Chicago-based firm Ceres wants to build a “seed to sale” transaction network for cannabis on the blockchain using its dollar-backed stablecoin – if the digital security is approved for sale by the U.S. Securities and Exchange Commission (SEC).
Launched in 2017 by West Point graduates and former U.S. soldiers Greg Anderson and Charlie Uchill, Ceres recently filed paperwork with the SEC to conduct a Reg. A sale, seeking permission to sell both a token and a coin. The token would represent an equity holding in the company, but the firm plans to use the coins as an actual transaction tool in its payments network. According to the application, the firm plans to sell up to $30 million worth of its tokens and $20 million in Ceres coins.
In addition to its plans to build a payments network, Ceres also markets itself as a lender for legal cannabis businesses, though Uchill – the company’s chief operating officer – said Ceres has yet to disburse any loans, and is counting on the digital securities sale to raise capital.
The firm’s SEC paperwork also notes that token holders, as a group, shall be entitled to receive 80% of the firm’s net revenues from its loan business and 20% of net revenues from the blockchain-enabled payments system.
“We have been working with the SEC for 18 months,” Uchill said, referring to the process of getting approval to sell the firm’s digital securities. “I tell investors that we lost every battle with the SEC to win the war to have SEC approval.”
Value proposition
As for the firm’s proposed transaction network for the legal cannabis industry, Ceres’ filing claims that its blockchain based network would improve transparency and aid compliance with regulations against money laundering and fraud. But the success of the blockchain network would also largely depend on producers, investors and consumers warming up to its stablecoin.
Uchill said the only time actual dollars would have to be used under the firm’s model would be when consumers paid Ceres to get its coin, and when loans were given out to producers. All of the other transactions among consumers, dispensaries, and producers would involve the firm’s coin.
According to the firm’s SEC filing, upon approval Ceres anticipates that it will target its marketing and sales efforts primarily in the states of Illinois and Washington where the firm “has identified certain strategic business opportunities,” related to its payment network, coins and tokens. Washington was the first U.S. state to legalize recreational marijiuanan in 2012, and Illinois legalized it this past January.
The firm’s application also notes that there is currently no trading platform available to sell the company’s tokens, and that it remains uncertain whether one will be available in the future. As an alternative, the firm suggests that it might conduct the sale on its own website.
Awaiting SEC approval for its securities, Ceres hopes to capitalize on the growing legal marijuana industry in the U.S., estimated to be $13.6 billion in 2019, according to Investopedia.