Safe Harbor Financial Submits Comments to the Justice Department Regarding Cannabis Rescheduling

Rhea-AI Summary

Safe Harbor Financial (NASDAQ: SHFS) has submitted comments to the Justice Department regarding the proposed reclassification of cannabis from Schedule I to Schedule III of the Controlled Substances Act. This change, while not legalizing cannabis, could significantly impact the industry by:

1. Alleviating tax burdens imposed by Section 280E, potentially adding over $100 million to large operators' balance sheets.
2. Creating a more favorable business environment for cannabis companies and financial service providers.
3. Increasing banking and transaction activity among Safe Harbor's clients.

Despite the reclassification, compliance requirements under the Bank Secrecy Act and Anti-Money Laundering regulations remain unchanged. Safe Harbor emphasizes its continued relevance in the cannabis financial services sector, expecting industry growth to increase demand for its services.

Positive

• Potential reclassification of cannabis to Schedule III could alleviate tax burdens for cannabis businesses
• Reclassification may lead to increased banking and transaction activity for Safe Harbor Financial
• Company expects industry growth to increase demand for its financial services
• Safe Harbor's first-mover status and expertise position it well for continued growth in the evolving regulatory landscape

Negative

• Reclassification does not change the federal illegality of cannabis
• Compliance requirements under BSA and AML regulations remain unchanged, maintaining operational complexities

GOLDEN, Colo., July 16, 2024 (GLOBE NEWSWIRE) -- SHF Holdings, Inc., d/b/a/ Safe Harbor Financial (“Safe Harbor” or the “Company”) (NASDAQ: SHFS), a leader in facilitating banking, payments and financial services to the regulated cannabis industry, announced that it has submitted comments to the Justice Department, following its recent proposed rule to reclassify cannabis from Schedule I to Schedule III of the Controlled Substances Act (“CSA”), consistent with the view of the Department of Health and Human Services (“HHS”) that cannabis has a currently accepted medical use as well as HHS’s views about marijuana’s abuse potential and level of physical or psychological dependence.

For the past 54 years, cannabis has been categorized as a Schedule I controlled substance under the Controlled Substances Act. Schedule I drugs, substances or chemicals are defined as drugs with no currently accepted medical use and a high potential for abuse.

The publication of this proposed rule initiates a public comment period that will remain open until July 22, 2024. Comments can be submitted electronically via the Federal eRulemaking Portal using the reference: ‘Docket No. DEA-1362.’

Safe Harbor Financial Chief Legal Officer Donnie Emmi:
Safe Harbor Financial welcomes the proposed rule to reclassify marijuana from Schedule I to Schedule III of the Controlled Substances Act. This reclassification represents significant progress in aligning federal policy with the growing recognition of the medical benefits of cannabis. However, it is important to clarify what this potential change does and does not mean for our industry.

First and foremost, the reclassification does not make marijuana legal, as it remains an illegal substance under federal law. From a banking perspective, the compliance requirements under the Bank Secrecy Act (BSA) and Anti-Money Laundering (AML) regulations remain unchanged. Banks must continue to adhere to these stringent regulations to avoid significant fines and penalties.

The reclassification to Schedule III is expected to have several positive impacts on the cannabis industry. Most notably, it will alleviate some of the severe tax burdens imposed by Section 280E of the Internal Revenue Code. Currently, cannabis businesses cannot deduct many of their operating expenses, leading to inflated tax liabilities. The change to Schedule III will allow these businesses to deduct expenses more akin to standard business operations, potentially adding significant amounts to their balance sheets. For example, some large operators could see more than $100 million added to their balance sheets, enabling them to reinvest in and expand their operations and create jobs.

Overall, the rescheduling of cannabis will create a more favorable business environment for Safe Harbor Financial and the businesses we serve – enabling each to expand its services, reduce operational risks and capitalize on new market opportunities. While this does not change the illegality of cannabis or change compliance requirements under the Bank Secrecy Act, the move to Schedule III represents progress.

For Safe Harbor, this reclassification underscores our continued relevance and importance in the cannabis financial services sector. Despite fears that regulatory changes might diminish our role, the reality is quite the opposite, as the expectation is that the industry will grow considerably, increasing the need for our unique service platform. The reclassification is likely to lead to increased banking and transaction activity among our clients, benefiting Safe Harbor through higher transaction volumes and enhanced financial stability.

In addition, the cannabis industry remains cash-intensive, similar to other sectors like liquor stores, tobacco and adult entertainment venues, due to restrictions on credit card processing and other financial services. As the regulatory landscape evolves, Safe Harbor will remain a crucial partner for cannabis and other high risk banking businesses.

In conclusion, Safe Harbor remains committed to supporting the regulated cannabis industry through these changes. Our first-mover status and deep industry expertise position us uniquely to continue providing essential financial services, ensuring the growth and success of our clients.

About Safe Harbor
Safe Harbor is among the first service providers to offer compliance, monitoring and validation services to financial institutions, providing traditional banking services to cannabis, hemp, CBD, and ancillary operators, making communities safer, driving growth in local economies, and fostering long-term partnerships. Safe Harbor, through its financial institution clients, implements high standards of accountability, transparency, monitoring, reporting and risk mitigation measures while meeting Bank Secrecy Act obligations in line with FinCEN guidance on cannabis-related businesses. Over the past nine years, Safe Harbor has facilitated more than $21 billion in deposit transactions for businesses with operations spanning over 41 states and US territories with regulated cannabis markets. For more information, visit www.shfinancial.org.

Forward-Looking Statements
Certain statements contained in this press release constitute "forward-looking statements" within the meaning of federal securities laws. Forward-looking statements may include, but are not limited to, statements with respect to trends in the cannabis industry, including proposed changes in U.S. and state laws, rules, regulations and guidance relating to Safe Harbor's services; Safe Harbor's growth prospects and Safe Harbor's market size; Safe Harbor's projected financial and operational performance, including relative to its competitors and loan performance; new product and service offerings Safe Harbor may introduce in the future; the impact of recent volatility in the capital markets, which may adversely affect the price of the Company's securities; Safe Harbor's ability to make the same or similar loans in the future; the outcome of any legal proceedings that may be instituted against Safe Harbor; other statements regarding Safe Harbor's expectations, hopes, beliefs, intentions or strategies regarding the future; and the other risk factors discussed in Safe Harbor's filings from time to time with the Securities and Exchange Commission. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words "anticipate," "believe," "continue," "could," "estimate," "expect," "intends," "outlook," "may," "might," "plan," "possible," "potential," "predict," "project," "should," "would," and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements are predictions, projections and other statements about future events that are based on current expectations and assumptions and, as a result, are subject, are subject to risks and uncertainties. These forward-looking statements involve a number of risks and uncertainties (some of which are beyond the control of Safe Harbor), and other assumptions, that may cause the actual results or performance to be materially different from those expressed or implied by these forward-looking statements.

Media Contact Information
Safe Harbor Media
Ellen Mellody
570-209-2947
safeharbor@kcsa.com

Investor Relations Contact Information
Safe Harbor Investor Relations
ir@SHFinancial.org

KCSA Strategic Communications
Phil Carlson
safeharbor@kcsa.com

FAQ

What impact would cannabis rescheduling have on Safe Harbor Financial (SHFS)?

Cannabis rescheduling to Schedule III could benefit Safe Harbor Financial (SHFS) by increasing banking and transaction activity among its clients, potentially leading to higher transaction volumes and enhanced financial stability for the company.

How would the proposed cannabis rescheduling affect tax burdens for cannabis businesses served by Safe Harbor Financial (SHFS)?

The proposed rescheduling of cannabis to Schedule III would alleviate tax burdens imposed by Section 280E, allowing cannabis businesses to deduct more operating expenses. This could potentially add over $100 million to large operators' balance sheets, enabling reinvestment and expansion.

Will the proposed cannabis rescheduling change compliance requirements for Safe Harbor Financial (SHFS)?

No, the proposed rescheduling of cannabis does not change compliance requirements for Safe Harbor Financial (SHFS). The company must continue to adhere to Bank Secrecy Act (BSA) and Anti-Money Laundering (AML) regulations.

What is Safe Harbor Financial's (SHFS) stance on the proposed cannabis rescheduling?

Safe Harbor Financial (SHFS) welcomes the proposed rescheduling of cannabis from Schedule I to Schedule III, viewing it as significant progress in aligning federal policy with the growing recognition of cannabis's medical benefits. The company sees this as an opportunity for industry growth and increased demand for its services.