Banks Could See New Opportunities If Marijuana Moves to Schedule III

Marijuana’s proposed move from Schedule I to Schedule III under the Controlled Substances Act has renewed focus on what rescheduling could mean for marijuana-related businesses (MRBs) and the financial institutions that serve them.

While rescheduling would not fully normalize cannabis banking, it could materially improve access to banking services, particularly in several important respects.

1. A Significant Indirect Benefit: Relief from Section 280E

The most consequential effect of Schedule III status could be tax-related.

Internal Revenue Code Section 280E, which disallows ordinary business deductions for businesses trading in Schedule I or II controlled substances, generally would no longer apply if marijuana is moved to Schedule III.

Potential effects include:

• • Improved cash flow and profitability
  • Stronger debt service coverage and credit metrics
  • Better underwriting profiles
  • Greater access to traditional lending products

For many institutions, this could make MRBs substantially more bankable, even without broader legislative reform.

2. Potential Improvement in Deposit and Treasury Access

Rescheduling also may encourage additional banks to enter or expand in the cannabis sector.

Some community and regional institutions that have stayed on the sidelines due to federal criminal law concerns may reassess that position if marijuana is no longer a Schedule I substance.

Benefits may include:

• • Expanded access to deposit accounts
  • Greater availability of treasury management services
  • Reduced compliance pricing associated with cannabis banking
  • Improved access to cash management and armored transport solutions

While these developments would likely occur gradually, they could meaningfully broaden financial services access.

3. Possible Reduction in Certain Legal and Regulatory Concerns

Rescheduling may also soften, though not eliminate, concerns surrounding the treatment of cannabis proceeds as proceeds of unlawful activity under federal law.

That could affect bank risk assessments involving:

• • Board and management risk tolerance
  • Correspondent banking relationships
  • Examiner perceptions of cannabis-related relationships
  • The Bank Secrecy Act and anti-money laundering concerns

This may be particularly true for state-licensed medical marijuana businesses, especially since an April 22 DOJ order reclassified narrowly defined categories of marijuana products and established a pathway for these businesses to register with the DEA.

4. What Rescheduling Alone Would Not Solve

Importantly, neither the executive order proposing the rescheduling nor the reclassification itself would create a statutory safe harbor for banks serving MRBs.

FinCEN Expectations

Existing FinCEN guidance on cannabis-related suspicious activity reporting and enhanced due diligence would likely remain relevant unless separately revised.

Banks would likely still be expected to maintain:

• • Enhanced customer due diligence
  • Ongoing monitoring and compliance controls
  • Seed-to-sale and licensing verification
  • Suspicious activity reporting protocols

Cannabis banking would likely remain compliance intensive.

Lack of Banking Legislation

The executive order is not a substitute for congressional action. Without legislation such as the SAFER Banking Act, banks may continue to face concerns regarding:

• • Money laundering exposure theories
  • Aiding and abetting theories
  • Added prudential examination scrutiny
  • Federal supervisory uncertainty

This may continue to limit broad participation in cannabis banking by larger financial institutions.

Payment Constraints

Rescheduling alone also may not fully resolve card network and payments rail constraints, which often turn on separate network rules, sponsor bank policies and broader federal illegality concerns.

5. Lending May Be the Biggest Beneficiary

Interestingly, the most significant impact may be in credit rather than deposits.

If Section 280E falls away and operating economics improve, MRBs may become more viable candidates for:

• • Commercial real estate lending
  • Working capital facilities
  • Equipment finance
  • Asset-based lending
  • Sponsor-backed transactions

For banks willing to serve the sector, this could represent one of the most meaningful practical consequences of rescheduling.

6. Potential Opportunity for Community and Regional Banks

Rescheduling may create opportunities for community and regional institutions.

These banks may be better positioned than large money-center institutions to serve specialized, compliance-intensive customer segments. They might be able to price and manage these relationships as they do in other higher-risk verticals.

For some institutions, rescheduling could create not only reduced risk, but also strategic opportunity.

The Bottom Line

The Trump administration’s executive order kickstarted movement toward Schedule III status. This could improve MRBs’ access to the banking system, particularly by improving borrower economics and reducing certain legal and regulatory concerns.

That said, rescheduling alone would not normalize cannabis banking. Enhanced compliance expectations would likely remain, major payment frictions may persist, and federal safe harbor legislation would still be highly relevant.

For financial institutions evaluating whether and how to engage in the sector, Schedule III status represents an important development, but not the final word.

Contact ​Chris Couch​, Beau Haynes or any member of the Phelps banking and financial services or health care teams with questions or for advice and guidance.