CANNABIS RISK

Advising Elected Officials on Unintended Risks in Cannabis Legalization

Challenge

California legalized recreational cannabis on January 1, 2018. Enormous consumer demand resulted in an industry making an estimated $3.7b in 2018. 

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Since cannabis is still federally illegal, FDIC-insured banks cannot accept cannabis industry deposits. This restricition creates public safety and compliance issues since managing billions in cash across businesses and governments means owners tempted to defraud and subject to theft or even violence.

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Action

Senator Herzberg of the California Assembly sponsored SB930 to create state-chartered cannabis banks for California cannabis businesses. Since these state-chartered banks would rely on private, and not FDIC, insurance, I advised the Senator and his staff on ways to avoid systemic risks and increase transparency in order to attract the maximum number of private insurers and depositors.

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These included concrete ways to analyze for Third Party Risks as detailed in a separate section of this portfolio.

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Result

SB 930 is pending a full vote in the Assembly and is expected to pass.