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Private lenders encouraged by cannabis victories


The legal marijuana movement — and the private money lenders that finance pot businesses — scored several big victories on Tuesday night.

Voters approved recreational marijuana use in California, Nevada and Massachusetts, and four other states passed medical marijuana propositions. A proposition to allow recreational use in Maine also was narrowly approved. Only Arizona voters rejected a ballot for recreational use.

LegalpotAdvocates said the victories show the majority of Americans want to see marijuana decriminalized.

“In seven of the nine states, cannabis initiatives got more votes than Donald Trump did,” said Taylor West, deputy director of the National Cannabis Industry Association. “This is really an indicator that the American people have rejected the ideas of prohibition and are really ready to move forward with a smarter path for dealing with cannabis as a product.”

A huge market will now open in California, a state with over 39 million residents. Also, Massachusetts and Maine also will expand legal marijuana to the East Coast for the first time.  

Prior to Tuesday’s vote, Colorado, Washington, Oregon and Alaska had approved recreational marijuana.

For private lenders, the latest victories present a potentially lucrative opportunity to finance real estate deals for growers and startup retail business that have few options for financing, but there is a caveat. The incoming Trump administration could clamp down.

Notably, several members of Trump’s inner circle — including two men mentioned as possible Attorney General appointees, former New York City Mayor Rudy Giuliani and New Jersey Gov. Chris Christie — have spoken out again legal marijuana use.   

Glen Weinberg, chief executive officer of the Colorado-based Fairview Commercial Lending, a company that has provided real estate loans to marijuana startups, said he doubts Trump will try to roll back the tide. For one thing, he said, Colorado and Washington, the states that legalized marijuana first, are now collecting significant taxes and fees each year from marijuana businesses.

“I don’t think that you can put the genie back into the container, especially with California,” Weinberg said. “California legalized it, and they are going to be coming online very quickly. That is like a $7 billion market just in California.” 

Weinberg also said he doubts that cracking down on marijuana will be at the top of Trump’s list of priorities.

“It would be kind of hypocritical because the Republican platform is based on states’ rights,” Weinberg said. “If you look at the general election, Trump really didn’t come out strongly one way or the other against it. So, my personal feeling is that the cat is out of the bag.”  

The Obama Administration has sent mixed messages on marijuana, but the Department of Justice has not been prosecuting cases in states where marijuana has been legalized. The Drug Enforcement Agency (DEA), however, this past summer reaffirmed marijuana’s status as a Schedule 1 controlled substance with no acceptable medical use — same as heroin. As a result, a cloud hangs over the entire industry, including the states where marijuana has been approved for use.

Federally insured banks won’t provide loans or allow marijuana businesses to bank their proceeds. As far as business loans and real estate loans go, hard money lenders and equity investors have been the only ones willing to finance startups.

“It continues to be an issue because banks are regulated at the federal level,” West said. “Some businesses have been able to get bank accounts through one means or another, but as an industrywide situation, it is still pretty much a problem.” 

This story was updated to reflect the final results in Maine. 


 

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