December 9, 2019

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Banking on Marijuana? The DEA Just Says No (Again)

On August 12, the US Drug Enforcement Administration (DEA) announced its rejection of two petitions seeking to reclassify marijuana as a less-regulated Schedule II substance under the federal Controlled Substances Act (CSA). This means that the drug’s federal classification as an illegal Schedule I substance with a “high potential for abuse” and “no currently accepted medical use” will be left in place (read our  LawFlash for more detail on the DEA’s decision).

The DEA’s decision runs squarely against the state law trend of legalizing marijuana for medicinal and recreational purposes. However, with few exceptions, banks across the country have been reluctant to do business with marijuana-related businesses precisely because of the drug’s federal treatment under the CSA, notwithstanding the prior conditional “non-prosecution” positions taken by the Financial Crimes Enforcement Network and the US Department of Justice on the issue. Banks’ reasoning on this matter is simple: due to the federal treatment of marijuana as an illegal substance, doing business with marijuana concerns is simply not worth the regulatory and law enforcement risk.

The DEA action will do nothing to encourage the banking industry to reconsider its reluctance to handle marijuana-related dollars. Apparently, that development will have to await future congressional action—if any—to change the treatment of marijuana under federal law.

Copyright © 2019 by Morgan, Lewis & Bockius LLP. All Rights Reserved.

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About this Author

Charles Horn, financial services attorney, Morgan Lewis
Partner

Charles M. Horn is a partner in Morgan Lewis's Investment Management and Securities Industry Practice. Mr. Horn focuses his practice on regulatory and transactional matters, primarily in the areas of banking and financial services. He works on behalf of domestic and global financial institutions of all sizes on regulatory, supervisory, enforcement and compliance matters before all major federal financial institutions regulatory agencies, and leading state financial regulatory agencies.

202-739-5951
Paul Bessette, Morgan Lewis, Utilities and Energy Attorney
Partner

Paul M. Bessette counsels nuclear utilities, reactor designers, and other nuclear service providers in licensing, regulatory, adjudicatory, and litigation matters. He has litigated more than 10 lawsuits before the US Court of Federal Claims in connection with federal obligations to accept and remove spent nuclear fuel, and supports ongoing settlements of spent fuel claims with the government. He also advises clients on licensing of new-generation nuclear power plants, and counsels nuclear utilities in their applications to renew existing nuclear power plant operating licenses.

202-739-5796