In a significant development for the cannabis industry, U.S. health officials have recommended easing restrictions on cannabis and reclassifying it as a Schedule III drug under the Controlled Substances Act. The move could open the door to more cohesive payments systems in the sector.
Currently, cannabis is classified as a Schedule I substance, which implies a high risk of abuse and no accepted medical use. The Department of Health and Human Services (HHS) has written to the Drug Enforcement Agency (DEA), urging them to reconsider the classification, according to Bloomberg News on Wednesday (Aug. 30).
If cannabis were to be reclassified as a Schedule III drug, it would be seen as less dangerous and could be obtained legally with a prescription. The news of the recommendation has already caused a surge in cannabis stocks, with the BI Global Cannabis Competitive Peers Index jumping as much as 11%.
The issue is that although at the state level, cannabis is gaining ground, legal retailers have had problems facilitating payments because it is illegal on the federal level, meaning banks regulated by the federal government can’t process transactions, making it nearly impossible for shops to accept payments other than cash.
However, dispensaries can accept cards, meaning cashless ATMs could process some of the about $28 billion that had been projected to come in from U.S. dispensary sales in 2022. PYMNTS reported last year that cashless ATMs have been used to process around $7 billion in cannabis transactions.
As an indicator of the size of potential business payments, consider that the B2B cannabis platform LeafLink passed the $1 billion transaction mark last September with its payment solutions and expected more growth.
“LeafLink looks to the future of cannabis and constantly strives to elevate the ways retailers and brands transact with each other,” LeafLink CEO and Co-Founder Ryan G. Smith said at the time. “As cannabis rapidly evolves, it is essential that our platform keeps up with the changing needs of our customers as we provide critical liquidity to the industry.”
A DEA spokesperson confirmed Wednesday the HHS and said the DEA will now conduct its own review, per Bloomberg.
President Joe Biden has already taken steps to ease penalties associated with cannabis use, including pardoning all prior federal offenses of simple possession. He has also directed the HHS secretary and the US Attorney General to review how cannabis is scheduled based on medical use, potential for abuse, safety, and potential for dependence.