Secured Transactions in Cannabis on Prohibition and Non-Prohibition Territory
Lacking federal oversight, industry players in the cannabiz would have the capacity to leverage cash influxes with on-hand inventory, to expand assets like equipment and land through secured loans, and generally operate not unlike many other businesses in our economy. A secured loan is basically receiving a cash front from a lender, with a specific item/s of your inventory identified as the leverage, which is repossessed if you default on the payments for your fronted cash.
In legitimate secured transactions there is no vig, so the cost of operations also goes down. This however isn’t possible, and the continued federal prohibition of cannabis has resulted in a lack of clarity surrounding how exactly financial transactions are to be conducted around the particular type of green that contains THC.
This reality also impacts our fictional composite dealer-stealer antihero Mr. Jackerman, and his continued efforts to build upon the stacks and bands in his safe, all the while evading the watchful eye of Big Brother and the crosshairs of his adversaries.
Having recently chomped a few duffel bags worth of Benjamin Franklin-stamped blubber off an industry whale, he is now the one being hunted. Mr. Jackerman is stressed out, man, he’s on edge, his business is volatile, and as a result so has been the mood of many of the players in his game. The fact that he’s robbed quite a few of them already, some repeatedly, doesn’t help to defray his sense of crackle, the quiet rumble, the heat.
Are clips sliding in and bullets being racked? Is the pleasant ringing of a machete’s steel sliding across a whetstone accenting the dewy, dusky air of a distant farmhouse? Do we have a crew of gentlemen in black skinny suits atop black Air Force 1’s under maroon ski-masks with white grinning demonic toothy grins drawn on, black minivan outside, waiting for a text containing the address of a certain Mr. Jackerman? These are questions businesspeople should not have to ask themselves.
The Notorious BIG’s 10th Crack Commandment & Business Development
Consignment according to the Notorious BIG, the “Black Frank White”, a reference to the classic Christopher Walken film King of New York, is “strictly for live men, not for freshmen”, and if “you ain’t got the clientele, say hell no”. This is because the higher ups in the crack game, BIG asserts, will want their money whether it is snowing, sleeting, hailing, or even, you guessed it, raining. The same is true for any other business, when products are provided on net terms with payment pending at some point in the future, payment is to be received or consequences are to be experienced.
A puddle of water is parted like the Red Sea by the tire of a blacked out Mercedes G-Wagon. Four pairs of black Air Force 1s connect with the concrete, a nondescript warehouse in a nondescript dead manufacturing district lies ahead. Curiously, a pair of parallel strings of hanging lights dance erratically down an alleyway into the darkness. Steel slides across leather, unholstered our hit team is on the move, oddly enough beneath the eerily incandescent string of lights the entire way towards their target.
Essentially consignment is giving product to another retailer without receiving full payment up-front, in the hopes that they eventually pay-up. Fronts are often more expensive than cash deals, but in the black market the risk is greater. The fronter may end up without their cash as the frontee has been arrested, or otherwise indisposed of.
When it comes to cannabis, ongoing federal prohibition precludes the free exercise of secured transactions in cannabis. I believe in secured transactions from a lender’s perspective, as the terms of traditional loans can be a bit too esoteric and imaginative for my liking. Securing a loan to a tangible asset with real value is the surest way to maintain your value and to mitigate risk.
Example: Lend a construction company $50,000 to buy a $50,000 truck, with the actual physical possession and title to the truck the security on the loan. The construction company pays $30,000, defaults, and the lender takes back the $50,000 truck, keeping the $30,000 in payments. Sounds almost illegal, yeah? No stick-ups involved, and if necessary ultimately an officer of the court, often a Sheriff, can be sent to take back what’s yours. Secured transactions are snazzy, but they are irrelevant when a product is illegal.
An End to Federal Prohibition is the Only Pathway to Peace
Mr. Jackerman understands that he has a certain knack for business, an innate hustle that he could apply to other industries, industries with lesser risk. However, Mr. Jackerman would rather own his schedule, sleep until whenever, go to the gym whenever, drink exclusively out of vintage Irish-mined Waterford Lismore crystal, and have more cash than he has ideas on how to spend it, with enough time to get into whatever. Barring one’s birthing with a silver spoon and a forthcoming payout on a trust fund, this simply is not possible without great ingenuity, and/or great risk. Mr. Jackerman is wise enough to know he is not ingenious enough, and so he’s accepted that his road to riches is the great reward through great risk pathway.
The Bootleggers of the 21st Century: for as long as cannabis is federally illegal, there will be businesspeople taking such an informed risk in pursuit of profit.
Wood splintering at the hinges, a door that should have been better secured swings open with ease. Black skinny suits are coated in dust as the four filter through the door, spilling across the room towards doors and hallways, whispers of the word “clear” dropping like pins in the silence. Our entry room is empty, as is the entire structure…
The light-blue hue of a black-and-white screen flickers through crystal, prisming across Mr. Jackerman’s face, the screen showing empty rooms and gentlemen with devilish grins on their maroon ski masks searching in vain for nothing. Flicking off the screen, BIG’s 5th Crack Commandment rings in his head, “never sell no crack where you rest at”.
It is wise to maintain a separate, secret residence if one is a player with assets in the black market. The best I’ve seen in fiction is probably Pietro Savastano’s in the exceptionally fine Italian crime drama “Gomorrah”. Gustavo Fring on “Breaking Bad” had a similar setup you might recall.
Will House Bill 1937 Pass and End Texan Prohibition on Cannabis?
A recently proposed bill could result in fewer black market whales for Mr. Jackerman to harpoon when he’s feeling hungry. New Bedford, Massachusetts was once known as the “City that Lit the World” given their possession of the whaling industry at a time when whale blubber-sourced oil lit homes via lamps. As the whaling industry waned and flickered out, and much of the manufacturing in the area alongside it, the Captain Ahabs of the coastline found new occupations, but the town itself was slow to recover.
Locally the town was known to have become salty, scrappy, populated by the descendants of whalers, while the officers and captains made new lives for themselves across the bridge in Fairhaven. The foundation was set for a fine American novel, a tale of lustrous success and devolution to something else, a widening gap in wealth between members of a close-knit yet caste-like community, until Massachusetts woke up and legalized recreational cannabis.
New Bedford is now lit in an entirely different way, and is presently an on-the-rise coastal town with craft cocktails, trendy boutiques, and recreational cannabis. With cannabis comes community, and capital. Texas has recently stepped back into the dark ages in terms of women’s rights, it would be noteworthy if we simultaneously leapt into the future by establishing a recreational cannabis market.
Until next time,
Michael John Westerman, Esq.
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