While the United States may have warmed up to relaxing marijuana laws, the financial rules surrounding money tied into the industry has yet to catch up. Colorado’s recent legalizations of recreational marijuana use, as well as decriminalization and medical marijuana approval in many other states has, brought the concerns of the financial industry to the fore front. Without more stringent guidelines many are fearful to do business with burgeoning industry at all.
The Department of Justice (DOJ) has said that it will not pursue state laws okaying marijuana unless they violate eight core responsibilities, among them ensuring that marijuana stays out of the hands of kids, and doesn’t coincide with the sale of other controlled substances. However this soft regulation has not done much to make banks comfortable with the idea of handling drug money.
But, while the financial industry awaits a memo from the DOJ that it hopes will make these rules clearer, some clever entrepreneurs are looking for ways to grab a foothold in the cannabis industry without tipping the applecart of financial regulation.
Recently featured in the Wall Street Journal, former Morgan Stanley banker Derek Peterson, founded a company, GrowOp Technology, and began manufacturing medicinal marijuana growing equipment in 2010. Resulting from the fears of the financial industry, Peterson was forced to form the ancillary business Terra Tech Corp., specializing in indoor agriculture when he was unable to get financial backing due to the ambiguous nature of marijuana being legal at the state level but still illegal federally.
Since Attorney General’s Eric Holder announcement in the summer of 2013that the government would not actively interfere with state laws, Peterson says that interest in the marijuana growing industry has increased. “I wouldn’t say that the floodgates have opened up, but they have loosened in terms of investor interest. We have taken sales from half a million to a little over $2 million this year, and are expecting next year something a lot more significant than that. That brings in some level of confidence, and capital behind it, so we are seeing a resurgence of interest from institutions,” Peterson told the WSJ.
While Peterson’s operations still run the risk of being shut down should they run afoul of the fed, focusing on urban gardening, and indoor greenhouse technology has reduced the risk that company will be shut down entirely. Peterson says that he never wanted to be “a one trick pony,” and capitalizing on the local food movement, while hedging bets on marijuana legalization seems to have all bases covered.
While investing in Marijuana still has its risks, overcoming the hurdles of making it legitimately profitable could be push that final takes it to federal legalization. Because let’s be honest, the federal government and American financiers love green more than the average marijuana-user, just a slightly different shade.
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