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Despite this exponential growth, the cannabis industry still suffers from the lack of even the most basic financial services. It’s a problem that over-anxious legislatures have simply avoided and swept under the rug, so as to not disturb the potential tax revenue that awaited them on the upside.

The cannabis “goldrush” shows no sign of letting up. As of January, there are more states that have legalized marijuana in some form, whether for medical or recreational use, than the 17 states that have no legalization whatsoever. For those 33 states and the District of Columbia, business is booming. A recent study from New Frontier Data, a data analytics firm focused on the cannabis industry, found that revenue from legalized marijuana nationwide would create at least $132 billion in tax revenue and more than a million new jobs across the United States in the next decade. This is good news for those investing in this burgeoning industry, until it comes time to reap the rewards. Despite this exponential growth, the cannabis industry still suffers from the lack of even the most basic financial services. It’s a problem that over-anxious legislatures have simply avoided and swept under the rug, so as to not disturb the potential tax revenue that awaited them on the upside. With a 50-state legalization on the horizon, the time to bury our heads in the sand is over. But what to do? To be fair, Congress has been focusing on this issue this past year. Several bills are starting to gain some traction and are moving through committees but they are piecemeal attempts to solve a problem that needs an overall holistic approach. The following are five ideas that if implemented could allow the cannabis industry to better integrate into and align with our nation’s banking system.

Marijuana Must be Reclassified Under the CSA

Marijuana remains classified as a Schedule I substance under the Controlled Substances Act (CSA). Section 811 of the CSA authorizes the U.S. Attorney General to set the criteria for classification of substances, including the removal of any drug or substance from the schedules if it is found that the drug or other substance does not meet the requirements for inclusion in any schedule. Schedule I drugs are substances or chemicals “with no currently accepted medical use and a high potential for abuse.” Not only is marijuana now used medicinally with proven results, but there are studies that conclude that medical cannabis use is associated with an overall decrease in opioid use. A 2016 Israeli study found that 44% of 176 opioidusing patients were able to discontinue opioid therapy entirely seven months after they began smoking cannabis or eating cannabis-infused cookies. Current Attorney General, William Barr, stated in his confirmation hearing that the discrepancy between federal and state law is unattainable and that he would look favorably to a federal approach so that states can comply. If that is true, then a reclassification and removal of marijuana from Schedule I is the only effective alternative. Various bills floated in Congress seeking to amend the CSA, implement a reverse preemption rather than reclassifying the legal status of marijuana. The STATES Act, proposed by Sens. Elizabeth Warren (D. Mass.) and Cory Gardner (R. Colo.) looks to exempt marijuana from enforcement under the CSA if a state has legalized it. The SAFE Banking Act, proposed by U.S. Rep. Edward Perlmutter (D. Colo.), has garnered broad bi-partisan support and would, among other things, prohibit the Federal Deposit Insurance Corp. (FDIC) from denying a financial institution deposit insurance or penalizing the financial institution for providing financial services to cannabis
businesses. Neither of these bills attack the root of the problem: as long as marijuana is a Schedule I drug, banking regulators are hamstrung in fulfilling their statutory duty to ensure that financial institutions are not laundering money from illegal activity. As long as marijuana is a Schedule I drug and proceeds of the sale of marijuana are deposited into a federally insured banking institution, federal law will be violated.