Despite remaining federally prohibited, almost half of the American population reside in a state where, for those over age 21, marijuana is legal for both medical and recreational use. The consistent wave of states legalizing the substance has garnered much attention, and so has the Department of Justice's recent proposal to reschedule marijuana from Schedule I to Schedule III. The potential rescheduling has raised many eyebrows and perhaps even more questions, including questions related to its effect on banking.

What We Know

The Controlled Substances Act (CSA) categorizes substances into five schedules, gauging their potential for abuse, medical utility, and risk of harm. As of June 10, 2024, marijuana and derivatives with over a 0.03% THC concentration, maintain the dreaded "Schedule I" status. Substances in this category are deemed "armed and dangerous," with essentially no redeeming qualities. As such, they face the most stringent controls, garner the longest prison sentences, and lack any recognized medical applications.

Rescheduling marijuana to Schedule III would not instantly legalize it federally or remove it from DEA and FDA oversight. The change, however, could offer advantages to marijuana-related ventures and facilitate sorely needed clinical research. Specifically, moving marijuana from Schedule I to Schedule III would allow state-legal marijuana businesses to deduct ordinary business expenses on federal tax filings. Schedule I drug businesses are not allowed such deductions. Additionally, some criminal penalties for CSA violations would be reduced.