Andrew DeAngelo Keynotes at 2018 U.S. Cannabis Conference in Miami

Andrew DeAngelo Keynotes at 2018 U.S. Cannabis Conference in Miami

One of the keynote speakers at the 2018 U.S. Cannabis Conference and Expo in Miami was Andrew DeAngelo, founder of Harborside, the largest medical marijuana dispensary in the country. In his talk, DeAngelo recalled his team’s journey, addressed legal cannabis stakeholders in Florida specifically, took questions about the financial difficulties faced by the cannabis industry, and noted his views about bitcoin.

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How It All Began

DeAngelo started his talk by recounting the beginning of his own “personal cannabis story.”

In high school, he was a highly competitive tennis player, being ranked among the top 10 players in his state. Unfortunately, he wound up hurting his back, and his hopes to become a professional tennis player were dashed.

One day while visiting with his mother thereafter, his brother offered him a joint. No longer on the path toward becoming a professional athlete, he decided to try it. According to DeAngelo, the cannabis not only made his injured back feel better, it made him feel better in general. He then realized that this was “a good plant, not a bad plant,” and in 1983 decided to enter the cannabis business.

Of course, at that time there was no such thing as a legal cannabis industry in America. At that point, DeAngelo and his brother guessed legalization must be barely 10 years away. Andrew started learning as much as he could about the plant and began selling cannabis while still in high school. When he graduated, he packed a half pound of cannabis into his bag and went off to college in California. Unsurprisingly, he became fully immersed in pot culture. He met with activists and patients, even helping Jack Herer himself with his famous book, The Emperor Wears No Clothes.

After college, DeAngelo moved to San Francisco. There he worked with people providing cannabis to patients during the height of the AIDS epidemic and was instrumental in helping to get the 1992 San Francisco medical marijuana ballot initiative passed, as well as Prop-215 in 1996.

The Story of Harborside

In first starting Harborside, DeAngelo identified four key points he felt were critical to eventual success. These points were taxation, laboratory testing, packaging, and community service.

When Harborside first opened, there were no taxation requirements. Andrew went to the city and asked to be taxed. This created interdependence and trust among the community.

The next step was to subject all of the product to lab testing for pathogens and potency. It showed to the regulators and the skeptical members of the community that Harborside had the best interests of their patients in mind and were striving to achieve a high level of professionalism.

Again, at the time there were no existing cannabis testing facilities and traditional testing labs refused to take DeAngelo’s products. So, Harborside had to create their own specialized cannabis testing facility from scratch.

Another serious shortcoming in the newly formed cannabis industry was packaging. In that fledgling period, there were no packaging requirements. Manufacturers would use simple Ziploc bags with little or no labeling information. In the absence of government standards, Harborside created their own. They required their suppliers to use child-safety packaging with labeling that showed accurate product and potency information.

Moreover, one unique aspect of California regulations when Harborside started operations was that all licensed cannabis businesses were required to be non-profit. DeAngelo took advantage of this reality by reinvesting would-be profits into community outreach programs and various services for patients. All of these pioneering efforts eventually paid off, and today, Harborside has earned the status of being the largest cannabis dispensary in the country.

For Cannabis Companies, Lack of Banking Creates Hardship and Risk

Perhaps the greatest challenge to operating a legal cannabis business today, aside from the ever-looming threat of being raided by a federal government team at any moment, is the lack of financial services.

Because banks are federally regulated, they are prohibited from servicing the cannabis industry. Even though these businesses are legally operating with a license under state law, they are still struggling to survive in an underserved market. This has created an environment where the industry is almost entirely dependent on cash for both transactions and as being a store of wealth.

This cash-heavy dynamic leads to a number of other problems. First and foremost is security. With so much cash being stored on site, in transit, and in cash warehouses, dispensaries in the U.S. face major risk from theft and burglary. Being unable to store money in a bank account places members of the industry at risk and forces them to spend more resources on protection and security.

Pain points abound for those seeking financial services in the cannabis industry.

This lack of banking services is not even limited to people directly involved in the industry. One case that DeAngelo brought up related to Niki Fried. Fried is a candidate for Agricultural Commissioner in Florida in the upcoming midterm election. She has strong support and financial backing from the cannabis industry. This is an important position because it is the office charged with issuing medical marijuana licenses in Florida.

The Fried campaign was initially banking with Wells Fargo but had their accounts shut down with very short notice. They scrambled to open up replacement accounts at BB&T bank but were kicked out of there as well.

DeAngelo did provide some advice about alternatives to traditional banking options for industry participants. He suggested looking at credit unions, non-FDIC institutions, and local banks. For payment processing, there have been a number of apps developed specifically for cannabis dispensaries, such as Hardcard and Cannpay. However, he acknowledged that theses alternative institutions and payment processing methods are not completely reliable and have other various shortcomings as well.

What About Bitcoin?

When asked about Bitcoin specifically, DeAngelo’s response was mixed. The cannabis industry as a whole is overall very enthusiastic towards bitcoin, he noted. The interest is there, and it is seen as a potential solution to the ongoing banking deficit. However, DeAngelo said the problem is that bitcoin is still relatively complex and overly technical for the average business owner to integrate into their business.

“We don’t do bitcoin not because I don’t want to do bitcoin, I just don’t understand it!” DeAngelo commented.

The other issue brought up by DeAngelo that he feels is significantly limiting bitcoin adoption in the legal cannabis market is acceptance among creditors. To cover basic business expenses such as rent and electricity, fiat currency is required. Creditors such as landlords and utility companies simply won’t accept bitcoin. Even if the dispensaries managed to implement bitcoin for payments, they would still be stuck because the lack of banking makes it prohibitively difficult to convert into fiat.

Do you think the legal cannabis industry is ready for a bitcoin solution?  What would this solution look like? Share your thoughts in the comments section below.

Images via Pixabay

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