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HHS recommendations is a prerequisite to DEA consider- The Treasury Department reported that just over 830 fi-
ation, and is based on "scientific and medical evaluation," nancial institutions had filed paperwork with the federal
by the Food and Drug Administration, an agency of HHS, government in the third quarter of 2024 acknowledging
along with a recommendation for the appropriate sched- their relationships with licensed cannabis businesses.
uling under the CSA. That's 30 more than there were in 2023, but just a fraction
of the estimated 9,000 federally regulated banks and credit
The DEA issued a notice of proposed rulemaking last July, unions doing business in the United States. None of this
opening a 60-day period for public comments on reclas- is apt to change if marijuana is classified as a Schedule III
sification. According to published reports, the agency re- drug.
ceived nearly 43,000 comment letters from various stake-
holders, including cannabis businesses, individuals for "Financial institutions that are newly interested in bank-
and against rescheduling, medical professionals, state ing [marijuana-related businesses] should note that the
regulators and law enforcement agencies. proposed [reclassification] rule itself would not likely im-
pact related legal risks, including the risk of liability for
In August the DEA announced plans for a hearing on the money laundering. This is especially true because recre-
merits of the proposal before an administrative law judge ational marijuana would remain illegal under federal law,"
– a process that is said to resemble a trial and is expected the law firm Morrison & Foerster wrote in a July 2024 brief.
to take several months to complete.
Over $100 billion in cash last year
The hearings were halted over what might best be de- Because of its precarious legal status, cannabis has be-
scribed as legal maneuvering, as some groups that wanted come an industry laden with cash. A lot of cash. Last year,
to testify were excluded from the witness list, and others according to MJBiz, consumers spent an estimated $15.2
argued the DEA itself should be removed on grounds that billion at retail pot shops; by 2028, the estimated spend
it doesn't really support a proposal it is supposed to be could reach nearly $171 billion. And most of that money
defending. is transacted in cash. Needless to say, this is not the most
efficient way to run a business.
An alternative to this ongoing process would be for Con-
gress to pass legislation calling for a rescheduling of can- "Not only do cash payments fail to provide the most con-
nabis, but no consensus regarding such legislation on venient and modernized customer experience, but they
Capitol Hill has emerged, according to a February 2024 also create public safety concerns and invite increased
blog post by attorneys with the Washington, DC-based criminal activity," the law firm Goodwin wrote in a March
law firm Akin Gump Strauss Hauer & Feld LLP. 2024 blog post.
Most banks shy away from pot shops
Some ISOs and agents have sought to find ways around
Most banks and credit unions are not keen on working this problem by, for example, setting up these businesses
with pot shops, for fear of incurring the wrath of regula- with cashless ATMs, also known as point-of-banking ter-
tors. Proposed legislation known as the Safe Banking Act minals. In this scenario a dispensary sets up a payment
was written to protect financial institutions from running device that's registered as an ATM. Customers then use
afoul of federal bank regulators when providing banking their debit cards to pay for transactions, rounded up to the
services to state-sanctioned cannabis businesses. nearest whole dollar.

That legislation has received bipartisan support on both It was a good workaround while it lasted. But then both
sides of Capitol Hill but has failed to accumulate the votes Visa (in 2021) and Mastercard (in 2023) issued warnings
needed to make it to the President's desk. to banks that cashless ATMs installed at pot shops vio-
lated their rules, and they threatened enforcement action
While Congress has failed to act, the Financial Crimes against acquirers and banks supporting these arrange-
Enforcement Network, which is part of the U.S. Treasury ments.
Department, and the Department of Justice have issued
guidance to FIs that want to work with cannabusinesses. Goodwin, in its blog post, suggested that ACH payments
are "generally permissible in the context of cannabis sales.
The guidance primarily focuses on required reporting, We recommend that merchants consider collaborating
such as Suspicious Activity Reports and monitoring cli- with payment providers that support ACH processing at
ents for compliance with the Bank Secrecy Act, as well as the point of sale," the law firm wrote.
the need for robust internal controls
CanPay, based in Littleton, Colo., is one example of a com-
These requirements, along with long-held federal prohibi- pany using this bank-to-bank payment scheme. It reports
tions on manufacturing, selling and using cannabis have that more than 300,000 consumers nationwide use its mo-
kept most banks out of the running to serve cannabusi- bile debit app to facilitate ACH payments to 1,100 dispen-
nesses. saries.

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