Federal Cannabis Shift: 'The Industry Is Projected To Surpass $100 Billion By 2030,' Says Expert

Zinger Key Points
  • DOJ proposes reclassifying marijuana to Schedule III, acknowledging medical benefits but not legalizing recreational use.
  • This change may affect financial institutions and require additional compliance and regulatory measures.

In a historic policy shift, the Justice Department has proposed reclassifying marijuana from a Schedule I to a Schedule III substance. This decision, if finalized, would acknowledge the medical benefits of cannabis and categorize it with drugs like ketamine and some anabolic steroids. However, it does not legalize marijuana for recreational use.

This reclassification follows President Joe Biden‘s call to review cannabis’s status in 2022. The change aims to address longstanding inequities and could significantly impact the cannabis industry, particularly regarding compliance and regulatory requirements for financial institutions.

Challenges and Opportunities for Financial Institutions

Kevin Hart, founder & CEO of Green Check Verified, a prominent figure in the cannabis community and an upcoming speaker at the Benzinga Cannabis Capital Conference, provided insights into these changes. In an exclusive interview, Hart told Benzinga that federal involvement would likely increase regulatory complexity. “We can expect more, not less, rules and regulations around the cannabis supply chain,” he noted. This additional layer of federal compliance will add to the existing state regulations for both medical and adult-use cannabis.

Hart highlighted the challenges financial institutions will face under the new Schedule III classification. They must adapt their compliance programs to accommodate new regulations and ensure their systems are ready for the changes.

“Financial institutions are going to want to know how this impacts their compliance programs,” Hart explained. “Who will be the licensing agency? What are the rules and the layers of hierarchy for the rules? How will they need to update their transaction monitoring systems to include a new set of regulations separate from what they're doing today?”

Hart also noted the potential opportunities. “The cannabis industry is projected to surpass $100 billion by 2030. With increasing deposits as the top priority for financial institutions, banking legal cannabis industries represents an enormous opportunity today,” he said. “As more financial institutions get involved, many will start to realize what they turned away or are leaving for their competition to scoop up.”

Preparing for New Regulatory Hurdles

Cannabis businesses must brace for additional regulatory hurdles. Drawing parallels with the 2018 legalization of hemp, Hart explained that it took two years for the USDA to release its regulations. Similar delays and complexities can be expected with marijuana reclassification.

“When states legalize marijuana for adult or medical use today, it takes months, if not a year, for regulations to be written… and that's starting from a blank slate,” Hart said. “Financial institutions will have a period where they can tighten up their compliance programs so that once federally-legal commerce starts, they'll be ready.”

Strategies for Smaller Cannabis Businesses

For smaller cannabis businesses, maintaining competitiveness will require meticulous preparation and transparency with financial partners. Hart suggested ensuring all business documents and data are in order and transparent about their operations. “No matter which bank or credit union they work with, providing certain business documentation will be a part of the application process,” he advised.

“With a ‘high-risk’ industry like cannabis, business owners likely need to be prepared to deliver more than what's typically necessary to open an account in order to support financial institutions' anti-money laundering efforts.”

Hart stressed the importance of transparency. “Cannabis business owners must also remember to be transparent with their new financial institution about business operations. The more honest and communicative, the better the relationship will be,” he said.

Learning from Other Regulated Industries

Hart pointed out that the cannabis industry can learn valuable lessons from other regulated sectors, such as alcohol and tobacco. “When it comes to regulations and oversight, cannabis is a new industry – brought to light even more by rescheduling news,” he noted. “But other regulated industries, like alcohol, tobacco, and gambling, provide a clear window into what the cannabis industry can expect. History does repeat itself, especially with governmental agencies.”

The proposed reclassification marks a crucial step in aligning federal drug policies with state-level changes and industry realities, paving the way for a more structured and potentially lucrative future for the cannabis industry.

Cannabis rescheduling seems to be right around the corner. Want to understand what this means for the future of the industry? Hear directly for top executives, investors, and policymakers at the 19th Benzinga Cannabis Capital Conference, coming to Chicago this Oct. 8-9. Get your tickets now before prices surge by following this link.

Now Read: Bipartisan Push In Congress Seeks To Ease Access To Medical Marijuana For Veterans

Photo: Courtesy of H_Ko via Shutterstock

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Cannabis rescheduling seems to be right around the corner

Want to understand what this means for the future of the industry? Hear directly for top executives, investors and policymakers at the 19th Benzinga Cannabis Capital Conference, coming to Chicago this Oct. 8-9. Get your tickets now before prices surge by following this link.