President Biden on Thursday said that he’ll ask for a review of whether marijuana should remain classified as a Schedule 1 substance under federal law.
Why it matters: This could be momentous for the upstart US cannabis industry, which has been slowed at every turn by federal prohibitions.
What to know: Most cannabis companies are unable to use federally chartered banks, largely owing to the Schedule 1 designation, and instead are relegated to using state-chartered banks and credit unions.
- Not only does this limit borrowing opportunities, but it also negatively impacts cannabis companies’ abilities to take credit cards and otherwise process payments.
- A proposed bill called The SAFE Banking Act would help remedy this situation, but Biden’s move could help set the conditions for passage.
Other impacts: Removing the Schedule 1 classification could also help more cannabis companies move public stock listings from Canada to the US, and also better enable federally funded researchers to study the plant’s medicinal benefits.
Caveats: Removing the Schedule 1 classification isn’t necessarily synonymous with full legalization in all 50 states.
- There is no public timetable for when the Departments of Justice and Health & Human Services will begin their reviews, let alone complete them. Nor are the outcomes predetermined.
By the numbers: 330 US-based cannabis companies raised around $3.1 billion in venture capital in 2021, according to research firm PitchBook. The data through late August of this year was a bit more modest, with around $900 million for 109 companies.
Elsewhere: Biden also announced plans to pardon all federal offenses of simple marijuana possession, and called on governors to do the same in their states.
What they’re saying: “This is massive. Both for the industry and obviously from a social equity perspective,” explains Karan Wadhera, managing partner of cannabis-focused VC firm Casa Verde Capital. “People have been waiting for this ever since Biden took office.”
- Wadhera adds that venture capital has always been comparably scarce for cannabis startups, which helped keep valuations from rising apace tech startups before this year’s correction.
The bottom line: Biden’s move could spark a ton of new investment in US startups, as a burgeoning industry gets normalized.