Rescheduling Won’t Fix Cannabis Industry’s Banking Issues

The federal proposal to reschedule marijuana from Schedule 1 to Schedule 3 under the Controlled Substances Act marks a significant step forward. This change would allow cannabis businesses to deduct ordinary expenses, mitigating the financial burden imposed by Section 280E of the Internal Revenue Code. However, rescheduling alone will not address the core banking issues faced by the cannabis industry.

Ongoing Banking Challenges

Despite rescheduling, cannabis businesses will remain outside the scope of federal regulations governing Schedule 3 substances. This discrepancy means that federal banks and financial institutions will likely continue to avoid servicing cannabis businesses due to ongoing legal uncertainties. The industry will still grapple with cash-only operations, which pose significant logistical, security, and operational challenges.

Need for Legislative Reform

The Secure and Fair Enforcement Regulation Banking Act (SAFER Banking Act) offers a more comprehensive solution to the industry’s banking problems. This proposed legislation seeks to create a legal framework that allows banks to serve cannabis businesses without the fear of federal repercussions. While SAFER has faced obstacles, its progress through the Senate Banking Committee and support from key legislators suggest it could be crucial in resolving these financial barriers.

For meaningful progress in addressing the cannabis industry’s banking difficulties, comprehensive legislative reform like the SAFER Banking Act is essential. Rescheduling alone will not fully resolve the sector’s financial challenges.