Is a Cash-Free Payment System a Good Idea for Ohio's Weed Industry?

The Buckey State might have a fix for weed's banking problem.

Ohio passed House Bill 523 earlier this year, establishing the groundwork for a medical marijuana program in the Buckeye State. The law leaves room for a "closed loop" payment processing system, much like prepaid debit cards, or gift certificates commonly used with mainstream retailers. 

Is such a system—which has yet to be developed, tested, and built for the state—the answer to weed's banking problem, or just more seeds and stems getting in the way? 

Cleveland media reports on the payment plan proposed by Republican senator Bill Coley:

Here's how [Coley] sees it working:

∙ Patients and registered caregivers would add money to their accounts by check, credit card or cash at a state-licensed liquor store, deputy registrar or other state agency that takes payments.

∙ Money in the accounts could be used to buy marijuana at dispensaries.

∙ Dispensaries, processors, testing labs and cultivators would also have accounts on the system.

∙ Businesses would buy products and pay bills through the accounts.

∙ If a business wants to pay an entity outside of the closed loop system, the state would cut a check to the payee. 

If this sounds complicated, that's because a closed-loop payment system probably would be awkward for a state that is taking its first steps into the weed world. Most states with medical marijuana programs are still figuring out the medical marijuana part.

It's a given that the money needs to end up somewhere, if anyone with an account wants to spend it on anything outside of the system. Anyone includes the state, and weed businesses that will be required to pay taxes to the state.

And where do liquor stores fit into a medical marijuana landscape? Anywhere? Sure, the Canadian model for legal marijuana distribution relies on stocking the herb at the country's booze stores. But in Canada the liquor stores are all government run, and they will be retailing recreational marijuana. Are America's recreational alcohol stores prepared to stock medical products? Plus, in the States, liquor stores are either privately owned, or—as is the case in Ohio—operated by state "agents," contractors who earn a commission from the alcohol that they sell. The booze itself is owned by the state, opening the door to intrusive government involvement, corruption, cronyism, and zero-chill-usion. .

Clearly, Senator Coley's plan is a problematic morass of contradictory and overlapping sinkholes. For starters, the state would have access to each and every purchase and financial transaction taking place within Ohio's medical weed industry––a transparency that exposes privacy vulnerabilities that other medical industries need not disclose.

"If you want privacy in this business [in] the state of Ohio, go to Illinois because you don't get that in the state of Ohio," Coley reportedly said. "You have no rights to do this in the state of Ohio, except for the rights that the General Assembly gives you to do this in the state of Ohio."

Coley should probably not be a part of the weed stuff anymore. Dude sounds kind of hair triggered, tbh.

Cannabis industry insiders and consultants have reportedly told the state that closed-loop payment systems are not common in other medical weed states, to the point of not existing, and actually pose a risk of putting a further drag on progress, due to technical difficulties alone. 

Similarly, there is talk of a full-on federal re-scheduling of cannabis, and the legalization movement is trending toward recreational use, with California voting yay or nay, in November. If weed becomes legal, you can bet (and hopefully securely store) your bottom dollar that banks will be first in line for their piece of the pie.