A potential shift in federal scheduling of cannabis is not anticipated to significantly boost banking availability for cannabis businesses operating legally at the state level, according to statements by congressional researchers.
The Congressional Research Service (CRS) has underscored in a recent analysis that if cannabis transits from Schedule I to Schedule III of the Controlled Substances Act (CSA), a complete federal decriminalization may still be out of reach, thus downplaying a significant effect on banking services for the cannabis industry.
A transition of cannabis to Schedule III may permit cannabis enterprises licensed by the state to avail federal tax deductions, an option currently blocked by IRS code 280E. Nonetheless, the CRS foresees that financial entities may continue to exercise caution towards serving this industry, due to the threat of sanctions under federal anti-money laundering regulations.
The Anticipated Marijuana Rescheduling Still Amid Uncertainty
The proposed reclassification of marijuana is not yet confirmed. The Drug Enforcement Administration (DEA) has scheduled a public hearing this December, preceded by a public comment phase, before the final rule is settled. The rule-making process could extend well into the upcoming presidential administration, which could potentially sway the final decision.
In their report, the CRS pointed out that restricted banking access “has, in effect, hindered the expansion of state-authorized marijuana businesses and has compelled them to predominantly operate on a cash basis, which in turn triggers public safety and tax regulation apprehensions.” The report further examines possible next steps from federal and state agencies that could minimize legal hazards for financial institutions looking to service the cannabis industry, should the reclassification happens.
However, the report signals that substantial legal risks may remain; thus, the reclassification alone might not greatly influence these businesses’ access to financial services. CRS alternatively suggested that the Secure and Fair Enforcement Regulation (SAFER) Banking Act might present a sturdier solution to mitigating the legal risks entwined with banking services for the cannabis industry.
Although the bill has secured approval from the House on multiple occasions, the future of the SAFER Banking Act is still questionable. Senate leadership has recognized the bill as an essential legislative item; however, other impediments and scheduling limitations may lead to further postponements.
The exhaustive report by CRS also dissected how rescheduling might minimally affect state cannabis legislation and customer access to marijuana. The rescheduling would not reform state recreational marijuana laws, as recreational marijuana activities would remain illegal under federal regulations. Products would be required to meet FDA standards and adhere to federal regulatory necessities befitting Schedule III drugs, requirements that current state medical marijuana laws are not in line with.
Congressman Earl Blumenauer, the co-chair of the Congressional Cannabis Caucus, suggested that the implementation of the rescheduling could expedite endeavors to move forward the bipartisan marijuana banking legislation. The congressman is of the opinion that this course of action could instigate a process heading towards all-out legalization and banking services.
