A Little Rock-based financial technology startup with ties to the Arkansas Medical Marijuana Association has announced it is partnering with an unnamed Arkansas bank to offer electronic payments and financial services to the state’s fledgling medical cannabis industry.
Doing business under a Little Rock partnership called Rockview Digital Solutions LLC, MediPays is the first financial option to emerge ahead of the state’s timetable to score and award one of the initial five licenses for Arkansas’ first pot-growing cultivation by the end of February 2018.
According to company co-founders Dan Roda and Brian Bauer, the Little Rock financial services firm will be accessible to the industry statewide, and will aim to implement its closed-loop, cashless payment system to medical marijuana dispensaries, cultivators and processors that will be selected by the Arkansas Medical Marijuana Commission in the first and second quarter of next year.
“Banking has been a difficult issue for marijuana-related businesses nationwide, with most being forced to transact all in cash” said Bauer, chief executive of the Little Rock firm. “We’ll provide these businesses with access to the bank accounts and financial services from which they are now generally excluded, and give patients a secure, cashless way to transact. The MediPays platform will also allow businesses to pay bills and vendors, manage company payroll electronically, and provides financial data and reporting to stakeholders and regulators.”
Roda, MediPays’ chief legal officer, said the company has four employees with overlapping experience in the banking, healthcare and legal cannabis fields. Bauer manages an innovation program that works with companies developing and deploying FinTech solutions, while MediPays Chief Technology Officer Greg Ellis is a bank technology and risk management expert who has founded several successful companies over the last 20 years.
Roda and John Foley, a former banker and the company’s new CFO, have been involved the region’s entrepreneurial ecosystem and have financial and regulatory expertise, company officials said. Roda is also a founding board member of the AMMA, one of the state’s cannabis trade groups that was birthed after the Arkansas General Assembly drafted and unveiled regulations for the infant industry earlier this year.
Roda would not divulge the name of the bank that will partner with MediPays to offer banking and payment solutions for the medical pot industry, but did say it is based in Arkansas.
“I am not authorized to disclose their identity, but they are here in the state,” he said.
AG SESSION UNDECIDED ON LEGALIZED MARIJUANA
The Little Rock entrepreneur also admitted that MediPays will face uncertainties with its business model, mainly because marijuana use is still illegal at the federal level and the most banks have kept their distance from the industry because the U.S. Treasury and other federal banking regulators have not provided guidance to FDIC-regulated institutions on accepting marijuana industry dollars.
In a June 27 advisory that addressed frequently asked questions, the AMMC was asked if state officials were aware of any banks that will work with growers and sellers of medical pot once operations begin in Arkansas. In its response, the Commission said it “does not comment on the business operations of third parties and does not maintain lists of any such services that may be offered by third parties.”
After the November election in which Arkansas voters approved medical marijuana, Robert Smith and Blake Lewis of Little Rock law firm Friday, Eldredge & Clark issued an alert to Arkansas bankers that even though voters approved Amendment 6, financial institutions providing financial services to a marijuana business could face charges of aiding and abetting money laundering and racketeering. They also said banks could be at risk when approached by marijuana related businesses.
“The cultivation and dispensary facilities to be licensed under the Amendment will need bank accounts. Unfortunately, Marijuana remains illegal under federal law,” Smith and Lewis wrote.
Rep. Doug House, R-North Little Rock, the chief sponsor of more than 50 medical marijuana-related passed during the legislation session, said he is “scared to death” that federal officials may come into Arkansas and shut down the startup industry if certain measures are not in place to address the cash handling issues that may emerge.
Roda said he and his partners are closely watching what direction the Trump administration will go on medical marijuana, given U.S. Attorney General Jeff Sessions’ recent comments that he may oppose protections for legal weed and seek legislation that would allow him to prosecute the medical cannabis industry in 34 states.
“The current state of federal regulations has made it difficult, but not impossible for banks to serve this industry. Your guess is as good as mine as to when any legislation changes will be made on the federal level,” Roda said. “Here in Arkansas, we are not counting on it. I’ve been hearing from a lot of potential dispensaries, cultivation and processing facility operators, and none of them won’t to wait around on the federal governments to pave the way and solve the problem.”
Roda continued: “The burden of compliance has been a significant factor in keeping banks and other financial service providers out of the industry to date, despite tremendous growth in many other sectors serving legal marijuana businesses.”
Once the Commission completes its review of nearly 100 applications for medical marijuana greenhouses on Feb. 20, the regulatory panel will issue awards based on the best scores for five operators of the marijuana growing facilities at board’s next public meeting a week later. The five-person panel will then conduct the same scoring and award process for 227 dispensary proposals that will be granted one of 32 licenses to operate up to 40 retail locations in eight quadrants of the state.
Once the business are doing business and generating revenue, Roda said MediPays will provide integrated reporting tools and a level of transparency that will enable its bank partner to serve the industry, and also provide important filing, record-keeping, and data security obligations are met.
The four-person firm is housed in the Little Rock Technology Park, and will have an exhibit at the upcoming Ark-La-Tex Cannabis Business Expo at the Little Rock Convention Center on Wednesday and Thursday.
Besides MediPays, Maumelle businessman William Carpenter has told Talk Business & Politics he has formed a limited liability partnership to support an online payment system to resolve the cash-only problem Arkansas’ medical marijuana-related businesses may face. That startup is still under development, Carpenter said recently.