A3
THE ASTORIAN • TUESDAY, OCTOBER 29, 2019
Cannabis: A lot of business still gets done in cash
Continued from Page A1
including one who had given an endorse-
ment to Linx for its website — told Ore-
gon Public Broadcasting that Linx also owes
them money.
The company acknowledges that almost
all of its 300 customers in 20 states are owed
money. Linx shut down operations in July.
But CEO Patrick Hammond said he’s work-
ing to start back up and vows that the retail-
ers will all get their money back.
“My goal is by the end of October,” Ham-
mond said. “But that’s a goal.”
Grossman said she’ll believe it when she
sees the money.
“They’ve been telling me that since
June,” said Grossman, adding that she’s
received shifting explanations of how Linx
would make good on her account. “Every-
thing they say I take with a grain of salt,”
she said.
Linx is one of several companies that
offered cannabis retailers a work around to
the refusal of the big credit card networks to
serve marijuana businesses that are techni-
cally illegal under federal law. They include
using cryptocurrency or phone apps tied into
checking accounts.
Linx offered something akin to a Star-
bucks card. The Linx cards could be used at
a cannabis shop. While it worked, retailers
said it boosted sales.
But, according to Linx CEO Hammond,
the surge in sales on 4/20 led to prob-
lems involved in ensuring that all the sales
involved legal cannabis. One of the banks
involved in processing payments decided
it wanted to “de-risk” its business, he said.
Hammond said Linx is now beefi ng up its
systems to make sure it can demonstrate its
transactions involve legal marijuana.
Linx is not the only card processing
company that’s given cannabis retailers
heartburn.
“You can’t go anywhere without running
into (card) payments people,” said Noah
Carey, a Wall Street veteran who now runs
a startup involving cannabis banking. He
said the business offers high fees and the
opportunity to make money on the “fl oat” –
that period of time between when they col-
lect money from credit card purchasers and
when they pay merchants.
“I just know that the people I’ve met on
that side (of the industry) for the most part
are kind of sketchy,” said Carey, CEO and
founder of Seattle-based Shield Compliance.
Mike Chappell, a Colorado resident who
owns a n ortheast Portland cannabis retailer
called Silver Stem, said he receives emails
“on a daily basis from people saying they
can do credit card purchasing. But this has
been an ongoing scenario for the industry as
long as I can remember.”
He said he’s been through the cycle with
nabis businesses in Oregon and Washington
state. And experts predict an infl ux of fi nan-
cial institutions if Congress passes the SAFE
Banking Act.
That could help drive down costs, but
Pross and others say that the federal fi nan-
cial guidelines will remain even if the bill
becomes law. She said bankers would still
have to spend extra money carefully over-
seeing cannabis-related accounts.
At the same time, Pross said MAPS must
remain ready to respond if federal offi cials
do an about-face and decide they don’t want
to tolerate the state-sanctioned cannabis
business. That’s one reason the credit union
doesn’t offer business loans to the industry.
“We have a very well-documented and
tested exit strategy,” Pross said, “so if there
is some dramatic change at the federal level,
we can act quickly.”
Cannabis cash is expensive
Jeff Mapes/Oregon Public Broadcasting
David Alport is the owner of Bridge City Collective in north Portland.
more than one processor. “They will allow
you to take credit cards and then after a cou-
ple of months it’ll just be shut down basi-
cally,” he said.
Chappell, who endorsed Linx on their
website, said that while the company owes
him money, he appreciated that the fi rm has
at least stuck around. “It doesn’t seem like
they’ve tried to cut and run,” he said.
The cannabis credit union
MAPS Credit Union appears to be thriv-
ing. Assets are up 60% in the last fi ve years.
They’re erecting a second building next to
their four-story headquarters in downtown
Salem. They run sideline businesses rang-
ing from health insurance to disaster recov-
ery services.
But here’s one thriving sideline you won’t
fi nd on their website: They’re the go-to bank
for Oregon’s cannabis-related businesses.
With more than 500 marijuana retail-
ers, growers and processors, MAPS – once
known as the Marion & Polk Schools Credit
Union – has become one of the pioneers in
serving an industry that most bankers avoid.
Nationwide, experts estimate that only about
50 to 60 fi nancial institutions openly work
with cannabis businesses.
Rachel Pross, the chief risk offi cer for
MAPS, said the credit union made what she
calls the “gutsy call” to serve cannabis busi-
nesses after Oregon voters legalized the drug
in 2014.
Many bankers worry about the risk to
their reputation if they get tied to canna-
bis. And an even bigger fear is that federal
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regulators could charge fi nancial institu-
tions with illegal drug traffi cking, yank their
deposit insurance or even shut them down.
But Pross said it’s better for everyone to get
these businesses into a “transparent, compli-
ant” banking relationship.
“Nobody benefi ts from an underground
economy,” she said, “except criminals and
cartels and all of the people we don’t want
operating in our state.”
This work doesn’t come cheap. MAPS
has a full-time staff of 13 handling cannabis
businesses. And the credit union beefed up
its security plans for handling the big cash
deposits generated by cannabis retailers.
MAPS charges fees for cannabis accounts
that typically run several hundred dollars
a month. That’s a lot more than the credit
union charges other kinds of businesses.
Cannabis retailers sometimes grumble
about the high costs. But Chappell, who
owns the n ortheast Portland shop, also has
business operations in Colorado and said
some banks there charge much higher fees.
“I think MAPS is actually doing a rela-
tively good job of keeping the monthly costs
low, at least low enough,” he said.
MAPS has built its cannabis business
solely by word of mouth, to the point that
Pross now estimates cannabis accounts make
up about 7% of the credit union’s overall
deposits. But it’s getting more competitive.
On their websites, Wauna Credit Union of
Clatskanie and Salal Credit Union of Seattle
both offer a suite of fi nancial services to can-
Alport, the n orth Portland retailer, didn’t
even have an ATM in his store when it
opened in 2014 as a medical marijuana dis-
pensary. He paid suppliers and workers in a
mixture of cash and checks, some drawn on
his personal bank account.
“If we had to pay our taxes,” he said, “we
would drive down to Salem with stacks full
of bills.”
Brook Binder, owner of High Qual-
ity in Corvallis, recalled the fi rst advice he
received on how to safeguard his cash: “Put
your money in empty pipes, and put it under
your compost or under where your dog
poops.”
A lot of the business still gets done in
cash. The s tate Department of Revenue says
most cannabis tax payments are now made
by check or money order, but about 40%
arrive in cash. The agency built a special
facility to securely handle that money.
Alport now banks through MAPS, and he
uses an armored car service to make his cash
deposits. In his shop, credit card shoppers
can either use the ATM or a smartphone app
that customers can load with money from
their checking account.
A bigger challenge is getting access to a
different kind of cash – capital to grow the
business. Even fi nancial institutions that
work with the industry tend to be wary about
loans.
Alan Hanson, a Portland cannabis lawyer
who once worked for MAPS, said banks are
always worried about the future stability of
businesses based on a drug still prohibited at
the federal level.
“It’s pretty easy for a bank to say, ‘We’re
closing your account, here’s the check,’”
Hanson said. “It’s a lot more diffi cult to say,
‘Yeah, that million-dollar loan we just gave
you? We need that back tomorrow.’”
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