Federal Cannabis Change: ‘Industry Projected to Surpass $100 Billion by 2030,’ Expert Says

In a historic policy change, the Department of Justice has proposed reclassifying marijuana from a Schedule I substance to a Schedule III substance. This decision, if finalized, would recognize the medical benefits of cannabis and classify it among drugs such as ketamine and some anabolic steroids. However, it does not legalize marijuana for recreational use.

This reclassification is a consequence of the President Joe BidenCalls for a review of the status of cannabis in 2022. The change aims to address long-standing inequalities and could significantly impact the cannabis industry, particularly in terms of compliance and regulatory requirements placed on financial institutions.

Challenges and opportunities for financial institutions

Kevin Hartfounder and CEO of the company Green check verifieda prominent figure in the cannabis community and an upcoming conference speaker Benzinga Cannabis Conferenceprovided insight into these changes. In an exclusive interview, Hart told Benzinga that federal involvement will likely increase regulatory complexity. “We can expect more, not less, rules and regulations around the cannabis supply chain,” he noted. This additional level of federal compliance will complement existing state laws regarding 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 adapt to new regulations and ensure that their systems are ready for change.

“Financial institutions will want to know what impact this has on their compliance programs,” Hart explained. “Who will be the licensing agency? What are the rules and layers of the rule hierarchy? How will they need to update their transaction monitoring systems to take into account a new set of regulations separate from what they do today?”

Hart also noted potential opportunities. “By 2030, the cannabis industry is projected to exceed $100 billion. With growing deposits a top priority for financial institutions, the legal cannabis industry represents a huge opportunity today,” he said. “As more financial institutions become involved, many of them will begin to realize what they have discarded or what they have left behind for the competition to scoop up.”

Preparing for new regulatory hurdles

Cannabis companies must prepare for additional regulatory hurdles. Comparing hemp legalization to 2018, Hart explained that it took the USDA two years to issue its regulations. Similar delays and complexities can be expected with marijuana reclassification.

“When states legalize marijuana today for adult use or medical purposes, it takes months, if not a year, to write the regulations… and it starts with a clean slate,” Hart said. “Financial institutions will have a period in which they can tighten their compliance programs so that when federally legal trading begins, they will be ready.”

Strategies for smaller cannabis companies

For smaller cannabis companies, staying competitive will require meticulous preparation and transparency with financial partners. Hart suggested keeping all business documents and data organized and transparent. “Regardless of which bank or credit union you are working with, providing certain business documentation will be part of the application process,” he advised.

“For a ‘high-risk’ industry such as cannabis, business owners will likely need to be prepared to provide more than is typically required to open an account to support financial institutions’ anti-money laundering efforts.”

Hart stressed the importance of transparency. “Cannabis business owners must also be mindful of the transparency of their new financial institution regarding business operations. The more honest and communicative they are, the better the relations 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 regulation and oversight, cannabis is a new industry – brought even more into the spotlight by the change in publication schedule,” he noted. “But other regulated industries such as alcohol, tobacco and gambling provide clear insight into what the cannabis industry can expect. History is repeating itself, especially when it comes to government agencies.”

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

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It appears that a reschedule for cannabis sales is just around the corner. Want to understand what this means for the future of the industry? Hear directly from top executives, investors and decision-makers at the 19th Benzinga Cannabis Capital Conference in Chicago on October 8-9. Get your tickets now before prices go up by clicking this link.

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