Federal marijuana rescheduling is “unlikely” to improve banking access for state-legal cannabis businesses, congressional researchers say in a new report. But one Democratic congressman says the reclassification move, when it is enacted, could have a political effect that spurs action on separate marijuana banking legislation.
The new report from the Congressional Research Service (CRS) that was published on Monday emphasizes that because the Justice Department’s proposal to move cannabis from Schedule I to Schedule III under the Controlled Substances Act (CSA) would not federally legalize it, the impact of rescheduling on banking access would likely be minimal.
A Schedule III reclassification would allow state-licensed cannabis businesses to finally take federal tax deductions they’re currently barred from under an Internal Revenue Service (IRS) code known as 280E. But without legalization or updated guidance, the expectation is that many financial institutions would continue to avoid servicing the industry out of concern that they could face penalties for violating federal anti-money laundering (AML) laws, CRS said.
As such, “rescheduling marijuana as DOJ has proposed is unlikely by itself to eliminate the legal risks of financial institutions serving marijuana businesses and, thus, might not significantly increase marijuana businesses’ access to financial services.”
It should also be noted that the proposed rescheduling action isn’t guaranteed. Following a public comment period, the Drug Enforcement Administration (DEA) on Monday announced that it has scheduled an administrative hearing in December to gain additional input before potentially finalizing the rule. It’s possible that rulemaking could extend into January, meaning there’s a chance that the next presidential administration could influence the final outcome.
In the meantime, the lack of banking access “has reportedly stifled growth of state-authorized marijuana businesses and forced them to operate largely in cash, raising public safety and tax compliance concerns,” CRS said. “DOJ’s proposed rescheduling of marijuana, in and of itself, is not likely to alter substantially the risk profile associated with providing financial services to state-sanctioned marijuana business.”
“It is possible that, if rescheduling were finalized, federal and state agencies might take additional actions that more significantly reduce the legal risks applicable to financial institutions that consider serving the marijuana industry,” the report says. “However, because substantial legal risks would remain, rescheduling alone might not have a substantial effect on state-sanctioned marijuana business’ access to financial services.”
CRS noted considerations for Congress on navigating the issue, pointing out that the Secure and Fair Enforcement Regulation (SAFER) Banking Act “would be more likely than rescheduling marijuana to reduce the legal risks associated with providing financial services and, by extension, could bolster the marijuana industry’s access to such services.”
Earlier versions of the legislation have passed the House on several occasions, and this session, the SAFER Banking Act cleared the Senate Banking Committee last September and is now pending action on the floor. Its path for the remainder of the session is unclear. While Senate leadership has insisted that the bill is a legislative priority, challenges advancing other key measures and calendar constraints could ultimately delay action once again.
The CRS report also details the limitations of the impact rescheduling would have on state cannabis policy and consumer access to marijuana:
“Rescheduling would have no effect on state recreational marijuana laws because recreational marijuana activities would remain unlawful under federal law. For medical marijuana regimes, Schedule III drugs, unlike those on Schedule I, can be lawfully dispensed by prescription—but only if they are approved by the Food and Drug Administration (FDA). The FDA has not approved marijuana as a prescription drug. Even if certain marijuana products gain FDA approval at some point in the future, manufacturers, distributors, and sellers would need to comply with federal regulatory requirements applicable to Schedule III drugs, including registering with the Drug Enforcement Administration (DEA) and recordkeeping, reporting, and safeguarding requirements under the CSA. Additionally, users of Schedule III drugs would need to obtain prescriptions from medical providers that comply with federal standards. As currently structured, state medical marijuana laws do not meet these federal requirements.”
But if rescheduling is enacted, Congressional Cannabis Caucus co-chair Rep. Earl Blumenauer (D-OR) says that could “hasten the day when banking becomes routine,” accelerating efforts to pass the bipartisan marijuana banking legislation.
“I do think that it’s going to hasten the day when banking becomes routine,” the congressman told The Wall Street Journal in an interview published on Tuesday. “Our SAFE Banking Act passed the House seven times. We passed legislation that would clear up their banking problem. Soon after they’re able to operate without the threat of double and triple taxation, [it] starts a process that’s going to accelerate towards full legalization, banking services.”
Federal marijuana rescheduling is “unlikely” to improve banking access for state-legal cannabis businesses, congressional researchers say in a new report. But one Democratic congressman says the reclassification move, when it is enacted, could have a political effect that spurs action on separate marijuana banking legislation. The new report from the Congressional Research Service (CRS) that Read More
