Nevada cannabis businesses have their eyes on Washington right now for a couple of reasons.
For one, a Senate committee for the first time has passed bipartisan legislation to give legal cannabis businesses the same access to banking that other businesses have. The SAFER Banking Act passed through the Senate Banking, Housing and Urban Affairs Committee in late September and would allow licensed cannabis businesses to access banking and insurance services without having to worry about federal law enforcement cracking down.
On top of that, the Department of Health and Human Services in August recommended to the Drug Enforcement Agency that cannabis be rescheduled from Schedule I to Schedule III. Schedule I drugs are defined by the DEA as having “no currently accepted medical use and a high potential for abuse,” and the category includes heroin and methamphetamine, while Schedule III is defined as having “moderate to low potential for physical and psychological dependence,” including ketamine and anabolic steroids.
Layke Martin, Executive Director of the Nevada Cannabis Association, says members and people in the industry have been waiting for these developments.
“It’s been important for our members since the beginning. … When the industry first launched, it was all cash. And obviously, there are many risks associated with that for public safety,” she says of the SAFER Banking Act.
With regard to the federal government’s moves to reschedule cannabis, she says it would correct a misclassification of the drug under federal law. “To have it classified alongside heroin and other drugs that are deemed to have no medicinal use is just an improper classification,” she tells the Weekly.
The SAFER Banking Act
Nevada Sen. Catherine Cortez Masto, who sits on the Senate Banking, Housing and Urban Affairs Committee, introduced SAFER Banking legislation in 2017 and has pushed for it ever since.
In a statement, Cortez Masto called the committee’s vote a “historic step forward that will help keep Nevadans safe.”
“There are so many Nevada business owners who have opened legal cannabis businesses and created jobs across our state, and they should be able to access the same banking services as all other businesses,” Cortez Masto said.
When the industry started, all-cash transactions posed safety risks, Martin says. In Nevada and across the country, cannabis businesses have had no choice but to run a cash payroll and pay vendors in cash. Aside from safety, there’s also a lack of convenience, as businesses have not been able to offer normal credit or debit card transactions. Credit unions have helped fill the gap for financial services.
“Having the business be all cash at the beginning was incredibly challenging. We wanted to make sure that our employees who were transporting the cash were safe and that the locations were safe and not targets for crime, and that our customers were safe,” she says. “A lot of credit unions are doing business … and so that has reduced the amount of cash and the ability for businesses to pay vendors with checks, to do regular payroll.”
In addition to safety and smoother business operations, legislation also could open up access to loans and capital. In 2022, Nevada Sen. Jacky Rosen introduced the Fair Access for Cannabis Small Business Act to provide legal cannabis small businesses access to loans and programs provided by the Small Business Administration.
Senate Majority Leader Chuck Schumer has said he intends to bring the SAFER Banking Act to the Senate floor with “all due speed,” with some possible amendments related to expunging records for cannabis offenses.
“I’ve long advocated for the expungement of records for cannabis offenses, and with SAFER Banking moving through the committee in such a strong, bipartisan way, I believe now is the time to get it done.”
The Department of Health and Human Services’ recommendation to reschedule cannabis comes after President Biden in 2022 ordered a review of the drug. Now, it’s up to the Drug Enforcement Agency to decide whether to follow the recommendation.
Rescheduling cannabis from Schedule I to Schedule III would not legalize marijuana. But it would change the steep taxes cannabis businesses currently are subject to, Martin says.
“The typical business expenses that any other business will deduct, cannabis businesses—even if they’re legal in the states in which they operate—cannot deduct those expenses from their federal taxes,” she says. “The effective tax rate comes in anywhere from 60% to 80% for legal cannabis businesses. Obviously, it’s very challenging for them to pay such a high effective tax rate.”
Martin says the tax code comes from an old law that says any business selling a product that is Schedule I or II cannot deduct ordinary business expenses. “Rescheduling would move cannabis to Schedule III, so that section of the tax code that doesn’t allow deductions would no longer apply to cannabis businesses,” she explains.
There already is an effort in the state, brought by the Cannabis Equity and Inclusion Community, to remove cannabis from the state’s Schedule I list. In 2022, the nonprofit, represented by the ACLU, sued the Nevada Board of Pharmacy over the classification and won. But the Board of Pharmacy has appealed to the Nevada Supreme Court. According to the Nevada Independent, the Nevada Supreme Court has issued a stay of the district court’s order, meaning cannabis remains a Schedule I drug in Nevada.
A’Esha Goins, founder of the Cannabis Equity and Inclusion Community, says she believes the lawsuit will lead to wider efforts to not just reschedule, but fully decriminalize cannabis.
“I think that our lawsuit in the state is the first step in watching national scheduling. … I think it will change here and … will start a domino effect of decriminalization,” Goins says.
“I think most people are looking at rescheduling as an incremental step in the right direction,” Martin says. “There’s still certainly more steps that need to be taken to get to full decriminalization, and rescheduling from one to three doesn’t fully address that.”
Nevada’s Cannabis Advisory Commission has a subcommittee “exploring cannabis rescheduling or descheduling.” Currently the subcommittee is working on a report, required by Senate Bill 277 from the 2023 Legislative Session, to present to the Legislature by March 2024.
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