16 Ways Marijuana Affects The Economy

In honor of 4/20, we had hoped to give you 420 reasons to celebrate. Then we randomly got lazy. So here are, like, 16 reasons instead. Legalizing marijuana could save the U.S. government $13.7 billion by eliminating prohibition enforcement costs and adding billions in tax revenue, according to a paper by Harvard economist Jeffrey Miron that’s gained the support of more than 300 of his economist peers. Proponents have highlighted the potential economic benefits of legalizing marijuana for years, but the growth and legitimization of medical marijuana dispensaries recently could lend the argument more credibility. Tax revenue from medical marijuana dispensaries is already giving state and local budgets a much needed boost. Oakland, California, for example, inhaled $1.4 million, or 3 percent of the city's total business tax revenue from medical marijuana dispensaries last year, The New York Times reports. Meanwhile, the states of Colorado, Maine and Oregon have all pulled in added tax revenue from medical marijuana. If the experience of marijuana growing supplier weGrow is any indication, the marijuana industry could also be a big job creator. The chain has opened stores in California, Arizona and, most recently, Washington D.C. and with each new store 75 indirect jobs are created, according to AZBusiness Magazine. Meanwhile, Harborside Health Center, the biggest medical marijuana dispensary in Oakland, employs 120 people, according to the NYT. But not everyone is convinced legal marijuna would be such a boon for the economy, namely the federal government. Despite President Obama’s campaign promises to respect state laws concerning medical marijuana, the Department of Justice has recently cracked down. This month, Oaksterdam University, which offers training to medical marijuana growers was raided by federal agents, while the IRS has been targeting medical marijuana businesses since last year. President Obama said in 2009 “I don't think [legalizing marijuana is] a good strategy to grow our economy” but others seem to disagree.

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Exclusive: Medical Marijuana Dispensaries No Longer Able to Accept Visa, MasterCard as of July 1

The main national company handling payment processing services for the medical marijuana industry will no longer accept Visa and MasterCard transactions from dispensaries, according to information obtained by MMJ Business Daily. Electronic Merchant Systems (EMS) – which provides merchant accounts for medical marijuana companies via a partnership with Chesapeake Bank in Virginia – informed its MMJ customers of the decision in an email (see full text at the end of this post). The new policy is effective July 1. The change covers both credit and debit cards, though the email says dispensary clients can still accept MMJ transactions conducted with Discover cards. EMS plans to send out another letter on Wednesday informing medical marijuana merchants to batch and settle all Visa and MasterCard transactions by June 30. EMS and Chesapeake Bank did not immediately return messages left by MMJ Business Daily. The move is another blow to the medical marijuana business, which is already struggling with a host of challenges tied to banking and payment processing. Most banks refuse to open or service accounts from dispensaries and related businesses, and American Express cut the industry off last year. With Visa and MasterCard out of the picture now, much of the industry will be forced to adopt an all-cash business model. While some dispensaries have worked out agreements with their local banks or offered vague, possibly misleading descriptions of their businesses to receive credit card processing services, most centers that currently accept cards use EMS. Companies that facilitate business between EMS and dispensaries are now scrambling to adapt. Several of these companies contacted for comment about the development said they are touting alternative services such as on-site ATMs, which eliminate the need for patients to carry large amounts of cash when they visit dispensaries. Others are still vowing to offer credit card processing services, though dispensaries should perform their due diligence on companies making these claims. “There are still legitimate non-cash solutions out there for dispensaries with a walk-in location, but proceed with caution,” said Michael L. Rupkalvis of The Transaction Group, which works with MMJ companies to find payment processing services. “If someone claims they can set up a merchant account for your dispensary, make sure they have medical marijuana dispensary listed as the business type on the application and medical marijuana as the product. Some reps will try and get an account approved by not putting the correct business type on the app, or what’s referred to as miscoding an application.” Aside from making life harder for medical marijuana businesses, the development could exacerbate security issues for the industry, as dispensaries will now have lots of cash on hand. “This is a disservice to the industry and communities around this industry,” Roger Neustadt, a principal of 420 Card Processing, said when contacted about the effects this will have on the industry. “The claim (by those opposed to MMJ) is that dispensaries increase crime, and this is going to tail right into that and support that notion because it makes them a bigger target.” Aaron Smith, executive director of the National Cannabis Industry Association, called on the Treasury Department to quickly step in and remedy the banking situation for MMJ companies. “The Treasury Department in our estimation has the ability to change regulations without an act of Congress,” Smith said. “It doesn’t make any sense regardless of what your position is on medical marijuana to force these businesses into a cash-only situation.” Here’s the email EMS sent to its agents: “In light of recent developments, we wanted to reach out and make you all aware of the latest news regarding Medical Marijuana merchants. Effective July 1st, 2012, MMJ merchants will no longer be able to accept Visa or MasterCard credit or debit cards, however, they can continue to accept Discover. All current MMJ merchants will be receiving a message on their May statements that reads: [IMPORTANT NOTICE Please be advised that as of July 1, 2012 you will no longer be able to accept Visa and MasterCard credit and debit cards for payment. Discover cards will still be honored. We will contact you in the coming weeks to facilitate this transition. If this situation should change with Visa and MasterCard we will inform you immediately. The process for this transition is simple; all merchants need to do is make sure that they batch and settle their transactions at the end of the day on Saturday, June 30th. On July 1st, only Discover transactions will receive approval. Those merchants who fail to batch and settle on June 30th will receive an RB error and will have to call in to Client Services for assistance.] We will be mailing a letter around June 20th that informs them of the need to batch and settle. Should you have any questions regarding this matter, please call your Agent Relationship Manager. As we informed the affected merchants, if this situation should change with Visa and MasterCard we will inform you immediately!”

Angel Perales, David Silva, Osvaldo Conde: Calif. Mayor And City Officials Accused Of Pot Shop Bribes

LOS ANGELES — If someone wanted to do business in the small Southern California city of Cudahy, federal prosecutors say one-time city manager Angel Perales had some advice. "Money makes the monkey dance," Perales told an FBI informant, according to court documents. Perales, Mayor David Silva and Councilman Osvaldo Conde were arrested Friday and charged with soliciting and accepting cash bribes totaling $17,000 to support the opening of a medical marijuana dispensary. If convicted of a bribery charge, they each face up to 10 years in prison. The three officials were in court Friday afternoon for bail hearings. Silva and Perales were released on $50,000 appearance bonds. Conde was released on $100,000 bond. It wasn't immediately known if they had retained attorneys. Court documents laid out the scheme to approve a pot shop in exchange for cash and also portrayed the suburb of 25,000 as a virtual den of iniquities where drug use, voter fraud and illicit sex permeated City Hall. The arrests are the latest in a series of corruption scandals plaguing small cities south of Los Angeles. Most notable were the 2010 arrests of the former city manager and several other officials from neighboring Bell, who are accused of misappropriating funds to overpay themselves. Federal prosecutors said in an affidavit that after weeks of soliciting bribes, Conde, Perales and Silva accepted $15,000 in February from an FBI informant who formerly owned a medical marijuana shop in a nearby city. Conde later met with the informant and received $2,000, court documents show. The informant estimated the dispensary could generate up to $2.5 million within a year. "The allegations in this case describe a corrosive and freewheeling attitude among certain officials in the city of Cudahy," said U.S. Attorney Andre Birotte Jr. "The stain left by public corruption is indelible, extending beyond any individual case because of the general erosion of public confidence in government." Recorded conversations show that Perales, who ran the city's code enforcement division, helped arrange the deal and knew plenty of the city's dirty secrets. Among them was the firing of former City Manager George Perez in March 2011. The council said Perez was let go "for cause," but Perales, 43, told the informant the ex-official was doing drugs on the job. Perez could not immediately be located for comment. Perales also said Conde, 50, was the most powerful man in Cudahy. Conde seemed to confirm that to the informant as well. "In other words, I'm leading and bring all these ideas," said Conde, according to the affidavit. One of the ideas was to be a business partner with Perales to build a massage parlor where sex would be provided to patrons, the affidavit said. Perales tells the informant the new venture could generate $10,000 to $15,000 every month. In two meetings with the informant, Conde showed up with a pair of armed bodyguards, who turned out to be employees of the 1.2-square-mile city. Conde also had a revolver with him at one of the meetings, according to court documents. Perales also suggested he helped get Conde elected five years ago. He tells the informant during a recorded conversation he persuaded 60 to 70 people to vote for Conde. Conde finished with 472 votes and won by a margin of 33 votes, court documents show. Thom Mrozek, a U.S attorney's spokesman, said the investigation is ongoing and he couldn't say whether additional charges would be filed. Perales suggested the shakedown of the prospective pot clinic owner wasn't the first time Conde and Silva looked to receive bribes. "These guys are not your typical, uh, council people," Perales tells the informant, according to the affidavit. "They've dealt with, uh, you know, people that throw money down." All three men are scheduled to return to court July 19 for arraignment.