A pragmatic recap of cannabis rescheduling’s return to the center of boardroom and risk-committee conversations and what it has actually changed for banks and credit unions evaluating commercial lending to cannabis-related businesses (CRBs).
President Trump’s December 18 executive order directing the DOJ to resume and expedite rulemaking to move cannabis from Schedule I to Schedule III reignited political momentum, but it did not reset the compliance landscape. For early and experienced cannabis lenders alike, the core reality held: narrative progress outpaced regulatory relief.
Rescheduling sharpened the strategic question for financial institutions, whether expanded lending represents a true shift in risk and opportunity, or simply a louder version of the same constraints. The answer landed firmly in the middle. While optics and competitive positioning evolved, foundational obligations around BSA/AML, due diligence, and supervisory expectations remained largely intact.
In this session, Chris Van Dyck, Partner at Cogent Law, examined what changed, what did not, and where institutions found durable opportunity.
The discussion cut through headline optimism to focus on practical lending implications, compliance continuity, and how banks and credit unions positioned themselves to compete responsibly as cannabis regulation continued its slow, uneven evolution..
A Career Spent on Both Sides of the Table
The event was led by a former financial regulator and BSA officer who helped implement one of the country’s earliest CRB banking programs before joining Cogent Law.
That dual perspective, regulator turned practitioner, frames the discussion: this is not theory, but guidance shaped by real examinations, real enforcement actions, and real balance-sheet exposure.
Rescheduling: A Strong Symbol, Limited Change
Moving cannabis to Schedule III is institutionally significant. It acknowledges medical benefits and opens the door to federally supported research. Yet even after rulemaking:
- Medical and adult-use CRBs will continue to operate in a federally illegal space until the FDA builds a comprehensive regulatory framework.
- Adult-use cannabis will remain outside any federal legalization regime even after FDA action.
- The 2014 FinCEN guidance remains fully in force, including enhanced onboarding, continuous due diligence, rolling SAR filings, and examiner expectations that have only intensified over time.
Rescheduling may reduce stigma and soften boardroom conversations, but it does not amount to banking reform.
The Three Risk Circles
Cannabis banking risk is best understood as three overlapping circles:
Compliance / BSA Risk
- This remains the dominant exposure. Failure to meet FinCEN expectations can result in documents of resolution, memoranda of understanding, or, in extreme cases, public cease-and-desist orders, as occurred with a credit union in 2022.
Reputational Risk
- Contrary to common fear, reputational risk is usually overstated. At industry conferences, no institution reported losing customers for banking cannabis. The real reputational damage arises when a bank enters the space without preparation and later exits, leaving CRBs stranded.
Legal Risk
- Despite federal illegality, prosecutors show little appetite to pursue highly regulated institutions that are safely vaulting cash and advancing public-safety goals. Financial institutions are viewed as the domain of regulators, not criminal prosecutors.
Post-rescheduling, these circles may shrink modestly, especially reputational and legal risk, but compliance remains firmly at the center.
From Deposits to Lending: Where Risk Stacks
For institutions already offering deposit services, commercial lending is the natural next question. The guidance here is unequivocal: lending does not replace deposit risk; it stacks on top of it.
FinCEN’s use of the term “financial services” strongly implies that both depository and credit activities fall under the same SAR and monitoring regime. Lending introduces new layers of complexity:
- Stickier relationships. Loans deepen CRB relationships, increasing revenue but creating tension if the BSA officer later determines the relationship must be terminated while balances remain outstanding.
- Borrower selection. Institutions are encouraged to prioritize CRBs with strong compliance track records, rewarding good behavior through access to credit (“carrots for compliance”).
- Ongoing monitoring. Loan purpose, use of proceeds, payment sources, and guarantor status must be monitored throughout the life of the loan.
This demands a far tighter connection between commercial lending teams and the BSA function than most institutions maintain today.
Collateral, 280E, and the Technical Core of Lending
Three product-design elements sit at the heart of CRB lending:
Collateral
- Real estate and other tangible assets are preferred. Institutions are strongly cautioned against using plant or product as collateral, which can create severe legal complications in default scenarios.
Valuation
- Conservative valuation is critical. Assets should be underwritten under a non-cannabis use case rather than inflated by niche cannabis premiums that may evaporate with regulatory or market shifts.
Section 280E
- Once rescheduling occurs, Section 280E of the federal tax code will no longer apply. CRBs will be able to deduct ordinary business expenses, improving margins and balance-sheet quality, an immediate and material underwriting improvement.
CRB-Specific Documentation
Institutions are advised to develop CRB-specific commercial loan side agreements addressing:
- Post-closing BSA obligations
- Permitted uses of proceeds
- Collateral usage limitations
- Default or renegotiation triggers tied to regulatory change
This documentation is not optional; it is the contractual backbone of a defensible CRB lending program.
Strategic Next Steps
Institutions contemplating or expanding CRB lending should already be:
- Updating strategic plans and commercial lending policies
- Establishing individual and portfolio-level exposure limits
- Defining approval authorities and documenting board engagement
- Scrubbing portfolios for cannabis and hemp exposure and stress-testing accordingly
- Preparing clear communications for CRB customers clarifying that rescheduling does not eliminate BSA obligations
Boards that fail to document visible involvement should expect examiner scrutiny.
The Bottom Line
Rescheduling might change the story boards tell themselves about cannabis, but it does not meaningfully reduce the operational burden of banking CRBs.
The institutions that will emerge as market leaders are not those riding political headlines, but those building disciplined risk frameworks now ready for a post-rescheduling reality that still lives firmly inside the BSA.