May 2024 Cannabis Connection

Modified on Fri, 03 May 2024 at 05:56 AM

Cannabis Rescheduling: What You Need to Know

On Tuesday, the Drug Enforcement Administration (DEA) shared its recommendation to reschedule cannabis from Schedule I to Schedule III under the Controlled Substances Act (CSA). While this will have a significant impact on how cannabis can be researched to identify medical benefits, creating opportunities for pharmaceutical companies to get involved with the sale and distribution of medical marijuana in states where it is legal, there are also ramifications for banks and credit unions serving this industry.

We spoke with Zane Gilmer, a partner at Stinson LLC, to better understand the nuances and complexities of this shift.

Increased Regulatory Complexity

Rescheduling could set up a system that is more challenging than what we currently have because it could result in the medical market becoming federally recognized, leaving the adult-use market unaddressed. There is also the question of what kind of regulations would accompany rescheduling. While there’s been some chatter in industry circles about a “Cole 2 Memo,” there are still many unknowns about what the regulations would look like, and how they would impact financial institutions. As Zane put it, “rescheduling is only part of the story. The rest of the story is about the regulations that come with it."

Improved Profitability of Licensed Cannabis Operators

A clear benefit of rescheduling will be the removal of the tax code 280E, allowing licensed cannabis businesses to deduct ordinary and necessary business expenses on their federal tax returns. This will dramatically improve cash flow for cannabis operators, making them more profitable and attractive targets for financial institutions – not just for their increased deposit balances, but also for their enhanced creditworthiness. There are still other credit and BSA/AML risks to overcome, but this will improve the financial viability for many operators.

Could rescheduling be the first step toward other federal cannabis reforms, including for banking? That's hard to predict, but we do know that banks and credit unions serving this industry today are benefiting from the low-cost deposits, non-interest income, and earning assets offered by this line of business – all while passing their exams.

Download the Cannabis Lending Guide

Free Webinar: Cannabis Lending & Rescheduling 

Registration is open for our webinar on May 7, 2024 at 3:00 pm ET featuring discussions with industry experts about cannabis lending and cannabis rescheduling. We’ll be joined by Scott Moskol, Co-Chair of the newly launched Cannabis Practice group at Blank Rome, and Kirsten Trusko, CEO and Co-Founder of the Emerging Markets Coalition (EMC), who will share their insights on these hot topics.

Designed for bankers already serving this industry and those who are “canna-curious, the Cannabis Bankers’ Quarterly webinar series, hosted by Shield Compliance and the American Cannabis Bankers Association (ACBA), offers the knowledge bankers need to gain a competitive advantage in a rapidly changing industry.



Register for the Cannabis Bankers' Quarterly Webinar on May 7

Simplifya "Monitor" Program 

Onsite inspections are an important way for banks and credit unions to enhance initial and ongoing due diligence when serving licensed cannabis operators, however they can be quite expensive, time-consuming, and resource intensive. Simplifya’s “Monitor” program can help eliminate the need for physical inspections by automating the process, from verifying licenses to ensuring compliance with state cannabis regulations.

 See Pricing and Details

Shield's Market Leadership 

Shield recently announced organizational changes and promotions to strengthen its position in the cannabis market and better support its customers.

Jenna Meyer was promoted to Chief Operating Officer. In her role leading the Client Success team, Jenna was instrumental in deepening Shield’s client relationships, while guiding the development of Shield’s products and services to ensure they reflect the changing needs of its bankers. As COO she will oversee the Client Success organization, Operations, and Product Management. Read Bio

Cami Cantrell was promoted to Executive Vice President, Administration and Professional Services. Cami will continue to lead Shield’s payments strategy work, while building a well-rounded professional services team designed to help bankers meet the expectations of regulators, auditors, and Board of Directors in the cannabis sector and other high-risk industries. Read Bio

Since its inception, Shield has partnered with more than 65 financial institutions and monitored 10.9 million transactions including $46.1 billion in deposit volume. For the 12-month period ending March 31, 2024, Shield’s financial institution customers have earned $37.9 million in fee income. As of March 31, 2024, these financial institutions have $1.1 billion in deposit balances and $290 million in loans outstanding from over 6,046 cannabis-related businesses representing more than 19,472 active cannabis licenses. 

Shield on the Road 

We have a busy year planned and hope to see you at the various conferences and events at which we’ll be attending and speaking.

Meet us at these upcoming FinTech and Banking conferences 

MAY 8-9
Missouri Bankers Association Lending, Credit & Finance Conference, Columbia, MO

MAY 13-15
Bank Director's Experience FinXTech, Tampa, FL. Use our discount code EXP24VIP to register.

JUNE 9-11
Minnesota Banks 2024 Annual Summit, Brainerd, MN

JUNE 11-12
National Association of State Credit Union Supervisors Cannabis Banking Symposium, Long Beach, CA

JUNE 11-14
American Bankers Association (ABA) Risk & Compliance Conference, Seattle, WA

JUNE 12-14
COCC Annual User Conference, Uncasville, Connecticut

JUNE 13-16
New York Credit Union Association EXCEL 24 Annual Meeting & Convention, Saratoga, NY

JULY 15-17
Independent Bankers Association of New York State (IBANYS) Annual Convention, Verona, NY

JULY 18-20
Community Bankers Association of Kansas Annual Convention & Tradeshow, Lake of the Ozarks, MO

BankIn Minnesota Convention, Duluth, MN

PBC Conference 2024, Washington, D.C. Contact Richard Drennen for a discounted registration code.

Let Shield help your financial institution unlock the benefits of a cannabis banking program. Schedule a meeting with us today. 

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