know kind of racing ahead gaining lots of values a lot of excitement in the area but it's all about the relatively distant future right the process of legalization it's not about doing business today as much so where does the industry stand in terms of being held back by the the banking rules so I mean a couple of great ways to think about this I mean first of all there's no access to the capital markets and so if you're involved in cannabis directly in the United States you you can't you can't you know raise debt if you're a REIT that wants to play in this space it's harder to raise debt so you have a capital markets problem I'm more fundamentally though you you don't have a bank account to be able to write your paychecks to and if you can convince one of the 200 to 300 very small community banks and credit unions that are willing to service these companies every week you're wondering okay is my account going to get closed is this going to be the week that they decide that they can't accurately track what I'm doing you know that's just yeah you can't manage a business that way and that's the problem here this says quickly emerged from you know something that goes on in back alleys to something that's on Main Street it's a real business now but it's the only real business we have in the United States with no access to banks you mentioned leader McConnell's opposition to full legalization of recreational cannabis I mean does that mean that essentially this is not necessarily gonna go anywhere this round yeah I mean that's the big hurdle the question is what can you do to force the Majority Leader's hand on this issue he got what he wanted last year in the farm bill which was legalization of hemp hemp is a big product in Kentucky and so when we think about ok you know what what can you do to advance cannabis that is not going to get the ire of the majority leader it's these narrow bills like the safe act on banking there's a number of bills on veterans medical use to deal with post-traumatic stress disorder those are the kind of provisions that you can talk on page you know 2113 of a massive bill and you're not actually having a debate on cannabis the big legalization stuff we just don't see the majority leader wanting to devote two or three days of floor time to talking about marijuana you