Green Check Verified is a compliance platform that seeks to help cannabis businesses keep track of and share their compliance history in an attempt to strengthen and stabilize relationships with banking partners — which remain reluctant to service marijuana clients.
The company's main differentiator is that it works "within the existing banking system, not around it," said founder and CEO Kevin Hart.
“As a regtech compliance company, we understand what is needed to make financial institutions not only comfortable with the idea of banking CRBs [cannabis-related businesses], but actually to want to seek more business from this market segment,†Hart told Benzinga during a recent conversation.
Green Check is in various stages of rollout in 14 states, with plans to expand quickly. The company wrapped an $800,000 SAFE founding round in 2018 and is currently raising a $3-million seed round that's one-third complete.
Interested in learning more about this technology, we caught up with the CEO and asked a few questions.
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Years In The Making
The Green Check team spent three years designing its regtech solution while building the company to support it, Hart said.
“Technology and coding are critical, but they need to be done with a purpose — a very specific outcome that satisfies all the clients."
This is why the Green Check team took the time to do it “the right way," he said.
The company sees massive value in intellectual property, the CEO said.
“We have patent-pending status on three of our technology business processes,†Hart told Benzinga. “And we did all of this before we hired our engineering team to then build the solution.â€
What makes Green Check different from its main competitors is its “enterprise class," he said.
The company knows exactly “what it takes to work in this class of product ... we know compliance can’t simply be stated as a mantra. It has to be exhibited and demonstrable, for all parties, at all levels.â€
The Q&A
Benzinga: How do you apply your previous work experience to the cannabis industry in general and to your marijuana business in particular?
Hart: The speed of growth and opportunity in this industry means mistakes are bound to happen. New ideas, new entrepreneurs, fast-buck artists, crazy ideas that sound good but aren’t well thought out for scale; they all point to the fact that this industry needs enterprise-class products.
I’ve lived this through the dot-com era and I see some of the same mistakes being made again — just a new group of failures.
I’m a big believer in “begin with the end in mind,†and that is principle we brought to the development of our entire company, not just the solution. Where is this industry headed and how can we help get it there and beyond? We focus on today’s challenges and tomorrow’s opportunities equally.
Benzinga: How would federal legalization change your business?
Hart: It will be jet-fuel for us! Rules and regulations will never go away and when legalization occurs — not if — it will only mean more people getting into the industry, so the number of CRB’s will expand. And with that, more banks will want to also be involved, but here is the rub: the banking compliance will not be less than what it is today. We emphatically state the existing rules and regulations will be even greater than what exists now.
The reason being is that illicit cash, not only from cannabis, but all illicit activities, will still need to be kept out of the banking system. The Treasury department doesn’t care what the FDA thinks; they do care about keeping the banking system clean. That means the Bank Secrecy Act, Anti-Money Laundering [and other banking regulations] will be amplified, not loosened. Anyone who believes otherwise is in for a big surprise.
Benzinga: What are the main challenges that your company and the industry in which it operates are facing?
Hart: The education that banking, while complex and believed to be “illegal," can be done with a high degree of compliance. To date, we have seen the “light bulb†moment with countless financial institutions once we walk them through the platform.
That “a-ha†moment of clarity is very recognizable once they see how a regtech platform can handle the vast majority of the work for them.
Benzinga: Do you have plans for geographic expansion?
From the beginning, we have designed the solution to work in every state where cannabis sales are legal, medical or recreational. We’ve always been a nationally focused solution, and the production system exists today for all state-sanctioned cannabis programs.
We are also keeping an eye on the developments in Canada. The banking and compliance challenges there are pretty much the same as here domestically. We could add Canadian compliance to the platform easily, but as of today we have a lot to do here across the U.S.
Benzinga: What is your take on cannabis industry consolidation?
Hart: Big markets will always drive consolidation and roll-ups. When we look at the transactions, we are somewhat surprised by the velocity and size of deals. The race is on with the multistate operators, and the early owners are cashing out.
This thrashing around will continue for two to three more years before we see stabilization. The economics of the plant are really being studied for what the real price points should be and way smarter minds are working on that analysis.
Benzinga: Do you have any M&A plans that you could elaborate on?
Great question, but nothing that we would disclose here. Thanks for asking though.
Benzinga: Would you be interested in an opportunity to combine with another company or be absorbed by a larger business?
Our platform is built knowing that we will integrate with other ancillary providers. It was part of our strategy from the beginning. That doesn’t mean we want or expect to be absorbed. I actually think we will be in a great market position to be the absorber. We have some strategic ideas that we constantly revisit internally, and there will be more stories to share in the future.
Benzinga: Do you have any plans to go public? Would you conduct an IPO or an RTO?
Hart: Nothing is off the table in terms of future possibilities for the company.
Benzinga: What do you think about the States Act and the Safe Banking Act? Do you expect them to pass this year?
There is still a lot of real detailed work to be done in the development of what the final legislation will look like. We firmly believe it is a “when†not an “if†these days, but I would be very surprised if there was any real progress in this session of Congress or even in 2019.
Benzinga: How will allowing all banks to work with cannabis affect your business?
Rules and regulations will never go away — ever. [Banking regulations] will always need to be monitored, and that means more opportunity for us. The challenge isn’t just about banking, it is about banking cannabis sales. That is what we are purpose-built for today and in the future.
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