The National Security Threat 💸

Is being bankless a national security threat when it comes to cannabis?

In Today’s Issue:

  • → Cannabis Banking Reform. 🏦

  • → Amazon's Announcement. ✅

  • → The Return Of Civilized. 💻

Can Cannabis Companies Access Banks?

The likelihood of cannabis companies being able to access the banking system is increasing as more politicians push for reform…

One of the biggest problems constraining the U.S cannabis industry today is the inability of cannabis companies to access the banking system.

The good news?

A growing group of politicians are seeking to solve this specific problem.

The latest update…

Banks that work with legal cannabis companies can be penalized by federal regulators in the U.S.

Yesterday, however, the U.S. House of Representatives approved an amendment to protect banks that service state-legal cannabis businesses.

As a result, this measure is now attached to large-scale defense spending legislation after Congressman Ed Perlmutter from Colorado asked for this specific amendment to be included.

Why defense?

The argument presented highlighted how the large amounts of cash being used in the cannabis industry today creates several problems.

“This will strengthen the security of our financial system in our country by keeping bad actors like foreign cartels out of the cannabis industry.

But most importantly, this amendment will reduce the risk of violent crime in our communities,” Congressman Perlmutter said.

He also highlighted the increased risks for people working in the cannabis industry today.

“By dealing in all cash, these businesses and their employees become targets for robberies, assaults, burglaries and more.”

He once again emphasized his reasoning for why this problem is creating a national security issue.

“This is a public safety and a national security matter — very germane to the issues at hand, dealing with foreign cartels and particularly the cash that is developed by this business that leads to crime,” he added.

With the House having approved a bill in April of this year, this marks the fifth time in recent years that the House has passed cannabis banking reform.

At no point did the measure move forward in the Senate under Republican control the last session.

Internal conflict…

A problem found within the Democratic Party is the disagreement on the right course of action.

Whereas some politicians favor getting banking reform legislation passed, others favor alternatives — asking instead for a much greater loosening of the rules when it comes to cannabis.

Social equity…

Senate Majority Leader Chuck Schumer and others are arguing that it’s inappropriate to make this reform without a focus on social equity.

Cory Booker, Chuck Schumer & the Senate Finance Committee Chairman Ron Wyden are working with each other to produce a final legalization bill.

As they are in the process of doing so, they are willing to proactively work to block any senators who attempt to get cannabis banking reform passed before a social justice-focused version.

Our Take

This focus on cannabis reform and the ways politicians are pushing this reform highlights how cannabis has become a very big issue.

With such a large percentage of American adults supporting cannabis reform, it would have been a missed opportunity if one political party didn’t choose to champion this cause in the U.S.

Amazon's Latest Announcement

The trillion-dollar company emphasized its support for cannabis reform…

Amazon has been making waves in the cannabis industry this year as the trillion-dollar company has become one of the strongest voices supporting cannabis reform in the U.S.

Yesterday, Amazon’s official blog made it crystal clear that they are fully supporting the current efforts to legalize cannabis in the U.S.

Amazon's support…

In June 2021, Amazon announced it would be excluding cannabis from its pre-employment drug screening program for positions not regulated by the Department of Transportation.

Additionally, Amazon reinstated the employment eligibility for former employees and applicants who were previously terminated or deferred during random or pre-employment cannabis screenings.

Clarity on why…

In Tuesday’s blog, Amazon’s senior vice president of human resources Beth Galetti outlined the three reasons they perusing this policy:

  • → An increasing number of states are moving to some level of cannabis legalization, making it difficult to implement an equitable, consistent, and national pre-employment cannabis testing program.

  • → Publicly available national data indicates that pre-employment cannabis testing disproportionately impacts people of color and acts as a barrier to employment.

  • → Amazon’s pace of growth means that we are always looking to hire great new team members, and we’ve found that eliminating pre-employment testing for cannabis allows us to expand our applicant pool.

To further aid the effort to change the outdated cannabis laws in the U.S, Amazon recently announced they are lobbying for cannabis reform.

  • → Amazon is currently supporting the Marijuana Opportunity Reinvestment and Expungement Act of 2021 (MORE Act).

  • →Amazon has announced its support for the Cannabis Administration and Opportunity Act.

“We strongly believe the time has come to reform the nation’s cannabis policy, and we are committed to helping lead the effort.”

We look forward to working with Congress and other supporters to secure necessary reform of the nation’s cannabis laws. — Amazon said.

Our Take

Make no mistake, Amazon is financially incentivized to make these moves, however, I still commend the course of action they are taking.

Having taken a leadership position on this issue in the U.S it will be very interesting to see if Amazon will seek to expand this advocacy beyond the U.S.

Investors Circle Civilized Founders

Cannabis media company Civilized is seeking to come back from ruins…

Leading up to the legalization of cannabis in Canada, the cannabis industry was flooded with cheap capital and many startups took advantage.

This resulted in several cannabis startups boosting very high valuations at this time.

Unfortunately, raising capital at extremely high valuations comes at a cost — as we are now seeing with cannabis-media startup Civilized.

The journey…

Founded in 2015 by Derek and Terri Riedle — Civilized was one of the first companies attempting to create a cannabis lifestyle brand.

The online publication gained good traction, and courtesy of this success they successfully raised $7 million USD from investors including RIV Capital — the former VC arm of Canopy Growth.

With this treasure trove of cash, Civilized completed the acquisition of the cannabis events company 420 Games and attempted to acquire Business of Cannabis — a deal that didn't end up closing.

In early 2018, the company was reaching over 2 million people online each month, with reports that Civilized was considering going public.

From boom to bust…

Civilized was finding it very difficult to generate enough revenue to break even with 30 staff.

The very restrictive marketing regulations Canadian cannabis companies are subject to did not help the companies’ cause to achieve profitability.

“People are very afraid of running afoul of those rules so they're erring on the side of caution and not putting money into it." the former Civilized editor said in 2019.

Having raised millions of dollars, Civilized had simply bitten off more than they could chew.

By the 2nd of December 2019, Civilized had run out of investors’ cash and was then forced to lay off all of its employees and suspended operations.

Investors want what's left…

Earlier this week Civilized announced that they would be restructuring the company however, this return comes with strings attached.

The investors who backed Civilized are working to break up with the husband-and-wife founders.

As part of the deal, the founders will retain a 10% stake in Civilized, in addition to Civilized COO Tricia Vanderslice taking over as CEO.

The lesson…

If a company raises capital at a $20 million USD valuation then they have created exceptions with their investors that they can generate enough revenue, and in time profits to support this valuation.

Unfortunately, several high-profile cannabis companies such as Aurora, who today laid off an additional 12% of its employees in addition to the 1,000+ employees let go in 2020 are failing to match these expectations.

The cost of not matching these expectations comes in the form of the founders of these companies being shown the door.

Our Take

I have empathy for the founders, however, Civilized is also a great example of how raising capital at too high a valuation and spending all this cash without gaining the required revenue can really backfire.

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