“Even if cannabis moves to a lower schedule, the industry will continue to face stringent federal oversight, complex financial regulations and significant compliance demands.”

By Sundie Seefried, Safe Harbor Financial

The cannabis industry is standing at the edge of what could be a major turning point.

With federal rescheduling looming on the horizon, many are anticipating a watershed moment that could reshape the entire landscape. There’s a growing excitement—and understandably so. Moving cannabis from its current Schedule I classification under the Controlled Substances Act (CSA) to a lower schedule would open new doors, providing much-needed legitimacy and potentially relaxing some federal restrictions.

But as we wait for this decision, it’s important to confront a common misconception head-on: Rescheduling is not deregulation.

While rescheduling cannabis may be a positive step forward, it won’t suddenly wipe away the heavy regulatory burden that cannabis businesses currently face. In fact, the shift could create new layers of complexity as the federal government, state authorities and financial institutions attempt to synchronize their policies and rules.

The cannabis industry is still far from being free of compliance hurdles—and that’s a reality we must prepare for. Let’s take a closer look.

Rescheduling Vs. Deregulation

Rescheduling cannabis would move it from its current Schedule I status—reserved for substances deemed to have no medical use and a high potential for abuse—potentially to Schedule II or III, where it would be acknowledged for its medicinal benefits. This would be a significant shift, opening doors for more research and easing some federal restrictions.

However, the implications of moving cannabis to Schedule II deserve special attention. Schedule II substances, like opioids, face much stricter controls than Schedule III, including mandatory prescription requirements and tighter restrictions on research and distribution, which could create a more challenging environment for businesses.

That said, rescheduling is not the same as deregulation. Even if cannabis moves to a lower schedule, the industry will continue to face stringent federal oversight, complex financial regulations and significant compliance demands. In fact, rescheduling could introduce even more layers of complexity, as federal, state and local authorities work to reconcile a patchwork of conflicting laws.

280E’s Burden Lifted

One of the most burdensome regulations for cannabis businesses today is Section 280E of the federal tax code. This rule prevents cannabis companies from deducting standard business expenses—like rent, payroll and marketing—because the plant is federally illegal. If cannabis is rescheduled to Schedule III, this tax burden would be lifted, allowing businesses to make the same deductions as any other legal industry.

While this would be a major win for cannabis companies, removing 280E won’t eliminate other regulatory requirements. Businesses will still need to navigate strict rules around compliance, security and reporting. The financial benefits of rescheduling, while helpful, should not be mistaken for a broader relaxation of regulations.

Banking Challenges Persist

There’s also a misconception that rescheduling cannabis will magically solve the industry’s banking problems. Many believe that once cannabis is rescheduled, banks will be eager to offer services to cannabis businesses. But even if rescheduling happens, the Bank Secrecy Act (BSA) will remain in place.

The BSA requires financial institutions to monitor and report suspicious activities that could indicate money laundering or other illegal activities. This has long made banks wary of serving the cannabis industry. Rescheduling won’t eliminate these concerns. Financial institutions will still be required to report transactions tied to potentially illicit activities and cannabis businesses will continue to face heightened scrutiny from banks.

While rescheduling may open some doors, it won’t erase the risks or complexities involved in cannabis banking. Furthermore, smaller financial institutions may find it even harder to meet these requirements compared to their larger counterparts, potentially exacerbating access issues for cannabis businesses.

Navigating The Regulatory Maze

One of the biggest challenges with rescheduling will be managing the interplay between federal and state regulations. States like California, Colorado and Oregon have spent years developing sophisticated systems for regulating cannabis, including strict rules around licensing, packaging, testing and distribution.

If cannabis is rescheduled at the federal level, businesses will have to comply with both state and federal laws, which could lead to even more regulatory complexity.

Additionally, state governments rely on the tax revenue generated by cannabis sales and are unlikely to give up that control easily. Federal rescheduling may lead to additional federal taxes, creating a potential “double taxation” scenario that could strain cannabis businesses even further.

This complexity could be further amplified by issues like interstate commerce, which may emerge as a key consideration if cannabis is rescheduled but not fully descheduled. The ongoing debate over whether cannabis can be traded across state lines could create new challenges, especially as states with more mature cannabis markets, like California, might flood other markets, potentially increasing black market activities.

Compliance Remains Critical

Regulatory compliance is a hallmark of any legalized industry—whether it’s pharmaceuticals, alcohol or tobacco. The cannabis industry will be no different. Even with rescheduling, businesses will be required to meet stringent standards for product safety, labeling, distribution and security.

For financial institutions, this means maintaining rigorous due diligence when working with cannabis-related clients. For businesses, it means staying vigilant and compliant with both state and federal regulations. Rescheduling may evolve the compliance frameworks, but it certainly won’t eliminate them.

Rescheduling Is A Step, Not A Magic Bullet

Rescheduling cannabis is a critical step toward broader reform, but it is not a magic bullet. Businesses should view it as an opportunity to prepare for a more legitimate, albeit more complex, market environment. The lifting of certain burdens, like 280E, will offer relief, but the cannabis industry will remain highly regulated, with ongoing challenges around compliance, banking and taxation.

Rescheduling is a sign of progress, but it’s not a shortcut to deregulation. It represents a path toward creating a more sustainable and transparent cannabis market—one where businesses can operate under clearer rules while continuing to meet the stringent demands of state and federal oversight. As the industry matures, we must keep our focus on navigating these regulatory waters, ensuring that we are prepared for the challenges and opportunities ahead.

Sundie Seefried is founder and CEO of Safe Harbor Financial (NASDAQ: SHFS), a leading financial services provider to the cannabis industry. She is a 40-year credit union industry veteran and the former CEO of Partner Colorado Credit Union (PCCU). Established in 2015 by PCCU, Safe Harbor was formed to provide an unmet need—compliant banking and financial services to the rapidly growing U.S. cannabis industry.

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