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What the Latest Cannabis Industry Finance Challenges Tell Us

The lack of clear cannabis regulation/acceptance at the federal level has again reared its ugly head causing further complications for both consumers and dispensaries – this time in the form of payments. Citing the federal illegality of cannabis, Mastercard has revoked the use of its cards – including bank cards and ATM cash withdrawals – for the purchase of marijuana products, even in states where it is legal.

The revocation is just the latest in the battle of business financing, with the lack of any concrete federal framework under which the industry can operate causing ancillary service providers to abandon the industry. Many banks have long refused to provide financial services for cannabis operations, and the Paychex payroll company informed cannabis operations earlier this year that they could no longer use their services for marijuana-related businesses.

Although there have been a few highly publicized federal steps made over the last year with the Biden Administration issuing an executive order in October 2022 for the pardoning for offenses of simple possession of marijuana, asking Governors to do the same for offenders in their states, and signing the research expansion act into law, there remains no clear legal and regulatory direction at the federal level.

Additionally, what has been less publicized than the steps above is the additional directive for the Secretary of Health and Human Services and the Attorney General “to review expeditiously how marijuana is scheduled under federal law.” Marijuana is currently classified as a Schedule I drug “meant for the most dangerous substances” (e.g., heroin and LSD). However, even with the “expeditious” directive, and Biden’s statement that “it’s time to right these wrongs,” nothing has been seen on the status of that review even as we close in on a year from the time of issuance.

A reassessment of the legal classification (scheduling) of cannabis could greatly benefit the industry, depending on the outcome. However, it appears that federal action is primarily influenced by political posturing rather than genuine progress. Consequently, no significant strides have been made in this regard. The industry and its consumers continue to face numerous challenges related to business operations, financial matters, purchases, and possession due to the lack of uniform federal legality, resulting in a patchwork of state rules. The limited efforts made by politicians and federal agencies offer little in terms of paving the way for federal legalization, and the few steps taken at the federal level can be considered nothing more than minor and incremental measures.


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