One of the biggest issues is the inability to find banks, even though Ohio’s law excludes banks from state criminal statutes.
Marijuana is an illegal federal substance, so it falls under the Bank Secrecy Act, which essentially is a money-laundering statute, Kravitz says.
“So you have banks that would like to get involved, in light of the opportunities there, but they still risk losing their federal charters,” he says.
Some credit unions and state-charted banks have taken on people connected to the industry, but they charge larger fees because of the additional reporting requirements.
The state also has met with vendors and individuals about setting up a “closed-loop” cashless payment system. Justin Hunt, COO of the MMCP at the Ohio Department of Commerce, says his team has gotten many questions and is doing its due diligence, but it doesn’t have a proposed solution yet.
Entrepreneurs who are unsure of a municipality’s reaction need to take the temperature now, and set up meetings with political leaders, Kravitz says.
Cultivators, processors, dispensaries or laboratories must be at least 500 feet from a school, church or public library, playground or park, but cities, villages and townships may adopt additional restrictions or opt out completely.
“Most of the clients I’ve talked to, the No. 1 thing they recommend in terms of consulting with and going through this process is getting a land use and zoning attorney onboard, day one,” he says.
That helps entrepreneurs identify regulations and whether an application will be regarded favorably.
Investors also need to carefully weigh the risks of getting involved with an industry in its infancy, where their identity could become public.
“The first step is knowing you could lose everything you put in,” Kravitz says.
Entrepreneurs are raising private money at relatively high rates because they cannot get bank loans. They also are in violation of the Controlled Substances Act.
“There’s no protection. You’re investing in a federally illegal business and for that risk, you anticipate some higher returns in your investment. You’re not protected just because Ohio has legalized medical marijuana,” he says.