President Biden said Thursday he would seek a review of whether marijuana should remain classified as a Schedule 1 substance under federal law.
Why is this important: This could be momentous for the nascent cannabis industry in the United States, which has been slowed at every turn by federal bans.
What there is to know: Most cannabis businesses cannot use federally chartered banks, largely due to the Schedule 1 designation, and are instead relegated to using state chartered banks and credit unions. .
- Not only does this limit borrowing opportunities, but it also negatively impacts the ability of cannabis companies to accept credit cards and otherwise process payments.
- A bill titled The SAFE Banking Act would help remedy that, but Biden’s decision could help set the terms for the switch.
Other impacts: Removing the Schedule 1 classification could also help more cannabis companies move public stock listings from Canada to the United States, and also allow federally funded researchers to study medicinal benefits. of the plant.
Warnings : Removal of Schedule 1 classification does not necessarily mean full legalization in all 50 states.
- There is no public timeline for when the Departments of Justice and Health and Human Services will begin their reviews, let alone complete them. The results are also not predetermined.
By the numbers: 330 U.S.-based cannabis companies raised around $3.1 billion in venture capital in 2021, according to research firm PitchBook. Data through the end of August this year was a bit more modest, with around $900 million for 109 companies.
Somewhere else: Biden also announced his intention to pardon all federal offenses of simple possession of marijuana and called on governors to do the same in their states.
What they say : “It’s huge. Both for the industry and obviously from a social equity perspective,” says Karan Wadhera, managing partner at cannabis-focused venture capital firm Casa Verde Capital. “People have been waiting for this since Biden took office.”
- Wadhera adds that venture capital has historically been relatively scarce for cannabis startups, which helped keep valuations from rising rapidly for tech startups ahead of this year’s correction.
The bottom line: Biden’s decision could trigger a ton of new investment in US startups as a booming industry normalizes.