By Nivedita Balu

Dec 18 (Reuters) – U.S. President Donald Trump’s move to relax marijuana regulations could ease some burden for cannabis companies, but will likely keep doors to access capital from big banks closed, experts said. 

Cannabis companies, once in the spotlight during their boom, have limitations to access capital, often relying on smaller banks or alternative lenders, credit unions that come with higher borrowing costs. The executive order seeks a speedy reclassification of marijuana that would ease federal restrictions on research that could lead to new medical marijuana products.

While Trump’s order that reclassifies cannabis as a controlled substance is good news for cannabis companies and removes red tape, including compliance costs, large lenders will remain on the sidelines unless it is federally legal, as lending could spark risks. 

“Rescheduling is great progress, but I do not expect it to open the lending floodgates for cannabis operators, or for it to be materially behavior-altering for larger banks,” said Samantha Gleit, a partner at Feuerstein Kulick leading the firm’s debt finance and corporate restructuring practices.   

“Until there is full federal legalization, lending and providing treasury services to cannabis companies will continue to be a banking hurdle, particularly for the larger institutions that need to maintain their FDIC ensured status.”  

Even under a reclassification, marijuana would still be treated as a controlled substance on a federal level and its use subject to tight restrictions and criminal penalties.  

“For big banks, this isn’t the moment they … start handing out term sheets. You might see some regional or tech-savvy banks start edging closer to the pot of gold, but not (the big banks),” said Michael Ashley Schulman, chief investment officer at Running Point Capital Advisors.

Most major American and Canadian banks declined comment. Some others referred questions to the American Bankers Association. 

The American Bankers Association, which represents major banks, said it would continue to call on Congress and the administration to pass the bipartisan SAFER Banking Act, which would give financial institutions the legal certainty they need to offer banking services to cannabis and cannabis-related businesses in the states where it has been legalized. 

“Because cannabis remains illegal under federal law, proceeds from its sale are still considered illicit, which carries significant risks for banks that want to serve the industry,” a spokesperson said. 

For Ari Raptis, CEO of cannabis distributor Talaria Transportation, the news brings optimism but core challenges on accessing capital remain.  

“From a financial standpoint, this improves a lot of optics, but not access. Capital follows clarity and clarity still hasn’t arrived yet,” Raptis said. 

(Reporting by Nivedita Balu in Toronto; Editing by Stephen Coates)

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