Litigation over Legislation: The Cannabis Industry's New Battle for Banking and Federal Reform in 2023

Litigation over Legislation: The Cannabis Industry's New Battle for Banking and Federal Reform in 2023

The cannabis industry in the United States has been navigating a complex and often contradictory legal landscape for several years. The tension between state laws legalizing various forms of cannabis use and the federal government’s continued prohibition under the Controlled Substances Act (CSA) has created significant challenges for businesses operating in this space. As of 2023, with the federal landscape still largely unchanged, the industry is exploring new strategies, including litigation, to push for reform. This article delves into the current status of the SAFER (Secure And Fair Enforcement) Banking Act, its implications for the cannabis industry, and the emerging trend of litigation as a tool for change.

Background: The SAFE to SAFER Banking Act

The SAFE Banking Act, initially introduced in Congress, aimed to resolve one of the major issues facing the cannabis industry: access to banking services. Because cannabis remains illegal under federal law, financial institutions are reluctant to serve cannabis-related businesses, fearing legal repercussions. This situation has forced many cannabis businesses to operate on a cash-only basis, creating logistical challenges and security risks.

In 2023, the SAFE Banking Act was reintroduced with revisions, rebranded as the SAFER Banking Act. This Act sought to provide legal protections for banks and financial institutions that choose to service cannabis businesses in states where it’s legal. The revisions aimed to address concerns from various stakeholders and increase the bill’s chances of passing.

Current Status and Challenges

Despite initial optimism, the SAFER Banking Act did not make significant progress in Congress as 2023 drew to a close. The lack of federal action has left cannabis businesses in a state of uncertainty and risk, unable to fully integrate into the mainstream financial system. This ongoing struggle highlights the broader issue of federal inaction on cannabis reform, despite increasing state-level legalization and public support for cannabis decriminalization.

Litigation as a New Strategy

With legislative efforts stalling, major cannabis operators, known as multi-state operators (MSOs), are increasingly turning to litigation as a strategy for reform. The most notable case is the lawsuit filed by Verano Holdings Corp in the United States District Court for the District of Massachusetts, challenging the constitutionality of the Controlled Substances Act (CSA). This lawsuit represents a direct attack on the federal prohibition of cannabis and highlights the growing frustration within the industry.

Implications for the Cannabis Industry

The move towards litigation marks a significant shift in strategy for the cannabis industry. If successful, these lawsuits could pave the way for more comprehensive federal reform, potentially resolving the conflict between state and federal laws. However, the outcome of such legal battles is uncertain, and the process is likely to be lengthy and complex.

As 2023 ended, the cannabis industry has found itself at a crossroads. The stagnation of the SAFER Banking Act and the ongoing challenges posed by the CSA have pushed the industry towards litigation as a means of seeking reform. While the outcomes of these legal efforts remain to be seen, they underscore the industry’s determination to resolve the legal paradoxes that have long hindered its growth. The coming years will be crucial in determining whether these strategies will bring about the desired changes in federal cannabis policy.