Cannabis and COVID-19

April 07, 2020

By Eric Altstadter

Before COVID-19, the cannabis industry was a hot industry.  It was going through some changes as would any industry as it matures, but it was still projected to become one of the largest industries in the country, generating tax dollars for federal, state and local governments, and providing jobs to many.

Even after the COVID-19 outbreak and the “stay-at-home” edicts, many locales deemed cannabis stores or dispensaries “essential.”  That meant cannabis dispensaries, along with grocery stores, pharmacies, liquor stores, doctor offices, banks and certain other businesses, provide products and services that people rely on every day. The general definition grants each state some leeway in what is considered essential.

However, cannabis is still a Schedule 1 drug, which means it has “the highest potential for abuse” and “the potential to create psychological and/or physical dependence,” according to the Drug Enforcement Administration of the U.S. Department of Justice.

So while possible changes to Schedule 1 have been proposed, and bills such as the “Secure and Fair Enforcement (SAFE) Banking Act of 2019” have been introduced, cannabis still finds itself on Schedule 1.

That takes on special concerns in a COVID-19 world. 

Because cannabis is still illegal according to the federal government, companies in the industry cannot get any of the funds being offered through the “Coronavirus Aid, Relief, and Economic Security Act” (the “CARES Act”). In addition, cannabis companies are not eligible to participate in the “Paycheck Protection Program,” a program which is intended to aid “small businesses” during the current economic turmoil.

And, cannabis companies are also unable to obtain a low-interest “Disaster Loan” from the Small Business Administration for the same reasons.

Companies operating in the hemp industry, which is not a Schedule 1 drug, should be able to take advantage of the various loan and relief programs. 

These problems will affect the industry for years to come.  

About Eric Altstadter

Eric Altstadter CPA is an Audit Partner with over 30 years of experience working with public companies and privately held businesses. He is the Editor-in-Charge of the firm's SEC Trends & Developments newsletter and a member of NY State Society of CPAs.