Biden move is a boon for cannabis capitalism
"This is massive. Both for the industry and obviously from a social equity perspective," explains Karan Wadhera
Dan Primack, author of Axios Pro Rata
President Biden on Thursday said that he'll ask for a review of whether marijuana should remain classified as a Schedule 1 substance under federal law.
Why it matters: This could be momentous for the upstart U.S. cannabis industry, which has been slowed at every turn by federal prohibitions.
What to know: Most cannabis companies are unable to use federally chartered banks, largely owing to the Schedule 1 designation, and instead are relegated to using state-chartered banks and credit unions.
Not only does this limit borrowing opportunities, but it also negatively impacts cannabis companies' abilities to take credit cards and otherwise process payments.
A proposed bill called The SAFE Banking Act would help remedy this situation, but Biden's move could help set the conditions for passage.
Other impacts: Removing the Schedule 1 classification also could help more cannabis companies move public stock listings from Canada to the U.S., and also better enable federally funded researchers to study the plant's medicinal benefits.
Caveats: Removing the Schedule 1 classification isn't necessarily synonymous with full legalization in all 50 states.
There's no public timetable for when the Departments of Justice and Health & Human Services will begin their reviews, let alone complete them. Nor are the outcomes predetermined.
By the numbers: 330 U.S.-based cannabis companies raised around $3.1 billion in venture capital in 2021, according to research firm PitchBook. The data through late August of this year was a bit more modest, with around $900 million for 109 companies.
Elsewhere: Biden also announced plans to pardon all federal offenses of simple marijuana possession, and called on governors to do the same in their states.
What they're saying: "This is massive. Both for the industry and obviously from a social equity perspective," explains Karan Wadhera, managing partner of cannabis-focused VC firm Casa Verde Capital. "People have been waiting for this ever since Biden took office."
Wadhera adds that venture capital has always been comparably scarce for cannabis startups, which helped keep valuations from rising apace tech startups before this year's correction.
The bottom line: Biden's move could spark a ton of new investment in U.S. startups, as a burgeoning industry gets normalized.
