Nikki Fried has become possibly the highest profile victim of how the legacy banking system fails underserved markets. Many argue that one of the primary benefits of blockchain technology is its ability to provide an alternative financial infrastructure to markets that are underserved by the incumbent systems.
Banking Services For Cannabis Companies an Ongoing Problem
These underserved markets lack services for a variety of reasons. One of the most interesting emerging underserved markets is the legal cannabis industry in the United States. Although cannabis is legal in some form or another in more than half of the states in the U.S., it remains illegal under federal law.
Because banks are subject to federal jurisdiction, they are prohibited from servicing the industry. Even companies who are fully licensed and legitimately operating under the laws of their state are unable to access banking services.
Historically, banks have only denied service to companies who have direct contact with cannabis products, such as dispensaries or cannabis farms. Companies who provide ancillary products or services without actually coming into contact with cannabis, such as packaging manufacturers, have generally been able to gain access to bank accounts.
This changed in 2018, when a politician running for office in the state of Florida was cut off from banking services during the height of the campaign season due to her outspoken position in favor of the cannabis industry.
Nikki Fried was the democratic candidate running for the office of Agricultural Commissioner in Florida during the 2018 midterm elections. This is an important office in Florida, responsible for regulating the production and distribution of the state’s Medical Marijuana program, as well as issuing concealed weapons permits.
Nikki Fried and the Pro-Cannabis Campaign
One of the primary platforms of Fried’s campaign was her outspoken and enthusiastic support for the newly formed cannabis industry in Florida. She also promised to defend and support the second amendment and concealed carry rights of medical marijuana patients. This has been an issue that has posed a problem in other medical marijuana states, such as Hawaii.
As a result of her support for the cannabis industry, on August 3rd, 2018, her campaign bank account was terminated by Wells Fargo Bank, in a move cannabis and crypto companies have suffered on numerous occasions.
However, it was a first for a pro-cannabis political candidate (who was not involved in the cannabis industry), and particularly disconcerting considering she was from one of the two major political parties. After being shown the door by Wells Fargo, the Fried campaign opened a new account at BB&T Bank. That too was shut down. On August 29th, they received notice saying they had 30 days to close their account with BB&T.
They were able to secure a replacement account shortly thereafter, but it has not been publicly disclosed which bank they were able to do this with. Based on reported experiences from others in the cannabis industry, it is most likely to have been a local credit union, and they probably had to sign an NDA promising not to publicly disclose the details of their relationship.
Whoever the partner, Wells Fargo surely has egg on its face. Interestingly enough, despite being cut off from the banking system, the campaign did not revert to crypto to try to raise funds.
Nikki Fried Calls For the Creation of a State Cannabis Bank
Following the account termination incidents, Fried began calling for the creation of a State Bank for the purpose of servicing Florida’s legal cannabis industry. That became perhaps one of the more interesting items on the Fried campaign’s agenda. Starting a state bank comes with a lot of implications and questions, especially when that bank would be primarily servicing the cannabis industry.
Firstly, it is unclear how the state would insure deposits at the bank, since it would not be eligible for FDIC insurance due to federal regulations. Would the State of Florida be responsible for insuring those deposits itself? Or would the cannabis companies making deposits simply need to live with the risk of having them uninsured?
Another issue raised was whether a state cannabis bank would be able to interact with the legacy banking system? If so, how would banks be able to legally justify dealing with an entity they know to be offering financial services to cannabis businesses?
Despite being confronted with significant economic censorship at the hands of the banking industry, Nikki Fried still managed to win one of the closest elections in the history of a state known for very close (and contentious) elections.
After two recounts, she was able to claim victory with a razor thin margin of 0.08 percent. Bitsonline reached out to the Fried campaign for comment, and at press time have received a response that they would be willing to answer our questions when scheduling allows.
Was Nikki Fried treated unfairly by Wells Fargo? Have you considered bitcoin or any other cryptocurrency to mitigate your problems with the legacy banking system? If so, what challenges have you come across? Share your experiences in the comments section below.
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