Marijuana banking reform still needed if rescheduling occurs, report says

Rescheduling marijuana “is unlikely by itself” to solve the cannabis industry’s longstanding banking woes, according to a new report from Congress’ official policy-research arm.

An analysis in an Aug. 26 report from the Congressional Research Service also reiterates a previous contention that recategorizing marijuana from Schedule 1 to Schedule 3, “without other legal changes, would not bring the state-legal medical or recreational marijuana industry into compliance with federal controlled substances law.”

That’s consistent with previous observations that Congress still needs to pass legislation – such as the long-awaited SAFER Banking Act – that provides protections for financial institutions that offer services to cannabis businesses.

The Justice Department’s May 21 proposal to move marijuana to Schedule 3 of the Controlled Substances Act would solve some of the marijuana industry’s tax woes because Section 280E if the Internal Revenue Code prohibiting most deductions for business expenses would no longer apply.

Anti-money-laundering statutes still in play

However, the anti-money-laundering statutes that generally prohibit banks from handling proceeds from illicit-drug sales would still apply, the CRS report noted.

“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,” according to the report.

The report also noted that rescheduling by itself also wouldn’t drastically alter state-regulated marijuana markets.

“Rescheduling would have no effect on state recreational marijuana laws because recreational marijuana activities would remain unlawful under federal law,” according to the CRS report.

Despite state-regulated adult-use markets sprouting across the country, many cannabis businesses still complain of expensive or unavailable banking services.

Would banks listen to federal, state agencies?

The report did allow that guidance from “federal or state agencies” might encourage banks to revisit their policies for dealing with cannabis.

That said, for any guaranteed progress, Congress must pass long-stalled banking protections.

“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 pointed out.

“However, because substantial legal risks would remain, rescheduling alone might not have a substantial effect on state-sanctioned marijuana business’ access to financial services.”

Partisan bickering as well as across-the-board dysfunction have thwarted the SAFER Banking Act in Congress this session.