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Cannabis and Banking: The Last Piece of the Puzzle

Some Benjamins and some marijuana

Based on the recent midterm election results, 21 states plus Washington D.C. have approved recreational use of marijuana. In addition, there now exists marijuana legislation permitting its medicinal use in 37 states. But despite continued advances at a state level, federal policies and laws still prohibit the use, sale and distribution of cannabis. While efforts by some Congressional members have tried to change existing laws, resistance remains. As a result, the cannabis industry as a whole has continued to face serious barriers. One of the most notable involves that related to cannabis banking provisions that prevent access to financial services. But based on current Senate and House election results, this may be about to change.

While control of the House has shifted to Republicans, Democrats have been able to maintain control of the Senate. As such, it is suspected that efforts to pass key pieces of marijuana legislation will occur in the upcoming lame-duck session. Of course, full marijuana legalization is not likely to occur at a federal level. Likewise, restorative justice policies promoted by Democrats within such legislation will likely face serious opposition. But when it comes to cannabis banking provisions, there seems to be greater bipartisan support. Therefore, many are anticipated major changes in this area in the coming weeks to months.

“I’m going to sit down and talk to my caucus about broadening the [cannabis legislative] agenda for the lame-duck session.” – Senate Majority Leader Chuck Schumer (D)

Ongoing Issues Facing Marijuana Legalization

For some time now, there has been notable discrepancies between marijuana laws at state and federal levels. At the federal level, marijuana is considered a Schedule I drug under the Controlled Substances Act. This means the DEA fails to see any approved medicinal cannabis use and thus prohibits its use, sale and distribution. This additionally means that any company involved in these activities or assisting with them in some fashion is in legal risk. Interestingly, cannabis producers have been protected from federal prosecution due to amendments prohibiting DEA use of funds for this purpose. But other agencies, including the IRS and Treasury Department, are not prohibited from taking action. This has resulted in cannabis banking provisions that restrict marijuana companies from accessing banking services and funds.

(Cannabis is the new medical frontier–read more about it in this Bold story!)

The persistence of the challenges has prompted those in the industry to favor marijuana legalization. But cannabis companies are not alone. Those in the banking sector are also lobbying for change to expand cannabis baking provisions. Many Republicans are not opposed to this aspect of cannabis legislation and might support this in isolation. But passing marijuana laws that legalize its broad use or allocate funds to for restorative justice are tougher sales. For new laws regarding cannabis to pass, more than 60% of the Senate must vote in favor of any bill. A Democrat-led Senate can certainly help set the legislative agenda. But in order to actually change existing cannabis banking provisions, some degree of bipartisan support will be needed.

“It’s important to keep in mind that the Senate usually sets the tone for the Congress in general.” – Justin Strekal, Founder of the BOWL (Better Organizing to Win Legalization) PAC

Potential Federal Changes to Come

In essence, changes at a federal level that could move closer toward marijuana legalization exist at executive and legislative levels. At an executive level, the DEA could make a move to reschedule cannabis from Schedule I to Schedule II. If this occurred, the FDA would likely takeover the regulation of marijuana much like it does for alcohol. This alone could cause all types of problems. Certainly, it would immediately expand cannabis banking provisions. At the same time, interstate transport of cannabis would no longer be an issue, and many states would oppose that. States have enjoyed serious tax revenues by keeping all sales, production and distribution services within their boundaries. Suddenly losing these protections would undoubtedly hurt many states. While this could occur, legislative solutions appear more likely and less problematic.

A marijuana piggy bank of some sort
Marijuana legalization faces one more hurdle: banking. Will a new Congress change that?

In Congress, there has already been a number of legislative bills presented in both the House and Senate. The Cannabis Administration and Opportunity Act (CAOA) is a comprehensive bill that seeks wide changes. These changes not only include cannabis banking provisions but also those related to equity, restorative justice, record expungement and more. This bill has very little chance of gaining Senate approval. However, the Safe and Fair Enforcement Banking Act (SAFE), addressing cannabis banking provisions only, has passed the House 7 times. But it has not previously passed the Senate. It is now believed that Senate Majority Leader Chuck Schumer will work to negotiate its passage during the lame-duck session. Based on the current climate and less comprehensive changes of this bill, its passage is much more likely.

“I don’t see it being impossible to get even comprehensive reform [in marijuana legislation] across or through the House if it’s controlled by Republicans.” – Morgan Fox, Political Director of NORML (National Organization for the Reform of Marijuana Laws)

A Final Step in Moving Toward Marijuana Legalization

Despite the limitations in cannabis banking provisions, the marijuana industry is expected to boom. In 2020, the sector generated revenues of $13.4 billion, but by 2031, this figure is expected to be $148.9 billion. Notably, medical legalization barriers hinder the potential for industry growth as do financial barriers. But by advancing cannabis banking provisions, a major obstacle can be removed. From a legislative standpoint, passing bills that address this issue now have the best chance for bipartisan success.

If such legislation indeed passes, then it would seem that marijuana legalization will be inevitable. With more than two-thirds of the states embracing medicinal and/or recreational use, social trends favor this. Likewise, surveys continue to show that 60% favor recreational use of marijuana while 31% favor medicinal use only. For too long, this sector has been handcuffed by federal policies and restrictions that no longer make sense. If lame-duck session progress to improve funding access to the cannabis industry succeeds, look for dramatic growth to follow. Short of marijuana legalization nationally, this is likely the last piece of the cannabis industry puzzle.


Sometimes businesses are like rose bushes, and need to be pruned to grow. Read more about prune and grow, and Musk’s use of it, in this Bold story.

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