Insuring Marijuana Farms from California Wildfires
It’s a particularly challenging situation for the approx 15,000 marijuana farms in California. Their crop, marijuana, is listed as a Schedule I controlled substance by the DEA (US Drug Enforcement Agency). So, technically, it doesn’t matter than states like California have legalized it. Because the Federal Government won’t recognize the state law making it legal, anything that is regulated by the Feds becomes a problem for these businesses.
So, for example, in this situation none of these farms can buy insurance to protect themselves. They can insure their buildings and their homes, but not their crops, which is by far their largest investment.
Wait a minute, if the state has legalized marijuana to be grown and sold, then why does the Federal Government have anything to do with this? Why can’t they buy insurance? Because financial institutions like banks and insurance companies have Federal oversight and can’t operate in violation of Federal law.
Another problem that marijuana farms and business are experiencing is with banking. Similar to the insurance problem, these businesses are having issues because most banks won’t accept their cash and deposits. Trying to run a business without a bank checking account is extremely difficult.
These are just a few examples of the many problems these businesses are experiencing. Regardless of your views about marijuana, it makes sense to level the playing field as far as businesses are concerned.
Federal law prohibits insuring marijuana farms burning in California Wildfires, so now these farm owners are watching their business and life savings being wiped out by fire. It doesn’t have to be that way. If states are legalizing marijuana, then the DEA and Congress should be allowing these businesses to also be in compliance with Federal laws.
This could be an easy solution. All it takes is the DEA and Congress changing marijuana from a Schedule I controlled substance. It has been listed as a Schedule I drug since President Richard Nixon signed the Controlled Substances act back in 1970. The Nixon administration didn’t know where it should put marijuana on the substance list. So it added it as a Schedule I.
It’s time to change or at least update this nearly 50-year-old law.
Federal Law Prohibits Insuring Marijuana Farms Burning in California Wildfires
“Nobody has insurance:” California wildfires burning up marijuana farms | FOX6Now.com MENDOCINO COUNTY, California — Deadly wildfires in Northern California are burning up marijuana farms in the so-called Emerald Triangle.
Blazes have destroyed a number of farms in Mendocino County right before legal recreational sales begin in California.
Cannabis business owners who lose their crops have little reprieve.
“Nobody right now has insurance,” said Nikki Lastreto, secretary of the Mendocino Cannabis Industry Association. “They might have insurance on their house, but not on their crop.”
Cannabis cultivators cannot insure their businesses because federal law prohibits marijuana, which means that financial institutions can’t go near it.
Derek Peterson, CEO of Terra Tech, which grows and sells marijuana in California, estimates that farmers typically invest upward of $5 million in their facilities and as much as $3 million on growing the crop itself.
“If their facilities burn down, a lot of these people won’t be able to get any economic relief for them from an insurance claim,” Peterson said. “There’s no mechanism for recovery to repay them for their loss. It’s a tremendous risk for these people.”
Josh Drayton, spokesman for the California Cannabis Industry Association, said it’s too early to tell just how many of the state’s estimated 10,000 to 15,000 marijuana farms have burned down.
The 22 wildfires currently raging through California have killed 23 people, with hundreds missing, and burned 170,000 acres along with thousands of homes and businesses. The seasonal wildfires have gotten worse in California in recent years, and this isn’t the first time pot farms have gone up in smoke.
Medical marijuana has been legal in California since 1996, and recreational marijuana was approved by referendum in 2016. The retail market for recreational marijuana opens on January 2018, and state officials are still working on how it will be regulated and taxed.
Sales totaled $2.8 billion last year, based on medical marijuana alone, according to New Frontier Data.