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In a much-anticipated move, sources recently reported that the Drug Enforcement Administration (“DEA”) will recommend rescheduling cannabis from a Schedule I substance to a Schedule III substance under the federal Controlled Substances Act.[1] This recommendation will likely be based on the Health and Human Services Report, which evaluated scientific evidence of cannabis use for medical purposes and determined that cannabis does have accepted medical value with a higher safety profile than Schedule II medications.[2] The DEA’s recommendation is also in line with President Biden’s directive for the Federal government to take steps to review how cannabis is presently scheduled under federal law.[3] In response to the DEA recommendation, the White House Office of Management and Budget will review the recommendation. If approved, there will be a public hearing allowing experts and the public to weigh in on rescheduling. Absent any major meritorious objections, cannabis will then be rescheduled from a Schedule I substance to a Schedule III substance.Continue Reading Bridging the Gap: Cannabis Rescheduling to Align Policy with Research

This article was originally published in the November/December issue of ELFA’s Equipment Leasing & Finance magazine.

In mid-July 2022, the United States House of Representatives passed provisions that would allow legitimate cannabis-related businesses to access federally regulated financial services. This marks the seventh time the House has approved a version of the Secure and Fair Enforcement (SAFE) Banking Act. The original version of federal cannabis banking reform was introduced nine years ago by Rep. Ed Perlmutter (D-Colo). The passage of the SAFE Banking Act, either as stand-alone legislation or as amendments attached to must-pass bills, would prohibit federal banking regulators from penalizing a federally regulated depository institution for providing banking services to cannabis businesses. Presently, cannabis businesses are essentially deprived of federally regulated financial services, which include the ability to raise capital, obtain loans and process payment. Continue Reading Federal Cannabis Banking Reform: What Happened?

Recreational cannabis is now legal in 19 states and Washington D.C., driving the growth of legal cannabis sales estimated at $33 billion this year—up 32% from 2021—and expected to reach $52 billion by 2026.[1] This movement signals that financial investment in cannabis is not abating but accelerating notwithstanding the impact of the lingering COVID-19 pandemic. This growth in the cannabis industry, of course, also means that operators and their investment partners face commercial risk, including insolvency.Continue Reading The Cannabis Conundrum: Can Cannabis Companies File Chapter 15?

Hope soared with the possibility of federal cannabis reform in 2021.  And for good reason – the induction of a new, more liberal administration, rapid state-level legalization, broad support by Americans,[1] and growing bipartisan backing led many to believe that 2021 was going to be the year where federal decriminalization of cannabis would become a reality.  But, as 2021 continued on, optimism dwindled as any advancement in federal cannabis reform was hobbled by the inability of Congress to agree on the appropriate level of reform and the proper mechanics for passage.  Specifically, tension rose amongst the elected Democrats on whether to support incremental reform (like access to banks or removal of cannabis from the list of Schedule 1 drugs) or comprehensive legalization with provisions to address social inequities stemming from the legacy of the War on Drugs.  And so 2021 came to an end, and the cannabis industry saw yet another year of failed meaningful change on the federal level.
Continue Reading Federal Cannabis Reform – Is 2022 the Year?

Although Congress failed to pass federal legislation legalizing cannabis in 2021, the push to end the federal prohibition of the ever-growing industry continues to gain steam.  While Republican lawmakers have traditionally opposed decriminalization, more are beginning to support or even introduce new cannabis legislation.[1]  On top of that, recent polls indicate that an estimated 68% of Americans now support legalization[2] with many consumers now viewing cannabis as less dangerous than alcohol.[3]  In addition, the industry’s total addressable market has been forecasted to grow to $84B by 2026.[4]
Continue Reading Cannabis Legislation Year-in-Review

It is undeniable that, not only is the cannabis industry here to stay, but it is growing exponentially.  To date, 47 states, 4 U.S. territories, and the District of Columbia have legalized cannabis in some form – whether they decriminalize production, allow uses limited to cannabidiol (“CBD”) or hemp, or is as expansive as permitting THC-containing cannabis for medical use, adult-use or both.  Yet, in comparison to other industries, legitimate licensed cannabis-related businesses remain hobbled by the difficulties they face in accessing traditional banking and financial services – largely due to the fact that “marijuana” is still considered illegal on the federal level under the Controlled Substances Act (“CSA”).  Currently, financial institutions (including federally-insured banks) are hesitant, and oftentimes unwilling, to work with cannabis-related businesses due to fear of reprisal from federal banking regulators.
Continue Reading SAFE Banking Act of 2021: Where Are We on Cannabis Banking Change?

On Wednesday, two businessmen were convicted of a single count of conspiracy to commit bank fraud (18 U.S.C. § 1349) for orchestrating a scheme to disguise cannabis-related financial transactions as transactions unrelated to cannabis.[1]  The conviction followed the close of a three-week trial in the Southern District of New York, which was one of the first federal criminal trials to be held in person since the start of the COVID-19 pandemic.  The jury deliberated for less than a day.  Sentencing is scheduled for June 25, 2021.
Continue Reading Online Cannabis Marketplace Businessmen Convicted of Conspiracy to Commit Bank Fraud

The trial of two men associated with an online cannabis marketplace began last week in the Southern District of New York.  Prosecutors seek to prove that Hamid Akhavan and Ruben Weigand, two businessmen who worked with the online platform from 2016 to 2019, conspired to commit bank fraud by disguising credit and debit card transactions for cannabis purchases as transactions for non-cannabis purchases.  While selling cannabis remains illegal under federal law, the case demonstrates how cannabis businesses face white collar enforcement risks unrelated to drug-trafficking charges.   
Continue Reading Bank Fraud Trial Highlights White Collar Enforcement Risks for Cannabis Industry

On June 29, 2020, the Financial Crimes Enforcement Network (FinCEN) published updated guidance intended to “enhance the availability of financial services” for the hemp industry (the Guidance).  Even though the Agriculture Improvement Act of 2018 legalized hemp[1] at the federal level, some banks have hesitated to provide financing to the hemp industry because they are uncertain of their obligations under the Bank Secrecy Act or Anti-Money Laundering regulations (BSA/AML).  The Guidance was published to clarify those obligations, and follows closely on the new National Credit Union Administration guidance for federally-chartered credit unions issued on June 20, 2020. 
Continue Reading Clearing the Air: FinCEN Guidance May Help Banks Find Their Way in the Field of Hemp Financing