How Would Rescheduling Marijuana Affect Cannabis Banking?

Currently “marihuana” is a Schedule I controlled substance under 21 U.S. Code § 812, meaning by definition that it has no known beneficial medical use coupled with a high potential for abuse. This classification has stymied efforts to legalize marijuana for over 50 years following the passage of the Comprehensive Drug Abuse Prevention and Control Act of 1970 even though arguments have been made by advocates that decades of scientific research here and abroad (notably Israel) suggest otherwise. The FDA themselves undercut the justification for keeping marijuana in Schedule I when they approved a synthetic form of Delta-9 THC called Dronabinol back in the 1980s as an antiemetic and appetite stimulant for persons with AIDS or those undergoing chemotherapy. This in and of itself should be enough to warrant its rescheduling into a less restrictive category due to the demonstrated beneficial medical use of one of the key active chemical components in marijuana, however those efforts have stalled out as well.

Undaunted, many have fought over the years to push the DEA to consider rescheduling marijuana, perhaps moving it down into something like Schedule III where it would be treated like ketamine, steroids, and even Dronabinol. Many were pleasantly surprised then when we learned back in August that President Biden had asked his Secretary of Health and Human Services Xavier Becerra to request that the DEA do just that. 

So how would moving marijuana into Schedule III affect cannabis banking?

“It’s federally illegal” is still enough to keep some financial institutions (FIs) from touching cannabis, so rescheduling should allay concerns about serving medical marijuana businesses. It would provide bankers with a familiar conceptual model – the global financial system has been banking pharmaceutical manufacturers and pharmacies forever. Financial institutions understand the risks and they’re lending today using accepted industry underwriting models. They won’t have to “reinvent the wheel” to accommodate cannabis.

Should medical marijuana be rescheduled then it would be difficult for credit card companies and other payment providers to continue to keep the industry at arm’s length. There may be issues separating state-legal adult-use from federally-legal medical activities, but even if financial services companies only served medical businesses that would be incredibly impactful. Remember that Visa, Mastercard, and AMEX all opened up their networks in Canada following federal legalization.

If marijuana is Schedule III it could be prescribed by healthcare providers, meaning insurance companies would have to start reimbursing folks for medical marijuana treatments. It would be surprising to see FIs drop these incredibly valuable accounts, like Cigna and Pfizer, over this decision. These companies are undoubtedly banking with one of the “big banks” today that say they don’t bank cannabis – even though we know they’re receiving tax revenues derived from the sale of state-regulated marijuana. The big banks simply won’t be able to turn a blind eye to marijuana anymore.

Also something to consider – if the pharmaceutical industry does embrace medical marijuana it’s unlikely they’ll be delisted from the NYSE and NASDAQ, establishing a precedent that marijuana-related businesses can be listed on the exchanges. That would open up investment opportunities to both big and small businesses.

So, to review:

• Financial institutions would have the obstacle of “marijuana is illegal” taken off the table and they’d be able to start seeing marijuana businesses through a more comfortable and familiar pharmaceutical lens.
• Credit card companies will likely start offering electronic payments to medical marijuana businesses.
• Cannabis businesses would have full access to capital markets for the first time.
• Big banks will be forced to embrace the medical marijuana industry and lending will naturally follow.

As a final note, I am sympathetic to the concerns that people in the industry have that this will disrupt state programs, particularly adult-use, and possibly deliver marijuana into the hands of monolithic pharmaceutical giants. No transition is going to be easy or painless, but from a banking point of view, rescheduling would go a long way to opening up access to the financial services that cannabis businesses need.