The Institutionalization of Cannabis Lending: Credit Risk, Regulators, and the Opportunity

By Chris Van Dyck, Partner, Cogent Law, and Ted Robinson, Chief Strategy Officer, CTrust

We have spent the better part of the last decade watching cannabis and hemp banking move from a fringe experiment to a real line of business, and we are now watching the same shift happen with cannabis lending for banks and credit unions. We have presented together many times, and the story is always the same. Institutions that once had this market to themselves are now facing competition, and financial institutions still on the sidelines are running out of reasons to wait.

Cannabis lending is not without risk. But the risks are foreseeable and can be managed with the right partners. What many financial institutions fail to take into account is the lost opportunity cost of not considering this market.

The Easy Money Era Is Over

Not long ago, a financial institution willing to take cannabis deposits could set its own fees. There was little competition, and operators had nowhere else to go. That time is finished. Fees have compressed cannabis prices, while compliance expenses have stayed constant, squeezing margins from deposits alone.

That combination is exactly why lending has become the logical next step for financial institutions with the risk appetite for it. Operators are shopping between banks now, not begging for one. Within the still-small group of institutions that bank cannabis, an even smaller group lends, which is exactly why the window is worth considering.

Where Cannabis Lending Regulatory Risk Actually Sits

Banks have been doing this for twelve, thirteen years now, and not one of them has faced prosecution. As an attorney, I can't tell you that you're never going to be prosecuted, but I can tell you this risk is small, and history is on my side.

Chris Van Dyck, Partner, Cogent Law

That track record matters. It does not eliminate risk, but it should reframe how boards weigh it.

The Three Risks Specific to Cannabis Lending

Cannabis lending introduces certain risks that deposit-only banking does not carry, and cannabis collateral is rarely at its best use once it lands on a financial institution's books.

• Credit risk is the same underwriting discipline that any commercial borrower requires.
• Collateral risk. A cultivation buildout with heavy HVAC and lighting inside ordinary warehouse space needs its own defensible valuation, not a generic commercial appraisal.
• Underwriting risk. Nearly every cannabis loan ends up in a random audit, so the file has to hold up on its own.

Cannabis documents are covenant-heavy. Having the appropriate bad boy carve-outs, the side letters, and a standardized set of docs is only going to enhance your experience when the examiner shows up.

Ted Robinson, Chief Strategy Officer, CTrust

There is also a contractual layer worth building deliberately. We favor cannabis-specific side agreements over provisions buried in standard loan documents, because examiners and borrowers actually read them. Each should include a bad-boy provision to call the loan, an exit clause tied to regulatory changes, and a requirement that the borrower keep primary deposits at the lending institution. Done right, cannabis lending can actually reduce certain risks such as losing cannabis deposits and incentivizing compliance.

Cannabis Lending Compliance: Consistency Is the Whole Game

Examiners want to see consistency across every cannabis loan file: consistent underwriting, consistent risk pricing across borrowers, and clear lines of authority between BSA and lending. Board awareness matters too. Regulators expect cannabis loans in board packages, though board approval of each loan is not required.

Cannabis loan surveillance should begin shortly after origination. Risk ratings should be refreshed on a cadence tied to performance, roughly annually for the strongest credits and quarterly or semiannually for weaker ones, so if a loan moves from performing to sub-performing, there is still time to fix it, rather than sliding straight to non-performing.

What Cannabis Rescheduling and the SAFE Banking Act Actually Change

Cannabis rescheduling has been moving in stages, and it is worth tracking the sequence rather than reacting to headlines.

Key dates so far

• December 18, 2025: President Trump directs the DOJ to move on rescheduling as expeditiously as possible.
• Late April, 2026: the DOJ moves state-licensed medical cannabis to Schedule 3.
• June 29 to July 15: administrative hearing on rescheduling adult-use cannabis.
• August 17: written closing arguments due, with no set timeline for a ruling after that.

The medical move alone delivers real 280E tax relief, improving cash flow and creditworthiness for those borrowers.

The SAFE Banking Act deserves a clear-eyed read too. It does not make cannabis legal. It gives banks a legal safe harbor and directs regulators to revisit compliance burdens. Passage in 2026 looks unlikely, 2027 is the more realistic window. Either way, the 2014 FinCEN guidance has not changed. It is still the baseline for every cannabis and hemp banking program.

The Cannabis and Hemp Banking Wildcard

A separate deadline complicates the picture. Many banks used the 2018 Farm Bill to offer hemp banking without banking cannabis, since hemp did not carry the same filing requirements. What is now known as the "intoxicating hemp loophole" allowed an intoxicating hemp industry to grow up alongside licensed cannabis but in a largely unregulated market.

A pending ban on intoxicating hemp could force financial institutions to reassess those customer relationships quickly. In our view, a well-built cannabis lending program is now the more settled risk of the two.

The Bottom Line on Cannabis Lending for Banks

Cannabis lending is not a leap of faith. It is a documented, examinable business line extension with a clear regulatory playbook, and the institutions treating it that way are winning both the deposits and the loans. The ones waiting for Washington to make the decision easier are handing that revenue margin to someone else.

About the Authors

Chris Van Dyck is a Partner at Cogent Law and has been involved in cannabis and hemp banking for more than a decade. He began his career as a financial regulatory attorney during the rollout of the 2014 FinCEN guidance and later served as General Counsel, Chief Risk Officer, and BSA Officer at a financial institution. During that tenure, he built and scaled the institution's cannabis and hemp banking program into a significant revenue source. Today, he advises financial institutions across the country on launching and expanding compliant programs, including risk management, policy design, lending covenants, and regulatory readiness.

Ted Robinson is the Chief Strategy Officer at CTrust, where he leads business development and financial institution engagement. He brings extensive experience in bank financing and debt collateralization, and previously served as COO of Cinder Cannabis, a vertically integrated multi-state operator with operations in Washington and New Mexico. Before entering the cannabis industry, Ted founded and led SWBC Lending Solutions, a fintech platform that supported more than 300 community banks and credit unions and originated $2 billion in home equity loans annually. He holds a BS in Business Administration from Montana State University.