Interesting to see the mainstream legal press report on the issue, It’s not something we normally see.
In response to the devastating economic impact of the coronavirus pandemic, Congress came to the rescue of American businesses, small and large, by approving an estimated $2 trillion stimulus package, known as the Coronavirus Aid, Relief, and Economic Security Act. The CARES Act, in part, prescribes $349 billion in small business loans to help American companies stay afloat during this economic crisis.
In addition to enacting the CARES Act, President Donald Trump signed into law the Coronavirus Preparedness and Response Supplemental Appropriations Act, which contains a $20 million grant to the Small Business Administration Disaster Relief Fund to provide additional low-interest loans to companies affected by COVID-19.
Like most other American businesses, cannabis companies are struggling with major economic setbacks, yet they are denied tapping into these SBA loans on the basis of their federal legality and their ability to comply with “all applicable federal laws and regulations.”
The cannabis industry includes both hemp and marijuana businesses. Hemp became legal upon the enactment of the Agriculture Improvement Act of 2018 (better known as the 2018 Farm Bill), which expressly removed the agricultural crop from the definition of marijuana under the Controlled Substances Act (CSA). Although heavily regulated, hemp is no longer controlled in the classic sense. Marijuana, on the other hand, remains a Schedule I substance under the CSA, which means the cultivation, manufacture, distribution, and possession of the plant is illegal under federal law. Therefore, while qualified hemp businesses are entitled to the same stimulus relief as businesses in most other industries, marijuana businesses are not.
In a statement released shortly after the enactment of the CARES Act and of the Coronavirus Preparedness and Response Supplemental Appropriations Act, SBA spokesperson Carol Chastang explained:
Because federal law prohibits the sale and distribution of cannabis, the SBA does not provide financial assistance to businesses that are illegal under federal law. […] Businesses that aren’t eligible include marijuana growers and dispensers, businesses that sell cannabis products, etc., even if the business is legal under local or state law.
This is not a new SBA position. In a 2018 Police Notice, the SBA explained that neither “Direct Marijuana Businesses” nor “Indirect Marijuana Businesses” are eligible for SBA-funded assistance.
More recently, the SBA released the 2019 Information Notice, in which it further clarified that cannabis businesses are not entitled to receiving money appropriated for disaster relief because the CSA continues to prohibit the sale, manufacture, distribution, and possession of marijuana.