Issue 55: Mastercard Pulls the Plug
"There are some things money can't buy," but weed isn't one of them.... or something like that.
Hey folks, I hope you’re beating the heat… and keeping those edibles and vape carts out of the melting sun.
This week, I’m discussing the Mastercard fiasco. Plus, I try to make sense of the latest cannabis news from Massachusetts that has everyone scratching their heads.
Mastercard Pulls the Plug on Cannabis Transactions
Yet Another Financial Crackdown Sends Cannabis Companies Scrambling
There’s never a dull moment in the world of cannabis banking.
This week proved no exception, as Mastercard announced that they are cracking down on banks and payment processors that conduct cannabis-related transactions. Apparently, Mastercard had no idea that cannabis companies were completing millions of dollars worth of transactions using their pin debit system.
"As we were made aware of this matter, we quickly investigated it. In accordance with our policies, we instructed the financial institutions that offer payment services to cannabis merchants and connects them to Mastercard to terminate the activity," a spokesperson for the company said earlier this week.
The whole situation is a bit reminiscent of that famous scene from Casablanca..
Whatever the cause of Mastercard’s crackdown, it’s clear that this incident feels a bit different than previous instances where cannabis businesses in various states have found their payment services interrupted.
Of course, there’s never been a piece of negative news in the cannabis industry that someone out there hasn’t found a way to spin into a positive. This story is no exception. Some feel that this calamity will lead to federal lawmakers suddenly realizing the importance of SAFE, although it should be pointed out that particular bill wouldn’t really force Mastercard to play ball with the cannabis industry.
News like this is also a reminder of how thick the walls of the cannabis bubble can be. Many voices in the comments called for a marijuana industry boycott of Mastercard, apparently unaware of the fact that such a boycott would have next-to-zero impact on a global company that is worth over $38 billion. Simply put, all the hooting and hollering in the cannabis world is unlikely to make this financial giant change its mind.
Is It Finally Time For Crypto to Have A Moment?
This sudden development has sent cannabis point of sale and e-commerce companies scrambling for solutions. Dutchie, one of the largest companies in the space, announced that they are rapidly pivoting to a crypto-based solution to keep their systems running.
This new method will require every single transaction to be converted into bitcoin, with retailers getting the cash equivalent back from Dutchie's payment partner.
Dutchie’s move to crypto is likely one of desperation. I’m no finance expert — let alone a crypto expert – but my understanding is that it’s considered a “taxable event” every time you convert U.S currency to crypto (or vice versa). Many crypto-nerds have long tried to claim that bitcoin is the solution to the cannabis industry’s banking woes, but it turns out regulators aren’t thrilled about the idea of mixing legal weed with hard-to-trace digital currency.
We’ll see how this plays out over the next week or two, but considering Dutchie’s recent 4/20 problems, I wouldn’t be surprised if this emergency crypto move is the last straw for many frustrated dispensary owners who use their services.
Other Payment Methods
It’s possible that we’ll see a migration back to systems that rely on ACH transfers, although paying with this particular method usually requires customers to use their bank account information to sign up via a mobile app well ahead of their first purchase.
Cashless ATMs may also make a comeback. From my perspective, this method never truly disappeared after last year’s crackdown, although both Mastercard and Visa have made it clear that they aren’t fans of this payment method either.
It’s also possible that we’ll see Mastercard struggle to actually fully clamp down on cannabis transactions. After all, these types of payments were never supposed to happen on their network in the first place. Considering the company handles somewhere around 366 million transactions per day across the world, it’s possible that they are going to have to play an exhaustive game of whack-a-mole in order to truly stop all cannabis-related payments.
There’s also still people out there who are claiming that they have ways to allow for the use of credit cards at dispensaries, although pretty much every cannabis banking person I’ve heard from claim this is a bad idea for companies who are hoping to access to credit card services in the long term.
All of this serves as a important reminder that progress in this industry is not linear, and that the latest calamity is always lurking behind the next corner.
Massachusetts Allowing Sex Offenders Into The Cannabis Industry?
New Suitability Rules Would Remove Many Offenses From Mandatory Disqualification From The Industry
A move that was designed to allow more people with prior convictions a chance to work in the cannabis industry has caused a strong reaction on social media, as it was discovered earlier this week that a number of sexual crimes were included in the list of offenses that are no longer to be considered mandatory disqualifiers under the state’s new suitability standards.
This change was first noticed by Grant Smith Ellis earlier this week, and a petition he created to urge the state to stop this move currently has 400+ signatures.
Green Path Training Founder Ellen Brown spoke with multiple state agencies about the change, and posted a helpful update on Wednesday:
…
Long story short Legislators, The Joint Committee on Cannabis, The Massachusetts Cannabis Control Commission don't believe it should be within their jurisdiction to mandatorily disqualify a felon if that felon's crime does not include distribution of a controlled substance to a minor.
Crimes that are no longer mandatory disqualifiers for the Massachusetts cannabis industry include sex offenders, human traffickers and felons of violent crimes.
The train of thought by the government is after a person has served their time, they are rehabilitated and deserve to be able to be a part of the cannabis industry..When it comes to heinous crimes of this nature, I firmly disagree, but there is very little that can be done now besides wait and see the Massachusetts Cannabis Control Commission meeting holds tomorrow.
My Thoughts
Generally, it’s true that people who have served their sentence should be allowed to fully reintegrate with society. That being said, it’s pretty clear that the existence of sex offender registry laws shows that we feel a bit different about this type of crime. I understand the argument being made by the state, but I can’t help that notice that the stakeholders that would be most impacted by this change – existing cannabis workers – weren’t really consulted or considered as part of this decision.
As of press time, the Cannabis Control Commission is currently holding a meeting with an agenda that includes this topic, so check back next week for some updates.
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New England
CHOICE OF INDUSTRY PROFESSIONAL TO OVERSEE MASSACHUSETTS MARIJUANA TESTING RAISES QUESTIONS (Chris Roberts | MJBizDaily)
In an emailed statement, a CCC spokesperson defended the hire, noting Kocis’ industry experience is “valuable expertise which made him a capable and qualified candidate for the role.”
Kocis “was fully transparent” during the hiring process and “no longer maintains any professional or financial ties with his former employers or their previous owners,” the spokesperson added.
“Kocis has not participated in any investigations regarding Green Analytics. To ensure there are no perceived conflicts, he has recused himself from directly working with that ITL (independent testing lab).”
ANALYSIS: The CCC’s Director of Testing has to sit out any investigations regarding their former employe for fear of a conflict of interest…but he’s free to be involved with investigations into his former employer’s eleven other competitors in the state?
RHODE ISLAND MARIJUANA INDUSTRY BECOMES FERTILE GROUND FOR UNIONIZATION (Christopher Shea | Rhode Island Current)
“It’s a really fun job, the people I work with are great,” he said.
Yet things soured quickly after Chicago-based Green Thumb Industries took over the former Summit Medical Compassion Center in 2021, he said.
While there were few changes at first, Botelho said employee discounts were reduced after the transition to recreational sales earlier this year. Then hours for full and part-time workers were cut without warning.
ANALYSIS: From my perspective, Rhode Island’s legalization rollout is going pretty poorly so far. At least there’s this silver lining.
CANNABIS CONSUMERS SCREWED OUT OF MASS SALES TAX HOLIDAY AGAIN (Talking Joints Memo)
When the next sales tax holiday comes around on Aug. 12 and 13, you won’t be able to get a Mass discount on that special ounce you have been saving up for. Because while consumers of innumerable other categories of goods will be able to save, weed remains on the shit list.
Joining cannabis on the unqualified compendium: meals, motor vehicles, motorboats, telecom services, gas, steam, electricity, tobacco products, alcoholic beverages, and any single item whose price is more than $2,500.
ANALYSIS: I thought cannabis might be removed from the unqualified list now that former Governor Baker has left office, but like a lot of Massachusetts residents, I’m quickly learning that Healey isn't that different than Baker. I don’t think removing the combined state tax of 17% on cannabis products for two days would cause some sort of public health crisis.
Rest of U.S / National
CHAIR OF ALABAMA MEDICAL CANNABIS COMMISSION FACES LEGAL CHALLENGE TO HIS SEAT (Jonathan Hardison | 6WBRC)
Stokes and the AMCC are embroiled in multiple lawsuits over the process the Commission used to issue the first-of-their-kind licenses for medical cannabis in June. Licenses that were paused then rescinded within days after the AMCC admitted it had found “tabulation errors” in the scoring system used to grade applicants for the limited number of medical cannabis licenses.
Stokes has also faced criticism from some applicants for what they call a conflict of interest when the commission voted to hire the University of South Alabama (USA) to score the applications, though Stokes has denied any conflict of interest and pointed out he recused himself from the vote to hire USA.
ANALYSIS: In an attempt to regulate cannabis like it’s plutonium, conservative Alabama has created an absolute mess of its medical marijuana program. You would think this state would be a fan of free market economics. Instead, they created a bureaucratic nightmare by trying to handpick winners and losers. Don’t expect any medical cannabis businesses to open in Alabama anytime soon.
FALLING STOCK PRICES FORCE DOWN CANNABIS INDUSTRY CEO PAY IN 2022 (Kate Robinson | MJBizDaily)
Total compensation for CEOs of cannabis multistate operators fell in 2022 versus 2021, as tumbling marijuana stock prices last year drove down the equity-based pay component top executives received.
By contrast, salaries for chief executives at the largest MSOs were consistent from 2022 to 2021, according to the companies’ filings with federal regulators.
ANALYSIS: Executive compensation is complicated (that’s probably a feature rather than a bug) but this piece did a good job of trying to make sense of all. For some frame of reference, every CEO listed is currently making more than Red Sox center fielder Jarren Duran – even though he’s undeniably having a more productive year.
(This is mostly due to the fact that Duran is still on a rookie contract, but still…)
International
🇱🇺 MARIJUANA LEGALIZATION LAW OFFICIALLY TAKES EFFECT IN LUXEMBOURG (Kyle Jaeger | Marijuana Moment)
This comes about a month after Luxembourg’s Parliament passed a legalization bill, making it the second country in the European Union to end cannabis prohibition following Malta’s vote to legalize in 2021.
The law in Luxembourg, which was first proposed by the ministers of justice and homeland security in 2021, allows adults to possess up to three grams of cannabis and grow up to four plants in a secure location within their private residence.
ANALYSIS: Before you start booking your vacation to Luxembourg, I want to remind you of the fact that this new law doesn’t allow for tourists to consume weed. In fact, by the letter of the law, only people in households that choose to cultivate cannabis can possess and consume it, and only while they are at home.
Possession of more than three grams is still punishable by a sentence of up to six months and a fine up to €2,500 (~$2,745). I believe I’ve said this before, but at a certain point you have to question whether it’s even fair to call this legalization. Lighten up, Luxembourg!
I’m loving the idea of Rewind Video, a new attempt to open a non-profit video rental store in Worcester that aims to also be a community center and a hub for local independent media.
If you’re in the Worcester area and want to help out with this project, head over to Rewind’s website.
This week it’s Jupiter, submitted by reader Alexandra G. Adorable!
Special Bulletins
I’m still putting the final touches on that Super PAC piece I mentioned last week, but it should be out today or tomorrow for paid subscribers.
This week’s CCC meetings have been a bit different than the typical meeting, as they’ve been engaged in a marathon policy discussion with the aim of finalizing new regulations governing community host agreements, and agent suitability. The second day of these meetings are still going on as we speak, but I’ll attempt to summarize this 10+ hours of discussion over the weekend. So if you’re a paid subscriber, keep an eye out for that on Monday.
If you’re not a paid subscriber, there’s still a chance to take advantage of the summer sale!