This story has been updated to correct the photo caption.
FRESNO, Calif. (KSEE/KGPE) – California’s pot shops operate legally under state law – but cannabis remains illegal under the federal Controlled Substances Act. A balance that makes operating a marijuana-based business tricky in The Golden State.
Federal law states that anyone who grows, possesses, uses, sells, transports or distributes cannabis can be subject to criminal prosecution in federal court. So how can a cannabis business operate while two layers of law seemingly contradict each other?
“There are challenges, but things have improved a lot over the last few years,” revealed Lauren Fontein, one of the founders of The Artist Tree – one of Fresno’s first-ever retail cannabis dispensaries.
One of the biggest hurdles is financial.
According to the Office of Congressmember Ed Perlmutter, “financial institutions providing banking services to legitimate and licensed cannabis businesses under state laws are subject to criminal prosecution under several federal statutes.” Even though state law may be on the side of cannabis businesses, it being illegal under federal law means banking the proceeds of a cannabis business can be arduous.
According to the California Cannabis Industry Association, the state’s cannabis market in California currently generates annual revenues of $5.6 billion – and that number is expected to grow to $7.2 billion by 2024. At one point the cannabis business was primarily cash-based, something Fontein says was a major challenge.
Perlmutter has authored legislation in the form of the SAFE Banking Act of 2021 in order to resolve this issue for cannabis businesses.
“In the past, it was definitely difficult because it can be hard to actually spend cash on things because a lot of things don’t take payment in cash.”
Fontein says The Artist Tree has found a credit union that permits deposits from cannabis business accounts. It also allows debit card transactions – but not credit card transactions.
“The difference I suppose is that a debit card can be processed similar to an ATM withdrawal,” said Fontein. “When something transacted as a debit, the money has to be in the person’s account – so there’s not any credit type of transaction going on. It’s an immediate withdrawal.”
Getting supplies is also a problem as a cannabis shop operating in California cannot receive goods from across state lines due to interstate commerce falling under federal jurisdiction. The Artist Tree is therefore forced to source materials from within the state.
“In the state of California, the regulations require that we only purchase products from licensed California cannabis distributors,” said Fontein. “So they have to be based in the state. We can not get anything that is produced outside of California and everything we do purchase is tracked by the state.”
While cannabis shops were once subject to raids by federal law enforcement, Fontein says the federal government’s focus has shifted away from businesses like hers operating in states that have legalized cannabis use.
“But technically we are in violation of the federal prohibition of cannabis as a controlled substance.”
Despite the federal pushback, Fontein says she wants to make the use of marijuana socially acceptable – describing it as “one of the safest things out there.”
“If someone can drink wine, or have a beer, or go to a bar then there’s really no reason why people of legal age shouldn’t be able to also use cannabis.”