Marijuana & the Title Industry: Where Are We Now?

The country is a lot greener than it was just a few years ago, and not just in terms of renewable energy. Forty-seven states, the District of Columbia and four U.S. territories have legalized some form of recreational or medical marijuana, including cannabidiol (CBD). Fourteen states have legalized it in some form in the past two years alone.

Despite growing state support, marijuana remains illegal at the federal level, continuing to expose title professionals who handle transactions involving marijuana farms, dispensaries, or extraction facilities to a myriad of risks. However, that could all change if landmark legislation to reform federal cannabis laws clears the U.S. House of Representatives (House) and Senate and is signed into law by President Biden.   

This article will briefly explore proposed legislation, how it could impact the title industry and why nearly a century of federal cannabis prohibition could soon come to an end.

Marijuana 1-to-3 Act of 2023

This act, reintroduced in January 2023, is designed to move marijuana from a Schedule 1 drug to a Schedule 3 drug under the Controlled Substances Act. Schedule 3 drugs have less potential for abuse, accepted medical application and low to moderate risk of dependence if abused.

Moving marijuana to a Schedule 3 drug would not completely mitigate risk for title professionals working with state-legal marijuana-related businesses (MRBs), but it would significantly reduce the likelihood and severity of associated penalties and fines.

The MORE Act

The Marijuana Opportunity Reinvestment and Expungement Act, better known as the MORE Act, was originally introduced to Congress in July 2019. It cleared the House but not the Senate. Democratic Senators have announced plans to reintroduce the bill this year.

The MORE Act is a historic bill that would remove cannabis from the list of scheduled substances under the Controlled Substances Act, eliminating criminal penalties for any individual who manufactures, distributes or possesses marijuana.

Decriminalizing marijuana would also make it easier for title insurance companies and title agents to do business with licensed MRBs. Under the Controlled Substances Act, the Drug Enforcement Administration currently has the authority to prosecute any entity that knowingly or unknowingly participates in unlawful activity (i.e., making Schedule 1 drugs available to the public). Removing marijuana from that list would allow title professionals to close transactions and insure title for properties that grow, sell or process cannabis where it is legal, without fear of penalty.

The SAFE Banking Act

The Secure and Fair Enforcement Banking Act, or SAFE Banking Act, was reintroduced in March 2021. It also passed in the House but stalled in the Senate. Democratic Senators have also announced plans to reintroduce the bill again this year.

The SAFE Banking Act would permit state-legal MRBs to access the federal banking system – something many have trouble doing now. That’s because most major financial institutions want to avoid the risks of dealing with funds generated from MRBs or complying with the U.S. Dept. of Treasury’s Financial Crimes Enforcement Network (FinCEN) guidance.

Proponents of the SAFE Banking Act argue that forcing MRBs to operate on a cash-only basis makes them sitting ducks for robbers. It also keeps them from holding checking accounts, getting loans, or wiring money, and it creates headaches for tax collectors and vendors who have to count bags of cash.

The SAFE Banking Act would keep banks from being penalized for working with MRBs under the Money Laundering Control Act. It would also alleviate similar concerns for other entities handling or settling financial transactions on their behalf, including title insurance companies and title agents. If MRBs gain access to banking services, it may also make it easier for title professionals to transfer real property (by working directly with lenders and customers to wire electronic funds and process checks).

Why Now?

After years of failed attempts to reverse or reform federal cannabis laws, you may be wondering, “Do these bills actually have a shot at becoming law?” That remains to be seen. A lot has changed in the last few years. Here are just a few drivers behind the momentum.

Health and wellness. While only a fraction of states have legalized recreational marijuana, 38 of them have adopted it for medical use. Physicians prescribe medical marijuana to treat a variety of illnesses and conditions, and CBD products have become popular as a natural way to reduce anxiety, pain and inflammation in humans and their pets.  

Economy. The U.S. cannabis industry is a multi-billion dollar industry and is expected to grow exponentially over the next seven years. If marijuana is legalized and taxed on the federal level, it could provide a significant boon to the economy in terms of revenue and job growth.

Environment. Hemp (which is low in THC, the ingredient that gets you “high”) is widely considered a sustainable and eco-friendly crop. It can be used to produce fabrics, paper, pharmaceuticals and much more.

Increased pressure from constituents. Some form of marijuana is considered legal in 47 U.S. states.

Growing acknowledgement/support in Congress. The Congressional Cannabis Caucus was established in 2017. Congress passed the FARM Bill in 2018, which removed hemp from the list of controlled substances. The MORE Act and the Safe Banking Act were both introduced in 2019 and passed the House in 2020 before stalling in the Senate. The Marijuana 1-to-3 Act of 2023 and the Veterans Medical Marijuana Safe Harbor Act were both reintroduced. More bills like these are expected to follow, with growing bipartisan support.

While the tide may be turning, until the gaps between state and federal cannabis laws close, title professionals are urged to continue carefully weighing all the risks before determining whether to handle marijuana-related business transactions.