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AUTHOR: Heather Allman
PUBLISHER: CANNABIS LAW REPORT
What Eaze’s Former CEO’s Guilty Plea Says About the State of Cannabis Banking: What’s Next?
BACKGROUND & CONTEXT
Eaze’s former CEO, Jim Patterson, pleading guilty in a case accusing the company of tricking banks into processing $100 million worth of cannabis credit card payments.
This news has sparked debate among the cannabis community over whether cannabis banking laws forced Patterson to go the illegal route, if this news proves the need for Congress to pass cannabis banking laws, and what legal payment/banking options cannabis businesses have other than cash.
On March 8, 2021, I talked with Tom Gavin, CEO of CannaTrac about this interesting development in the Eaze case and the possible ramifications for cannabis banking.
Additionally, CannaTrac offers cannabis businesses the option to apply for bank loans with PBC when applying to adopt their cashless payment option, CannaCard. And, while Eaze‘s distinguisher is the ability to pay for weed delivered to your door, CannaCard can be used for the same purpose – but legitimately. When the weed arrives at their door, consumers simply show their ID to pay for the weed via the CannaCard app.
What Eaze’s Former CEO’s Guilty Plea Says About the State of Cannabis Banking; What’s Next?
CANNABIS LAW REPORT: Q1) Did you expect Patterson to plead guilty?
Tom Gavin: I cannot say I necessarily expected it. However, I am not surprised.
CLR: Q2a) Here at CLR we believe that Patterson was quite rightly brought to task for his actions and acted illegally. For example sales increased the value of Eaze and therefore by default Patterson’s personal wealth?
Tom Gavin: Well, there would have to be some sort of motivation there, because it was blatantly illegal. Whether that was the specific reason, I can’t say, because I don’t know how much of a holding he had in the company.
However, it would definitely be the most obvious and likely one.
CLR: Q2b) Do you think that is a fair assessment of the situation or do you see more grey in the whole affair?
Tom Gavin: The industry as a whole is operating in a very grey area simply because of the contradicting legislation, but there definitely are much more scrupulous ways to do business. I mean, they could have worked with us to run their operation legally.
CLR: Q3) This brings into sharp focus the need for regulation and quickly – do you feel the MORE act should be pushed through ASAP as a standalone act or that financial regulation be written into a comprehensive omnibus act?
Tom Gavin: I feel the MORE Act is the only way that new financial regulations will really work. We need rescheduling.
Passage of acts like SAFE Banking will do nothing more than draw more attention to the potential problems and the creation of more work-arounds. I think these pieces of legislature will be amended as time goes on to address current problems as any bill is supposed to do.
CLR: Q4) How soon do you hope to see reasonable regulation? How soon realistically do you expect to see reasonable regulation?
Tom Gavin: I hope to see reasonable regulation soon because there is going to be a learning curve. The longer we wait the harder and more expensive it will get to implement.
CLR: Q5) We have reported over the last year on a number of players in the industry both in the US and Canada acting deplorably with regard to the markets, investors and we believe beginning to give regulated cannabis a bad name. Thoughts?
Tom Gavin: I agree that it is giving the industry a bad name, but only when it comes to the people working or heavily investing in the industry.
Conversely, the industry is doing so many great things that I don’t think it is being looked at the same way by the general public.
Let’s hope it stays that way. It took us long enough to get rid of the stigma.
CLR: Q6) Do you think there is currently enough enforcement with regard to financial matters that are blatantly illegal?
Tom Gavin: I don’t think there is enough enforcement. This could, again, all be simplified by rescheduling, so let’s keep our fingers crossed on that.
CLR: Q7) Do you think as a new industry the sector should take stock and police itself better – do you have any suggestions as to how it should do that?
Tom Gavin: I do think that we have to monitor our fellow industry partners.
It would be much better for our industry to correct itself than watch another story landing on the front page regarding fraud in the cannabis industry.
If we ever really want to strive for legalization, we have to be uniform.
Unfortunately, perception will always be ruined by the one bad apple if the right media outlet picks up the story.
CLR: Q8)We would suggest that current industry bodies are not up to the task – what are your thoughts?
Tom Gavin: I don’t know if I completely agree with this. I think that anyone willing to take the time to read the current information and numbers should be able to judge the plant on its merits and benefits as opposed to what they have been told past.
Any legislators will see the need from a health and socio-economic perspective, not to mention a tax base perspective, this is a key ingredient to our country’s success.
CLR: Q9) At Cannatrac, do you think technology is going to be the main route to creating efficient compliance within the sector?
Tom Gavin: Technology is the only sure way to create efficient compliance. Take our product for example.
One of the major benefits to using our cashless payment platform is the transparency and auditability it provides: the main components for compliance.
This couldn’t be done for anywhere remotely close to the same cost otherwise. Not to mention, we take out the potential for human error.