Despite Federal Prohibition, Cali Cannabis Shops Continue Operations

KTLA75 reported pot shops in California operate legally under state law. But marijuana remains prohibited in the context of the Federal Controlled Substances Act. This makes running businesses that are based around marijuana challenging within the Golden State.

Image from CBS47, Fresno

Federal law says that anyone who cultivates, uses, owns, transports, sells, or distributes cannabis could be prosecuted criminally in federal courts. So how does the cannabis industry function when two legal layers seem contradictory?

“There are challenges, but things have improved a lot over the last few years,” said Lauren Fontein, one of the co-founders of The Artist Tree – one of Fresno’s first ever marijuana dispensaries that retail.

A major obstacle is the financial aspect.

In accordance with the office of Congressman Ed Perlmutter, “financial institutions providing banking services to legitimate and licensed cannabis businesses under state laws are subject to criminal prosecution under several federal statutes.” However, even though state law might be in favor of cannabis-related businesses, being prohibited under federal law means that banking on the profits of a cannabis-related business could be challenging.

According to the California Cannabis Industry Association, the state’s market for cannabis in California has an annual turnover of $5.6 billion. That amount is predicted to rise to $7.2 billion in 2024. At one point, the cannabis industry was predominantly cash-based, which Fontein claims was a significant obstacle.

Perlmutter has written legislation that is legislation known as the SAFE Banking Act of 2021 to address this issue for cannabis companies.

“In the past, it was definitely difficult because it can be hard to actually spend cash on things because a lot of things don’t take payment in cash,” Fontein explained.

Artist Tree Artist Tree has found a credit union that accepts withdrawals from businesses with cannabis accounts. The credit union also permits debit card transactions, but not credit card transactions.

“The difference I suppose, is that a debit card can be processed similar to an ATM withdrawal,” Fontein said. “When it’s done as debit, the funds are required to be in the account of the individual, and there’s no transactions that are based on credit taking place. It’s a withdrawal that is immediate.”

Supplying supplies is an issue as the cannabis shops operating in California can’t receive products across state lines because of commerce between states that falls under federal control. Artist Tree is therefore forced to purchase items within the state.

Louis Levey is the Content Success Manager and Founder at No Strings Content. He's passionate about helping cannabis businesses use content to attract, educate, and convert audiences. His hometown is Boca Raton, Florida, but he currently lives and works remotely in Chiang Mai, Thailand.

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