University at Buffalo School of Management

In June, when Amazon announced it would no longer test job applicants for marijuana, it captured headlines—since federal labor law means employers can still fire you for smok- ing during off hours. Pot is prohibited in federally assisted housing and at higher education institutions that receive federal funding, including UB. Many businesses face issues when securing a lease, getting insurance and, especially, in both obtaining capital and keeping it away from Uncle Sam. Aer 200 episodes of his podcast, "Raising Cannabis Capital," Humiston knows this story well: Fearful of cross- ing the Federal Deposit Insurance Corp. (FDIC) and Federal Reserve Bank, most major financial institutions will not issue loans, open accounts or process credit card payments for cannabis businesses. In turn, some companies are forced to accept high-interest loans from small or niche lenders. "A good chunk of people in the industry are still boot- strapping it, living sale to sale or borrowing money from family until they get traction," Humiston says. "A lot of busi- ness is still in cash, which is scary. You don't realize how challenging managing cash is until you have hundreds of thousands of dollars and can't write a check." The SAFE Banking Act, which passed the House with bipartisan support in April, would change everything, preventing regulators from going aer banks for canna- bis-related services. But, while the bill awaits action in the Senate, businesses are getting creative. For example, Fotak has seen two companies operate in the same space, one selling cannabis, the other selling related merchandise. The non-marijuana business then covers rent and other expenses— and may even "buy" its inventory from the other side—to reduce costs and bring in cash for the cannabis business. "Truth is, capital flows—when you put up barriers, capital finds a way around them," Fotak says. "But barriers create friction—and friction, in this context, leads to a higher cost of capital— which ultimately means fewer stores, fewer jobs and a persistence of black market sales as legal cannabis is priced out of the market." On the taxation front, businesses—and customers— must contend with different rules at the federal, state and local levels. In Alaska, while sales aren't subject to a statewide Fotak Autumn 2021 Buffalo Business 11 While cannabis remains illegal at the federal level, laws are changing fast in states across the country, either through ballot measures or the traditional legislative process. At press time, here's where each state stood. Adult and medical use Medical use only CBD/low THC only Fully illegal * During the 2020 election, voters approved ballot initiatives allowing adult use in South Dakota and medical use in Mississippi, but both were overturned by state courts in 2021. Source: National Conference of State Legislatures, July 2021 STATE OF THE UNION

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