SHF Holdings has submitted comments to the Justice Department, following its recent proposed rule to reclassify cannabis from Schedule I to Schedule III of the Controlled Substances Act (CSA), consistent with the view of the Department of Health and Human Services (HHS) that cannabis has a currently accepted medical use as well as HHS's views about cannabis' abuse potential and level of physical or psychological dependence.
For the past 54 years, cannabis has been categorized as a Schedule I controlled substance under the Controlled Substances Act. Schedule I drugs, substances or chemicals are defined as drugs with no currently accepted medical use and a high potential for abuse.
The publication of this proposed rule initiates a public comment period that will remain open until July 22, 2024. Comments can be submitted electronically via the Federal eRulemaking Portal using the reference: 'Docket No. DEA-1362.'
Safe Harbor Financial Chief Legal Officer Donnie Emmi:
"Safe Harbor Financial welcomes the proposed rule to reclassify marijuana from Schedule I to Schedule III of the Controlled Substances Act. This reclassification represents significant progress in aligning federal policy with the growing recognition of the medical benefits of cannabis. However, it is important to clarify what this potential change does and does not mean for our industry."
"First and foremost, the reclassification does not make marijuana legal, as it remains an illegal substance under federal law. From a banking perspective, the compliance requirements under the Bank Secrecy Act (BSA) and Anti-Money Laundering (AML) regulations remain unchanged. Banks must continue to adhere to these stringent regulations to avoid significant fines and penalties."
"The reclassification to Schedule III is expected to have several positive impacts on the cannabis industry. Most notably, it will alleviate some of the severe tax burdens imposed by Section 280E of the Internal Revenue Code. Currently, cannabis businesses cannot deduct many of their operating expenses, leading to inflated tax liabilities. The change to Schedule III will allow these businesses to deduct expenses more akin to standard business operations, potentially adding significant amounts to their balance sheets. For example, some large operators could see more than $100 million added to their balance sheets, enabling them to reinvest in and expand their operations and create jobs."
"Overall, the rescheduling of cannabis will create a more favorable business environment for Safe Harbor Financial and the businesses we serve – enabling each to expand its services, reduce operational risks and capitalize on new market opportunities. While this does not change the illegality of cannabis or change compliance requirements under the Bank Secrecy Act, the move to Schedule III represents progress."
"For Safe Harbor, this reclassification underscores our continued relevance and importance in the cannabis financial services sector. Despite fears that regulatory changes might diminish our role, the reality is quite the opposite, as the expectation is that the industry will grow considerably, increasing the need for our unique service platform. The reclassification is likely to lead to increased banking and transaction activity among our clients, benefiting Safe Harbor through higher transaction volumes and enhanced financial stability."
"In addition, the cannabis industry remains cash-intensive, similar to other sectors like liquor stores, tobacco and adult entertainment venues, due to restrictions on credit card processing and other financial services. As the regulatory landscape evolves, Safe Harbor will remain a crucial partner for cannabis and other high risk banking businesses."
"In conclusion, Safe Harbor remains committed to supporting the regulated cannabis industry through these changes. Our first-mover status and deep industry expertise position us uniquely to continue providing essential financial services, ensuring the growth and success of our clients."
For more information:
Safe Harbor Financial
www.shfinancial.org