New Small Business Association Rules May Spell Trouble for Legal Weed

In April, CNBC reported on a slight change to the U.S. Small Business Administration (SBA) that could cause real problems for the legal marijuana industry. The agency’s lending rules have tightened to restrict interaction between banks and any company working within the marijuana industry.

Who is behind this move? What are the political ramifications? How will the industry respond? This blog will take a look at the latest changes to the fledgling marijuana industry.

Jeff Sessions Hates My Business

We’ve written in the past about the politics behind rulings like what just happened with the SBA. The problem lies in the concept that states can pass their own individual laws that sometimes directly conflict with federal law. This makes for a sometimes-conflicting patchwork of laws that typically must be coordinated with a ruling by the U.S. Supreme Court.

The issue with marijuana today is that thirty states and the District of Columbia have passed some sort of legislation allowing some sort of marijuana consumption. The conflict here is that federal law places cannabis in the same legal category as other drugs, like heroin, that has no medical benefit. This creates the unusual situation where people are being arrested for possessing pot by the federal government when the state allows possession and consumption of the plant.

Too, there is Attorney General Jess Sessions that has said things like, “Good people don’t smoke pot.” When you consider that the Attorney General’s role is like the top cop of the United States, this is rightfully making anyone who believes marijuana cures diseases very nervous.

True to form, the SBA just changed its rules to prevent banks from using SBA-sponsored loans to finance any business within the marijuana industry. The agency quietly released the new public policy notices but they could have a big impact on other types of businesses, as well. That’s because CNBC reports that the language defines the businesses covered under this rule as those that “derived any of its gross revenue for the previous year from sales to direct marijuana businesses.”

While it’s clear that government loans would not be available to, say, a bong manufacturer, the law could broaden upon application. For example, a liberal interpretation of the ruling could mean that businesses that sell potting solid to marijuana grow farms could be prevented from using SBA-sponsored loans.

CNBC also says the new SBA rule prohibits lending to any business producing and selling hemp products unless they can demonstrate that they are in no way tied to the marijuana industry.

The irony is that public support for marijuana is increasing even as the feds seek to shut it down. Cash-strapped states have gotten a taste of the tax revenue for these booming businesses – and they want more. In fact, CNBC says the legal marijuana industry is expected to generate $24.5 billion by 2021

It’s clear that the current administration is eschewing states rights in favor of regulations that are both unpopular with the public and outdated; there is plenty of research showing the health benefits of pot beyond it’s use as an intoxicant.