As marijuana sales grow, startups step in for wary banks

NEW YORK — When Lamine Zarrad was not at his job as a federal banking regulator in recent months, he was spending a lot of time at Denver’s marijuana dispensaries.

As a federal employee, he could not partake of the drug.

He was there, instead, to pitch the shops on a startup he has been working on in his free time and is making official this week after quitting his job as a bank examiner at the Office of the Comptroller of the Currency, a division of the Treasury Department.


Zarrad’s startup, Tokken, is one of several new companies looking to solve one of the most vexing problems facing marijuana businesses in Colorado and several other states: the endless flow of dirty and hard-to-track cash.

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Colorado legalized marijuana for recreational use in 2014, joining several other states where the drug has been decriminalized in some form, but Visa and MasterCard will not process transactions for dispensaries and most banks will not open accounts for the businesses — leaving dispensaries dealing with an influx of cash, and nowhere good to put it.

Tokken and other startups, with names like Hypur and Kind Financial, have been putting together software that helps banks and dispensaries monitor and record transactions, with the long-term goal of moving transactions away from cash.

Stephanie Hopper, the owner of Ballpark Holistic Dispensary in Denver, said the tech solutions could not come soon enough.

“We are all kind of champing at the bit, trying to figure out what to do,” Hopper said. “We’re fighting so hard on so many fronts that taking one thing off of us would be such a relief.”


Despite the various state laws legalizing it, marijuana is still listed by federal authorities as a so-called Schedule 1 drug. Such drugs, which also include LSD and heroin, are deemed to have the highest potential for abuse.

The Department of Justice has said that it will generally let states enforce their own laws on marijuana. And the arm of the Treasury Department responsible for enforcing money-laundering laws has provided guidelines for banks that want to work with marijuana-related businesses. But federally regulated banks have generally refused to open accounts, and credit card companies have prohibited transactions from going across their networks.

Most of the startups trying to help with this problem are focused, in one way or another, on tracking every detail of every purchase in a more sophisticated way.

Zarrad is aiming to offer something new — an electronic payment system that will not rely on the credit card companies or debit networks. Tokken will use the electronic money transfer system in the United States known as the Automated Clearinghouse, or ACH, to move money from the bank account of a customer to Tokken’s bank account. Tokken will then keep subaccounts for each dispensary — making it unnecessary for the banks to deal directly with dispensaries.