Cannabis Rescheduling Update for ISVs

Cannabis reclassification opens up new opportunities for software developers interested in tapping into this lucrative, but challenging, market.

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Rumors about a coming cannabis reclassification have been swirling for years. Those rumors intensified following an August 2023 recommendation from the Department of Health and Human Services (HHS) to the Drug Enforcement Agency to move marijuana from a Schedule I to Schedule III substance. On May 21, the DEA took a major step forward, publishing a proposed rule based on that guidance.

Even with this development that takes cannabis rescheduling closer to the finish line, there are still hurdles to cross. Cannabis Business Times reports that it’s possible that rulemaking would be final by Election Day, November 5, 2024. However, public comment on the rule and then action to finalize will take time. There are also issues to resolve, such as the Canna Provisions lawsuit, a federal lawsuit challenging restrictions on cannabis – will there still be a case if the classification changes?

Dispensaries and the IRS will also have to come to terms with 26 U.S. Code 280E regarding expenditures in connection with the sale of illegal drugs. If cannabis rescheduling becomes final, this rule won’t immediately change, so dispensaries and the like will need guidance from you and other professionals to keep them compliant and make investments at the right time so they can see a tax benefit.

The Current State

Because of marijuana’s Schedule 1 classification, those running cannabis dispensaries for adult and medical use are required to comply with numerous restrictions. And those regulations also impact growers, banks, and payment providers.

One of the biggest issues is how to take payment. Because banks won’t risk facilitating payments for substances the federal government considers illegal, cannabis retailers can’t accept credit cards like other merchants can. Some dispensaries have ATMs onsite, allowing customers to withdraw cash to pay. There are pros and some pretty substantial cons to this model. When customers pay with cash, businesses don’t have to deal with overdrafts, chargebacks, or bad checks. On the other hand, dispensaries and cannabis retailers need to overcome cash management challenges. They need ample, secure cash storage, solutions that help employees identify counterfeit bills, and surveillance or other solutions that help prevent or collect evidence if the dispensary is the victim of theft or employee fraud.

What the Future May Hold

If cannabis rescheduling becomes a reality, the industry will still need to establish regulations (and trust) between cannabis businesses and financial institutions. The SAFER Banking Act could meet that need. This proposed legislation would allow banks to provide services in states where cannabis is legal. Although the act hasn’t successfully passed to date, cannabis rescheduling reclassification could give the act new life.

Again, legislative activity moves on its own schedule, so it’s unlikely this act could become law before 2025.

Still, with cannabis rescheduling and possibly more appetite for the SAFER Banking Act, it may mean that this market will be ready to deploy new point of sale and payment solutions. Forward-thinking ISVs might want to be readying solutions for market.

The Way Forward

The cannabis industry is booming in the US and total sales are projected to reach $42.98B in 2024. Even if reclassification is delayed, the marijuana industry is still expected to continue to grow.

For the moment, the cash-only business model is a reality in this booming market, projected to reach $42.98 billion this year. However, you should prepare for change. The potential rescheduling of cannabis presents a prime opportunity for software developers to create innovative solutions for dispensaries. If cannabis moves to a more regulated system, dispensaries will need tools to comply with new regulations, track inventory, and manage sales. This could include software for point-of-sale systems, age verification, seed-to-sale tracking, delivery, and customer loyalty programs. With a growing legal market, developers who can meet these needs may be able to steal market share from incumbent software offerings.

Micah Goring

Micah Goring is a contributing editor for DevPro Journal.


Zebra MC9400
Micah Goring

Micah Goring is a contributing editor for DevPro Journal.