Monday, September 22, 2014

If State Governments Build a Bum’s Pocket for Pot Purchases, Would the Feds Bust ‘em?

Twenty one States and DC have some form of legal marijuana distribution. Two more have imitative on the 2014 ballot. Yet the Federal Government continues to force consumers and businesses to pay for pot with cash. Financial Institutions (FI) do not want to get involved in business that may force their permanent closure and have their principals banned from the financial services industry forever. Governments, with a theoretical purpose of protecting citizens, instead put them at risk by forcing them to carry and keep large volumes of cash. It’s really time for State Governments to pool their resources, build a jointly held bum’s pocket for any retailer to join, and move marijuana industry money safely and efficiently. If the States adopt some of the features that I described in an earlier blog (see ) then states can protect their citizens and create a continuous daily stream of tax money that the businesses will no longer need to collect and pay.  

I understand the reluctance to attempt the push payment architecture of the bum’s pocket, but all state governments already have a ubiquitous payment system using a pull design for consumer redemption at retailer locations. All States have electronic benefit transfer (EBT) used to efficiently allow citizens to access their cash from many different types of government programs such as SNAP (nee food stamps), or child support funds. It would be simple to add a pot program to allow consumers to fund the account and retailers to accept the EBT card. Consumers can walk into any grocery store or retail location that accepts EBT cards, and fund accounts with a return transaction. The entire infrastructure already exists!

The account aggregation occurs at the State treasury level. Since the State treasuries actually move the money into the retailer accounts, they act as the FI. If the Feds want to stop it, they would have the Hobson’s choice of taking action against the State government or its EBT contractor. Either way, the 22 point headlines will scream something like “Black Booted Federal Thugs block Food Funds destined for Poor Children”. The public outcry might accelerate the movement to repeal Federal marijuana laws once and for all.

I ask the States that allow legal distribution of marijuana, do you want to protect your citizens or let them operate with the Federal Sword of Damocles dangling over their heads? What happens if citizens pass a referendum that requires EBT systems to support pot purchases? That is a case to make Supreme Court justices queasy and the DEA and FINCEN despair.

Next Blog: Unnatural Payment System Evolution

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