Green Check confirms $1 billion in legal cannabis sales every month through its banking compliance softwareapplication. Inside the business that’s cashing in on an market where money is king.
By Will Yakowicz, Forbes Staff
InF ebruary 2016, Kevin Hart, the previous CEO of Apple computersystem repairwork attire Tekserve, discovered himself standing inside an Oakland, California vault filled with numerous millions of dollars in money. The vault belonged to one of the nation’s initially medical cannabis dispensaries, Harborside, and the money, obtained from state legal medical cannabis sales, was nevertheless considered unlawful drug cash under federal law.
Hart, who is now the 65-year-old cofounder and CEO of Florida-based marijuana banking compliance business Green Check, was there to assistance Harborside construct a payment processing system.
“It’s a huge vault—it made the scene in Breaking Bad appearance like I knocked over my granddaughter’s piggy bank,” states Hart, who is not associated to the comic. “That’s how much cash was there.”
Hart turned to his host at the bank—the famous California marijuana activist and businessowner Dress Wedding, who established Harborside in 2006 with Steve DeAngelo—and asked why the hell they kept so much cash around. Wedding described that the dispensary might not get a bank account since cannabis was still unlawful at the federal level. That is when Hart understood that Harborside, and other state-legal marijuana business, had a big issue: they had almost no gainaccessto to America’s mainstream monetary system.
Even though cannabis is legal in 38 states—25 of which enable for leisure sales to grownups 21 and older—the drug is still unlawful under federal law. This suggests that most banks and payment processors have policies prohibiting them to work with pot suppliers. And most payment processors, consistingof the huge ones like Visa and Mastercard, likewise do not enable marijuana deals on their networks, which hasactually required the market to conduct most of its sales—about 75%—in money. For an market that is anticipated to create almost $35 billion in sales this year, according to marijuana information company BDSA, that indicates billions of dollars are negotiated the old-fashioned method with paper currency.
“That was a thunderbolt minute for me,” states Hart. “That was it, I was on a objective to resolve this issue. I understood that it was a information issue, not a cash issue.”
On the flight home to Connecticut, Hart took out his notepad and began mapping out how state-licensed marijuana business and banks, 2 extremely managed markets, might work together. And for the for the next 3 years, he worked with 3 of his cofounders, Paul Dunford, John Gadea, and Michael Kennedy, to establish a compliance softwareapplication item that might persuade banks to work with state-licensed however federally unlawful marijuana business by proving every dollar and every item was made and offered according to state law.
The outcome is Green Check’s softwareapplication, which plugs into a dispensary’s payment operating system and aggregates stock, purchase orders and sales to guarantee marijuana business are following hundreds of guidelines and policies, gathers a lot of monetary information. The softwareapplication then feeds that details to banks to make sure monetary organizations do not break anti-money laundering guidelines or run afoul of the Bank Secrecy Act by doing company with a federally prohibited organization.
“The greatest misconception of marijuana is that it is federally prohibited [to deposit funds derived from state-legal marijuana sales] and that it cannot be done—it is not and it can be,” states Hart. “As long as you can display that you’re following the compliance guidelines of the marijuana market and the banking market.”
Every month, Green Check’s compliance softwareapplication validates the authenticity of approximately $1 billion in marijuana sales throughout the nation, significance it procedures about 40% of U.S.’s $30 billion (2023 yearly sales) legal cannabis market. It has offered its softwareapplication to more than 150 monetary organizations to aid more than 11,000 marijuana business—from sellers to growers and producers—get and preserve a bank account. The banks, which are looking to get in on the ground flooring of a growing market, pay about $5,000 a month; marijuana business get the softwareapplication for totallyfree.
It’s not a lot of cash for Green Check. The business scheduled $8.3 million in incomes last year and is looking at around $12 million this year. Since 2019, they raised $19 million at a $90 million assessment from the likes of Mendon Venture Partners, Flatiron Venture Partners, and Fenway Summer Ventures.
Green Check’s greatest banking consumer is New Jersey-based Valley National Bank, a 100-year-old openly traded business bank with $64 billion in properties. Some of the nation’s biggest vertically incorporated marijuana business—from Green Thumb Industries to Curaleaf to Trulieve—use Green Check’s platform to comply with banking laws. Brinks Security, through its subsidiary PAI, has likewise partnered with Green Check to supply ATMs for marijuana dispensaries.
“We make sure banks bring great cash in and keep bad cash out,” states Hart. “We are allowing monetary services to work with the marijuana market.”
The heart of Green Check is its compliance engine. Banks that usage its softwareapplication will just work with marijuana business that are likewise on the platform. In easy terms, marijuana business open their books—accounts, supplier contracts, purchase orders, and other information—which enables Green Check to confirm the chain of custody for every item offered and every dollar that comes in.
According to the newest report released by the U.S. Treasury Department’s Financial Crimes Enforcement Network, just 683 banks and credit unions accept deposits from marijuana business. And those that do have stringent guidelines.
Bryan Watkinson, manages the marijuana banking department at Affinity Federal Credit Union, a little New Jersey-based credit union with $4.1 billion in possessions and 20 branches throughout the tri-state. Since its program introduced last year utilizing the Green Check platform, Affinity now counts about 25 marijuana business as consumers. And, like numerous other credit unions, Affinity should offer with another misstep: it cannot put cash from its marijuana customers to work. All money from marijuana business needto go straight, and peaceful paradoxically, to the Federal Reserve in Boston or Philadelphia. (About 80% of the cash produced in the marijuana market goes direc