A 2016 study commissioned by the state and conducted by researchers at University of California Davis Agricultural Issues Center estimated that legalization and regulation of adult pot usage in California could add $5 billion to the market. At the time of the study, the medical marijuana market was estimated to have a $2.7 billion valuation.
Jonathan Barker, Professor of Agricultural Economics at UC Davis and leader of the study, said most would likely come from a redistribution of pre-existing revenue from medical patients or the black market.
Others argue the new market will also attract those Californians who, previously, were interested neither in getting a medical recommendation nor in breaking the law.
Purveyors of legal weed in California will have to get even more creative. Cannabis businesses without access to banks often come up with unconventional ways to cope with the large quantities of cash. In the absence of organized banking, a number of startups offering alternative solutions to banking, or bank-adjacent services, have cropped up to tackle the cash problem.
One of the most widely known services, CanPay, boasts an app that offers debiting services via a customer’s digital wallet at the point of sale.
At the core of CanPay’s business are banks or credit unions willing to bank cannabis businesses, which enables cannabis businesses to post transactions in their own names. In some cases, CanPay can help connect dispensaries with banking services. The state of Hawaii in September 2017 turned to CanPay in an unprecedented move to take the entire market cashless.
CanPay’s business model, however, relies on protections granted under the Cole memo. Since Sessions’ move, CEO and founder Dustin Eide said, some banks have paused services or backed out entirely, although he would not specify which.
“Some have stopped taking on new accounts. We do know of one institution that was getting ready to launch cannabis banking program that has decided to suspend their launch indefinitely,” Eide said.
With financial institutions at the core of his business, CanPay could stand to lose a lot should banks decide the risk is too great. But Eide is less concerned about losing existing partnerships than bringing new banks online to tackle the cash problem in California, a market he said is widely under-served.
“People that are heavily invested in the industry are continuing to move forward. I think the bigger issue is bringing new institutions into new markets,” he said. “It is concerning to the point that creates additional uncertainty, but this industry has thrived despite uncertainty.”