This is a case study on the disruption that is coming with the collision of our legal system, the stranglehold of the payment gateways, the demands of the health, wellness, CBD and Cannabis markets, and crypto-powered digital cash.
And a significant Trojan horse, gateway-market opportunity to capitalize on an underserved market as a leg in to what I think could signal a possible shifting of power in the credit card and payment infrastructures in the U.S.
Here’s the storyboard of market forces as I draw it.
Crypto payment/digital cash blockchain projects talk about the unbanked in vertical industries like Cannabis ($10B/Y) as the low hanging fruit for a first in underserved market segment.
It is both much larger than they talk about, broader in scope, just in its very early infancy and highly strategic in the long game.
Today there are eight states that have legalized recreational use of Cannabis and some thirty that allow it in some fashion. This number will most likely triple or better within a decade as a legal business today operating outside of the banking system.
But Cannabis is only part of this puzzle and while the largest now, I think simply a leg into something even larger in the future.
My interest and work in the wellness and nutrition world has drawn me into the benefits of CBD or Cannabidiol which is different (bear with me please) than Cannabis/THC which is a cannabinoid. Both can be derived from Cannabis but the medicinal supplements the use CBD are primarily derived from Hemp.
CBD is not psychoactive (doesn’t get you stoned), is legal though murky way, for sale most everywhere and has a host of attributes for disease treatment from depression to arthritis, is in many beauty and sports medicine supplements, sprays and topicals.
While numbers are hard to come by, I’ve heard from multiple sources that within the last 3-5 years it has grown from almost nothing, hitting the $5-600M number last year selling into the $6-7T wellness, health and beauty market and the $100+B supplement segment.
The reason you are most likely using this ingredient and don’t know about it is the legal murkiness around it that is well outlined in this excellent post by Claire Mccormick in Beauty Independent.
In 2016, the federal government classified CBD that comes from marijuana as a Schedule I narcotic, lumped in with heroin. And with our very own Jeff Session verbalizing his war on cannabis, by association only, CBD from Hemp is guilty.
Not guilty legally but the payment gateways—credit cards, authorize.net, Stripe, Square—if they know you are selling CBD-based products are refusing to service your transactions, or sporadically charge crippling fees and have seized funds with little or no recourse, including bonds posted to guarantee payment.
This rolls downhill by association that if you are selling beauty creams with CBD not only can’t you process online with credit cards but many other services including your insurance and credit will be impacted directly as you go on published lists of illicit companies selling questionable products and likewise become a credit risk as well.
So—CBD, a proven scientific (and yes I use it) ingredient is now lumped in with THC, porn and firearms. And the majority of companies simply don’t tell you or list that you are getting it in your skin cream for example, except by innuendo. And still, it is creeping up to a $1B/Y biz in a few years.
This story and opportunity not just about the unbanked buying pot-laced cookies or chewing gum before you jump on the lift at Vail to ski the back bowls stoned. This is as well not just about the entire breadth of the supply chain of the cannabis industry.
It is also about CBD as an ingredient that is in spite of everything, is turning into a huge market in the umbrella wellness, supplement and genomics businesses. And understand, it is not just about CBD, it is about the market and the today small companies that sell it along with other products into the mass market.
How does this pertain to crypto?
The truth that we have all learned about crypto-based projects are that the garden variety replumbing on the blockchain follow-ons are invariably a mistake.
Wrong because the true utility of these solutions comes when you reimagine the industry and market itself, not bolt on decentralization or tokens. And invariably the work required to configure an application is not simply a point one, but broader by definition encompassing the larger segment it plays in.
So, with the Crypto, Cannabidiol and Cannabis conundrum.
I’ve spoken with people in the crypto payments space and all of them acknowledge the Cannabis market as a low-hanging fruit for a stable coin transaction system.
I also know that adjacent industries like supplements and wellness through CBD means that this is not just about recreational pot, it is a Trojan horse for an unbanked, unbranded, unacknowledged need for a new payment system cross these multi-Trillion dollar adjacent markets. When the large companies start gobbling up the CBD-based supplement and beauty companies, one transaction system will be needed cross all the lines.
It may start with a way to transact at the pot shop in Aspen but has legs into a competitor to authorize.net and Stripe, Shopify and PayPal.
And while I presume that the digital cash players are talking to alternative platforms providers in the Cannabis niche, I am pretty certain that this is not the case with the CBD, and greater wellness and supplement industries.
That’s the story.
How often do we have this roaring market pull in spite of every possible obstacle and still have a common good as the goal?
The product, marketing, biz dev, and communications upsides here are the stuff of dreams.
If you are an expert in the niche pieces of this murky puzzle, I’m interested in connecting.
I am as well currently accepting clients at the intersection of these areas.
