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On December 18th, President Trump signed an executive order directing the rescheduling of cannabis from Schedule 1 to Schedule 3—a move that has generated both excitement and confusion across the industry. In this special Qredible Live Broadcast, CEO Brian Fitzpatrick breaks down exactly what this policy shift means for cannabis and hemp operators, covering everything from 280E tax relief timelines to the future of banking reform and the recent hemp industry crisis.
[00:03] Faith: Hi and welcome to the Qredible Bonus Broadcast. Today we had to jump on just so we can discuss Trump's cannabis, hemp, and CBD policy shift. And this is Brian Fitzpatrick, the CEO of Qredible. We have a lot to get to today. So Brian, I'll let you start.
[00:44] Brian Fitzpatrick: We do. We're going to dive right in and you're going to hear me talking a lot. Normally I have a guest, but I'm getting over a cold, so if you hear me going aside and coughing or hitting the mute button, I already told Faith to forgive me for that. But we have a lot to jump into and it's really all about what happened December 18th.
[01:00] Brian Fitzpatrick: President Trump signed an executive order that directed the attorney general to accelerate the process of rescheduling cannabis from Schedule 1 to Schedule 3 under the CSA. So you'll hear me talk about the CSA—we're talking about the Controlled Substances Act. Now, this really marks the most significant federal policy on this in more than five decades.
[01:27] Brian Fitzpatrick: So we're going to talk today about what it is and what it's not. We're going to unpack all of this, what it really means, what it doesn't mean. I've also spent the weekend literally just pouring through social media, looking at LinkedIn and seeing what people are saying about it, what's the sentiment of those in the industry. And we're going to unpack some of that as well.
[01:48] Brian Fitzpatrick: So there's a lot of excitement, but also a lot of confusion and we're going to sort through all of that. I want everybody to realize that this is a step. Okay, it's an important step in the right direction. So what does Schedule 3 mean? Cannabis moves from the most restrictive category—so it's sitting there alongside heroin, LSD, psilocybin, and MDMA—to a Schedule 3. So now it's like sitting next to testosterone and Tylenol with codeine, right?
[02:14] Brian Fitzpatrick: The most important thing here is the federal government now recognizes on paper—the paper being the executive order—that cannabis has accepted medical use and a lower abuse potential. This does not legalize cannabis federally. I want to make sure that everybody's aware of that. And it remains a controlled substance. State programs continue to operate as they currently do. We're going to dive into that as well.
[02:42] Brian Fitzpatrick: We're going to talk about that because I hear lots of people saying big pharma's coming, they're taking over, this is the end of the cannabis world as we know it. The cannabis world as we know it is changing, but it's not the end of the cannabis world.
[03:01] Brian Fitzpatrick: So 280E—to me this is the biggest benefit from an economic perspective. Those of you familiar with IRS Section 280E know it prohibits businesses that are trafficking in either Schedule 1 or Schedule 2 substances from deducting ordinary business expenses. Same stores, same customer, same products. We're not going to see this massive increase in revenue because of this. But what we are going to see is that cannabis can now deduct all operating expenses, not just cost of goods sold.
[03:31] Brian Fitzpatrick: So today they can deduct expenses in cost of goods sold but not everything below that line. If you look at the example of how this impacts a dispensary—and for those of you in the industry that already know this, I apologize, but we do have viewers and listeners that don't understand this—a dispensary with $1 million in revenue and $700,000 in non-deductible expenses pays taxes on the gross profit, not the net income.
[04:19] Brian Fitzpatrick: Let's take an example. Let's use a million dollars in revenue. And let's say your cost of goods sold at the top line is $400,000. So your operating expenses and everything else underneath of that—what would be referred to as SG&A, your payroll, your rent, your marketing, your admin—let's say that's another $400,000. So that's $800,000 in total expenses. Essentially your pre-tax economic profit before tax is $200,000, right? Million minus $800,000. Make sense? Everybody's with me so far?
[04:43] Brian Fitzpatrick: Under 280E, the business can only deduct that first $400,000, right? So they can only deduct cost of goods sold operating expenses and that's it. So revenue a million, cost of goods sold $400,000, your gross profit is then $600,000 and that's what gets taxed. The operating expenses of $400,000—forget about that, you can't bring that into play.
[05:18] Brian Fitzpatrick: Now I know a lot of cannabis operators have talked to me and said, "Well, we're just loading up our cost of goods sold." Well, that's not really good accounting principles when you get right down to it. Doesn't really meet GAAP standards. So basically now you're being taxed on—you got a million, you're only able to deduct the $400,000.
[05:54] Brian Fitzpatrick: But what removing 280E does is it changes the picture this way: Million dollars, you got $400,000 in cost of goods sold, gross profit is $600,000. Now deduct the $400,000 in operating expenses. Now your taxable income is $200,000. So your income tax expense is $42,000 as opposed to 3x that scenario.
[06:23] Brian Fitzpatrick: So the same $1 million in revenue, same $400,000 in cost of goods sold, same $400,000 in operating expenses. Under 280E, you keep $74,000. Without 280E, you keep $158,000. Think of that. That's more than double the after-tax profit just from normal tax treatment.
[06:56] Brian Fitzpatrick: Now, so what changes with Schedule 3? 280E only applies now to Schedule 1 and Schedule 2. This represents a massive financial relief. Now, I'm going to tell you folks, please be cautious with this for a couple of reasons. First of all, the executive order does not automatically reschedule cannabis. There's a little thing that has to happen here. What the president did was direct Pam Bondi to complete the formal DEA rescheduling process. Yes, there is a process. That signature just didn't magically make everything change that day. He said get it done quickly.
[07:18] Brian Fitzpatrick: The DEA must still publish a final rule. The administrative law hearing process may continue or could be bypassed—we've seen things being able to skip some steps. But as it relates to 280E and rescheduling, there's a process. And keep in mind, you're not really going to get the benefit of 280E in the 2025 tax year. It will not benefit 2025 returns. The rescheduling just frankly won't be finalized in time.
[07:45] Brian Fitzpatrick: What about the 2026 tax year? Possible, but uncertain. I'm not going to tell you either way. I'm not an accountant. I'm not a tax lawyer. But what I can tell you is it depends on when the final rule is published. So watch that date.
[08:06] Brian Fitzpatrick: Now, will it be retroactive? That's unclear as well. Could it be? Yes. Will it likely be? Maybe not. So if it happens in the middle of the year, can you do half the year taxes? Don't know, we have to wait and see. What's more likely to see a full-year benefit is when you file in 2028 for 2027.
[08:36] Brian Fitzpatrick: So it could still be a couple years away. We have to wait and see. We're not going to give complete and total guidance because it's not our job to do that. I'm just warning you to be aware of that. So the consensus is that, as I was reading some expert tax opinions, generally tax changes are not retroactive and we'll have to see what the effective date is. I don't expect to see—just generally they're not retroactive. So put it on your radar. Keep an eye on when this is going to happen.
[08:59] Brian Fitzpatrick: Now, the other thing I want you to put on your radar is, believe it or not—and not a lot of people know about this—but the No Deductions for Marijuana Business Act has been proposed by Senators James Lankford out of Oklahoma, he's a Republican, and Pete Ricketts, he's a Republican out of Nebraska. What they proposed is that 280E would permanently codify against cannabis businesses even if it gets rescheduled.
[09:26] Brian Fitzpatrick: So that's been sitting out there for a little while. There's other GOP members that introduced similar legislation. I will tell you that the likelihood is low of that getting passed. So don't panic over that, but just be aware that you should keep an eye on that. For reference purposes, House Bill HR147, titled the No Deductions for Marijuana Business Act, was introduced by Jody Arrington, Republican out of Texas, and it's been referred to the House Ways and Means Committee.
[10:13] Brian Fitzpatrick: Senate Bill 471, also entitled the No Deductions for Marijuana Business Act, was introduced by Lankford and Ricketts. So keep an eye on those two. I don't expect them to go anywhere.
[10:36] Brian Fitzpatrick: So that's 280E. Topic number two, I want to talk about medical research impact. Currently, there are research barriers for anything in Schedule 1. What are those barriers? Generally, researchers must register with the DEA. Only roughly about 600 researchers have registered for any Schedule 1 substance as of 2019. That's a pretty low number.
[11:10] Brian Fitzpatrick: Why? Because they can't use National Institute of Health grants to purchase cannabis. They can't use DEA-approved suppliers. There are no state dispensary products they can go to. And it requires double-locked doors, safes bolted to the ground, extensive paperwork, lots of bureaucracy. So it drives talented researchers away. It's not that it can't be done, it's that it's virtually impossible. Researchers don't want to take their money and spend it on bureaucracy. They want to spend it on research. And that's the bottom line.
[11:34] Brian Fitzpatrick: So with the Schedule 3 change, it dramatically reduces the regulatory burden on researchers. It's a more straightforward DEA registration process and it provides access to broader funding sources so they can attract more research to conduct high-quality studies.
[11:56] Brian Fitzpatrick: Specifically, Trump's executive order specifically emphasizes expanding medical research. That's a good thing. Research priorities per the executive order: he's prioritizing dosing guidelines for medical use. There's not a lot of good dosing data around this. And he wants to see dosing data, safety profiles for different patient populations, long-term health effects, especially for adolescents and young adults.
[12:15] Brian Fitzpatrick: I've raised five kids and I've read about all of this impact on the brain. There's not enough research around it, but kids—they've got the amygdala still forming up to 24. I can attest to that. That whole frontal lobe isn't exactly formed yet. And there's been some medical research that said it might not be great for adolescent young adults, but Trump's research is saying hey, we want to do more on that. So they want real-world medical evidence collection. Good clinical information on how this can help chronic pain, cancer symptoms, seizure disorders, neurological disorders, etc.
[13:07] Brian Fitzpatrick: I'm just going to quote Dr. Alana Braun who's from the Dana-Farber Cancer Institute. She said, "Rescheduling allows us to ask these questions rigorously about dosing, about safety, and who may benefit most. This research reflects the best of federal investment, helping people not only live longer, but live better."
[13:32] Brian Fitzpatrick: So you saw a lot of white coats behind Trump in the room, and she was one of them. The executive order explicitly states it will have an impact on this area. Now, what it won't have an impact on is criminal penalties or the recreational use of marijuana. Nothing was said about that. This executive order doesn't address any of those important topics, but we'll get into some of those.
[13:53] Brian Fitzpatrick: The other thing that I've been reading all weekend is a lot about this fear—the fear of "big pharma's coming, it's going to take over." Here's what I see. I've seen both sides and I understand the fear and I understand the concern. So the fear is that the cannabis community is very worried that rescheduling to Schedule 3 rather than descheduling will allow big pharma to take over and require prescriptions and it's going to shut down dispensaries.
[14:20] Brian Fitzpatrick: The reality here is that federal scheduling does not override state programs. Cannabis remains federally controlled under the CSA, under the Controlled Substances Act. True. State licensing frameworks, however, remain completely unchanged. States will continue to license and regulate cannabis businesses exactly as they do today. The federal government has historically allowed states to make their own laws.
[15:10] Brian Fitzpatrick: This is, if everybody remembers, sort of the Cole Memorandum. This is very similar to the Cole Memo era where cannabis stays federally illegal, but Washington largely lets tightly regulated state programs operate, using federal enforcement only when the states fail to control diversion, crime, or harm. So the government can step in if the states aren't controlling harm, crime, diversion, all of those things.
[15:38] Brian Fitzpatrick: States have zero incentive to change is the other thing. Think about this: states generate massive tax revenue from cannabis programs. It's become part of their operating budgets at this point. It's top-line revenue to them. Plus they also want to serve their constituents. And in all these states where they've legalized it, it's because their constituents voted for it.
[16:00] Brian Fitzpatrick: So giving up state programs would mean loss of billions of tax revenue. Like I'm a business owner—I wouldn't want to see most of my top-line revenue go away. That would be painful. And it's also political suicide for state lawmakers. They're going to say, "Okay, we're going to take away our revenue and we're going to upset our constituents." Political suicide right there. Not a good idea.
[16:38] Brian Fitzpatrick: The other thing is the FDA pathway is separate and optional. Schedule 3 creates an optional pathway for pharmaceutical companies to develop FDA-approved cannabis medicines. Guess what? The pathway already exists. And this is the part that we've got to understand. Epidiolex, Marinol, Syndros—these are tightly prescribed FDA-approved cannabinoid drugs.
[17:12] Brian Fitzpatrick: In the case of Epidiolex, it's CBD. Synthetic THC, dronabinol, is in Marinol and Syndros. What is it used for? It's used for severe seizures in the case of Epidiolex, chemo nausea, AIDS-related weight loss—a variety of things. So pharma has always had access to cannabis for FDA drug development. That's not new.
[17:41] Brian Fitzpatrick: State dispensaries do not need FDA approval. They operate under state law. These products also, when big pharma gets involved, they look for very different things as far as how those things are grown and produced. They're not looking to get into this other area. Will there be more drugs? Probably under research, but they have access to that today.
[18:05] Brian Fitzpatrick: This does open up to more drugs, but dispensaries are not pharmacies. State-licensed dispensaries don't hold DEA registration to dispense Schedule 3 controlled substances. And some people say, well, that's our point—they're not pharmacies. And if this now requires prescriptions, which it doesn't—their products, flowers, gummies, and vapes at dispensaries are not FDA-approved drugs. They will continue to operate under state regulations.
[18:30] Brian Fitzpatrick: Now, somebody may feel differently about this, but everything I'm reading, everything I'm seeing, and many people I'm talking to—this seems to be the non-emotional response of reality. And I think that's the important thing: don't get too emotional over this stuff. No statute requires them to become pharmacies. Distribution remains state controlled.
[18:52] Brian Fitzpatrick: Big pharma distribution also, by the way, takes forever in case you haven't noticed. Let's talk about Epidiolex. That was created by a company called GW Pharmaceuticals. That's a British cannabinoid drug company, which is now a subsidiary—I think it was 2021 or 2022 they got acquired by Jazz Pharmaceuticals.
[19:13] Brian Fitzpatrick: They met with the FDA for a pre-IND—what is an IND? It's an investigational new drug. That meeting happened in 2014. Do you think they just on the night before decided to have this? No. They started investigating these drugs back like in 2010 in order to get ready for that initial meeting in 2014.
[19:42] Brian Fitzpatrick: They then filed the IND May of 2014—February to May—and that started pivotal trials in late 2014. They then submitted the NDA—and NDA doesn't stand for non-disclosure agreement, it stands for new drug approval in this case—the NDA. They submitted the NDA in October of 2017 and then received FDA approval on June 25th, 2018.
[20:11] Brian Fitzpatrick: So they started looking at all this stuff back in like 2010. They got to the formal process in 2014 and then 2018. Will Schedule 3 and the research start to bring some of that timeline down? Absolutely it will, that time between 2010 and 2014. But that time between 2014 and 2018 is the process. You've got to understand that scientific development on pharmaceutical-grade drugs takes a while.
[20:41] Brian Fitzpatrick: These products serve different markets than what the state dispensaries serve. There's currently no credible evidence that I can see that the FDA plans to shut down state programs. I just don't see it. And quite frankly, they don't have the bandwidth to do it anyway. We've got to be aware of that. They've got their hands full with a lot of different things.
[21:01] Brian Fitzpatrick: So what about prescriptions? Medical cannabis currently operates on physician recommendations or certifications, not prescriptions. Be aware of that. So that avoids conflict with federal law today. Rescheduling is not going to change that. If you think about it, it's been operating under Schedule 1 that way. Now it's operating under Schedule 3 that way.
[21:22] Brian Fitzpatrick: Recommendations remain valid through the doctor under state law. Only FDA-approved drugs require federal prescriptions. And I know this is a hotly debated issue and you can argue with it and that's fine. This is—some of this is based on talking to a lot of different people, doing a lot of different research, and it's also my humble opinion. You can feel differently about it. We live in America.
[21:46] Brian Fitzpatrick: Recreational cannabis—no prescription concerns whatsoever. 24 states plus Washington DC have legalized recreational adult-use cannabis. Schedule 3 has zero impact. Trump explicitly stated the order doesn't legalize marijuana in any way, shape, or form. In no way sanctions its use as a recreational drug. Be aware of that.
[22:07] Brian Fitzpatrick: So the big pharma takeover narrative is hopefully clear now as we're talking about it. Now let's talk about safety standards, best practices, and guidance from the FDA that can and will likely influence these programs going forward. It's my belief that more and better safety standards are likely over time. It's going to happen. I'm reading the tea leaves and seeing this, but mostly indirectly via expanded research and evolving FDA guidance rather than an immediate federal rewrite of state rules.
[22:58] Brian Fitzpatrick: So standards are likely to tighten. Very clearly, rescheduling to Schedule 3 lowers barriers to clinical research, which should generate stronger data on dosing, impurities, and drug-to-drug interactions and all these things that we're going to learn about. That evidence will give FDA and the CDC a clearer basis for best practices, which are all likely to impact safety standards and practices for the better. That's a good thing.
[23:27] Brian Fitzpatrick: The Trump executive order calls for increased medical marijuana and CBD research as well. We'll get into the CBD issue in a bit. We're probably going to go a little over 30 minutes because I have a little more to cover.
[23:47] Brian Fitzpatrick: How is that going to flow into the state programs? It's going to pull more towards pharmaceutical-style safety, but not pharma takeover. Quality control, validated testing, tighter potency accuracy, better labeling, more rigorous manufacturing standards—stuff we should be doing anyway. States already borrow from FDA concepts when they're looking at things like GMPs and contamination limits, labeling norms. These things are all likely to continue.
[24:16] Brian Fitzpatrick: My advice is get your house in order now. Be prepared for best practices-driven safety and standard certifications. Get involved with the ASTM D37 committee programs. Become a member. Get involved. Pay attention to the results of the research that's coming out of this new funding. It's not the enemy of the state. It's the enabler of the industry. It's going to be important.
[24:43] Brian Fitzpatrick: Start your journey towards ISO or GMP certification now. Get in the fire prevention business and not the firefighting business. The good news is that you're going to have some money to do this with as 280E starts to come your way. And even though it's not a boon of cash today, start planning now and redirecting some money to compliance, quality, and safety. It's very, very important.
[25:28] Brian Fitzpatrick: Now, before we shift over to the CBD and hemp side and what that all means—because he made a comment about that—I quickly want to talk about banking, credit cards, and the SAFER Banking Act. Here's what I believe. Only if you look at the number of banks—there's not a lot of banks and credit unions relative to the grand scheme of the thousands of federally insured financial institutions nationwide that are actually in the business.
[25:48] Brian Fitzpatrick: Now, if you look at FinCEN data—and I always believe there's more banks in it than what I've been able to see on the FinCEN data—507 banks, we know there's more, 182 credit unions, and 127 non-depository institutions are in the business. Cannabis businesses operate primarily in cash, and folks, we all know that creates a public safety risk. There's no access to traditional credit cards and debit cards and loans or basic banking services.
[26:19] Brian Fitzpatrick: So why am I talking about this? I'm talking about this because this has implications for SAFER Banking. Will credit card companies all of a sudden rush in now that it's Schedule 3? No. Cannabis remains federally illegal. Even as a Schedule 3, it still violates the Controlled Substances Act. Moving to Schedule 3 does not legalize cannabis again. And card networks prohibit illegal transactions.
[26:42] Brian Fitzpatrick: What does Visa say about it? Visa prohibits the purchase of products that claim or imply a similar efficacy as prescription drugs, controlled substances, or recreational street drugs. Irrespective to claims of legality. That's an important statement. Irrespective to claims of legality. That's the critical phrase.
[27:15] Brian Fitzpatrick: Mastercard: marijuana purchases are not allowed on the card company's network because the drug is illegal under federal law. Confirmed this position remains unchanged.
[27:41] Brian Fitzpatrick: What concerns are there for banking? Well, anti-money laundering concerns. The federal AML laws criminalize handling proceeds of scheduled CSA violations. Financial institutions can face 20-year prison sentences and civil crimes, fines, fees, penalties—you name it. They have to do a lot of enhanced due diligence under the Bank Secrecy Act and under FinCEN 2014 guidelines. They also have to do ongoing monitoring and they have these obligations, but it doesn't eliminate these legal conflicts.
[28:16] Brian Fitzpatrick: What's likely to happen? This is starting a perception shift, not a legal shift. It reduces the perceived legal risk, doesn't eliminate it. The federal government formally acknowledges medical value. It may encourage more financial institutions to take the gamble under normal banking, but rescheduling is not going to bring in Visa and Mastercard who are operating under a clear risk position and prohibition.
[28:51] Brian Fitzpatrick: What I do see happening is that the SAFER Banking Act—this first domino to fall is going to help pave the way for safer banking. What is SAFER Banking? SAFER Banking would protect financial institutions from financial penalties. It provides a safe harbor for banks, credit unions, and payment processors who enter the space. This could potentially allow Visa, Mastercard, and American Express to open up their networks.
[29:18] Brian Fitzpatrick: Now, yes, they do allow credit card transactions in Canada, but why? Because cannabis is federally legal in Canada. So I don't expect this to create an immediate pathway to federal legalization, but I do see it greasing the way towards safer banking.
[29:46] Brian Fitzpatrick: Here's the thing that's going on. We all know that SAFER Banking is important. The House has passed this version seven times over past sessions. The Senate Banking Committee approved it September 27th in 2023. It cleared for a floor vote. The Senate Majority Leader at the time—well, still Chuck Schumer—never brought it to the floor. I'm not saying it's his fault. I'm saying that there's a lot of priorities that were competing. Healthcare subsidies, government funding. Why? Because it's still sitting there.
[30:16] Brian Fitzpatrick: Tyler Lindholm, who we've had on this show before—great guy. What I love about Tyler is his commentary is never emotional. It's always very factual. He's from Leafstreet Strategies. He's a former Nevada cannabis compliance board regulator and compliance board member. Also on that panel was Senator Catherine Cortez Masto, a Democrat from Nevada, Senator Tom Tillis, a Republican from North Carolina, and Senator Bernie Moreno, Republican from Ohio.
[31:04] Brian Fitzpatrick: What are their positions? Well, I'm going to just give you a couple quotes from Tyler's testimony: "No discussion of the issue is complete without addressing the challenges facing the cannabis industry and the role policy solutions like the SAFER Banking Act can play." He's absolutely correct. "40 states with regulated cannabis markets but businesses continue to struggle to access basic financial services."
[31:30] Brian Fitzpatrick: He continues on that these cash-intensive operations are a public safety risk. SAFER Banking would provide the certainty financial institutions need to serve the growing industry. If we do not fix the hemp problem that we're going to get into real quick—Tyler talked about this in his hearing—even greater pressure and urgency after the hemp restrictions. Thousands of hemp companies will automatically be like Schedule 1 and thrown into the same turmoil. So that's going to get fixed, I believe. We'll talk about that.
[31:56] Brian Fitzpatrick: Where are those other folks on that committee? How do they feel about it? We know how Tyler feels about it. Catherine Cortez Masto, strong SAFER Banking supporter. She's the Democrat from Nevada. Passing it remains one of her top legislative priorities. Hopes to finally pass it in the new year. Very positive sign.
[32:17] Brian Fitzpatrick: Tom Tillis said he absolutely agrees banking needs to be addressed. We're not quite there yet on SAFER Banking, wants more of a comprehensive framework. And Bernie Moreno, Republican from Ohio, is expected to sponsor SAFER Banking in the Senate and hopefully help move that through.
[32:44] Brian Fitzpatrick: We do know that Trump even said in 2024 in his campaign that he would work with Congress to pass a safe banking bill. The executive order was rumored to include a SAFER Banking directive to Congress, but it fell short at doing that. The final order did not include that. But we do have Trump's support on record, and so far he seems to get what he wants and push through what he says. He is a populist president. He listens to what the people want and he tries to push it through. So let's hope that he makes good on what he said in 2024. We'll wait and see.
[33:38] Brian Fitzpatrick: What happens if SAFER Banking passes? Traditional banks can enter the market without fear of federal penalties. Visa, Mastercard, American Express are likely—not guaranteed, but likely in my opinion—to open up their networks at that point in time. Some may argue with me on that, and that's okay. Again, we're in America. You can debate.
[34:00] Brian Fitzpatrick: Electronic payments become standard for dispensaries, which it's not today. Lending products can become available. Reduced cash operations for improved public safety and lower cost for cannabis businesses.
[34:28] Faith: Hi Joy.
[34:28] Brian Fitzpatrick: That's great though. These are high-impact insights. Thanks.
[34:28] Joy: They are.
[34:28] Brian Fitzpatrick: Credit card reality check. So let's talk about this. What happens today? And why they're problematic. How do you buy cannabis today? Cash, right? We know that is a very common practice—cash is used. Cashless ATMs. This is the interesting scenario where people say, "Oh, I always use my credit card." No, you're not. You're using your ATM card. It's called a point-of-banking withdrawal.
[34:54] Brian Fitzpatrick: You go there, you buy $73 worth of cannabis products, you give your card, they give you this little terminal back, which is a mini ATM—it's like wheeling the ATM up to you, but it's only this big. They hand that to you. They do an $80 transaction and forget about the probably $3 fees you pay. You get the difference back in cash. So, make math simple: $73, you get $7 back in change. You're basically doing an ATM transaction, and it's called a cashless ATM transaction, even though you probably get cash back in change.
[35:44] Brian Fitzpatrick: Then there's, by the way, this is one of my personal favorites, the gray market credit card processing. And that is you go to one of these maybe non-sanctioned sites or an area that they're affiliated next door with a t-shirt store or a clothing and apparel store and you buy $80 worth of t-shirts and you get a bag of weed with it or your cannabis product. It's miscategorizing. It's basically defrauding the Visa, Mastercard, American Express system by telling them it's an apparel transaction. We see a lot less of that now given the state controls in place.
[36:12] Brian Fitzpatrick: These workarounds are just not sustainable and they're failing because they can lead to payment processors regularly shutting down cannabis accounts, hidden fees, and really there's no true credit card acceptance. So that's a problem.
[36:41] Brian Fitzpatrick: What I really believe is going to happen here is, first of all, Schedule 3 alone is not going to bring credit cards and banking magically into the equation. SAFER Banking is the critical piece. Folks, keep an eye out for SAFER Banking. Support it. Watch what's going on here. It's critical. And there's a lot of belief and consensus that we're going to see this happening in 2026. Very important year. Keep an eye on that.
[37:00] Brian Fitzpatrick: I want to switch a little bit over now to what's happened on hemp, CBD, and full-spectrum products.
[37:28] Faith: There's so much anxiety. So yeah, please address that because I feel like the last three months—
[37:39] Brian Fitzpatrick: Yes, because particularly like last month we all entered into panic mode.
[37:39] Faith: Right, everyone pushed the panic button.
[37:39] Brian Fitzpatrick: Because what happened? Now it is going to impact the industry. There's no question about it. But what the executive order said was it's directing the White House to work with Congress to update the statutory definition of what is final hemp-derived cannabinoid products.
[38:02] Brian Fitzpatrick: The goal here, the president's goal, is to allow Americans to benefit from access to appropriate full-spectrum CBD products. And when you say CBD, keep in mind we're also talking about CBN, CBG, all those other positive cannabinoids that are non-intoxicating. But it's also going to address the intoxicating portion and what that means because what came out last month was not really kosher.
[38:32] Brian Fitzpatrick: While preserving Congress's intent, he wants to preserve Congress's intent to restrict the sale of products that pose serious health risks. Not a bad thing. That's a good thing. Direct the Department of Health and Human Services to develop research methods and improve access to hemp-derived CBD products or CBD-related. CBD is kind of like this big bucket of hemp-type cannabinoids.
[38:56] Brian Fitzpatrick: What happened? 2018 Farm Bill. Senator Mitch McConnell was a big supporter of the 2018 Farm Bill. I mean, he championed it. And then Trump signed it. Cool. But the hemp industry, like when I started in the business in like 2019, all the products were like full-spectrum, broad-spectrum CBD and CBD salves and creams and those types of things.
[39:30] Brian Fitzpatrick: But then there were unintended consequences. The hemp industry grew to $28 billion, which included these intoxicating products. I'm not going to go through them all because there's a ton of them. It's the alphabet soup of semi-synthetic and synthetic products. Delta 8, Delta 10, Delta 11, HHC, THC-O, THC-P—what did I see the other day? It was one I never even heard of, didn't even know it existed, but it was crazies.
[39:52] Faith: Alphabet soup, I think.
[39:52] Brian Fitzpatrick: Yeah, they call it the alphabet soup. They were mass-marketed off the back of this 2018 Farm Bill. And now being explicitly written out by state and federal lawmakers as this is not what Congress intended when it legalized hemp. We get that. We understand that.
[40:14] Brian Fitzpatrick: So whether you agree or disagree with this or not, I'm just telling you what the facts are. Washington doesn't have a lot of tolerance for sitting here and talking about all that alphabet soup. They're really interested in getting rid of the alphabet soup and determining what's safe and what can help. So we're going to talk about that quickly.
[40:36] Brian Fitzpatrick: Now what happened with McConnell's reversal? He claims that he intended to only legalize hemp for fiber and grain, not consumable intoxicating products. Now, I believe him on the intoxicating products, but there had to be a thought about other stuff that can come out of it. I'm not going to get political here.
[40:58] Brian Fitzpatrick: But what I will tell you is what happened. McConnell and Andy Harris—Andy Harris is a Republican from Maryland—they authored prohibitive language. This was proposed way back and we talked about this back in July and August, but it was sort of quelled and shut down and pushed out of the language and it didn't pass.
[41:33] Brian Fitzpatrick: Well, guess what? Here comes the appropriations bill that was causing—we had a big government shutdown if you remember. What ended up happening is that got included in the government shutdown spending bill last month through the appropriations bill and it limited hemp products to 0.4 milligrams of THC per container.
[41:58] Brian Fitzpatrick: That would effectively ban about 95% plus of the hemp industry, including these other good CBD products and everything else. It would essentially have decimated the entire industry.
[42:18] Brian Fitzpatrick: Who spoke up against it? Rand Paul, of course, everybody knows, threatened to hold up the entire spending bill, said it would destroy the entire hemp industry. But what happened was we were in a government shutdown. The government was shut down for what, 45 days, something like that—something crazy.
[42:31] Faith: No, what happened was 76 to 24. Only Ted Cruz sided with Rand Paul amongst the Republicans.
[42:54] Brian Fitzpatrick: Now, does that mean no other Republicans support the hemp industry? No. They wanted to get the government back open. So they weren't going to sit—I can just imagine this. I don't know if this is exactly what happened, but I can just imagine like Trump sitting there going, "Hey guys, we're not going to sit here and debate hemp and CBD for the next 6 weeks while the government's shut down in a 45-day government shutdown. We have bigger fish to fry. We'll fix that problem later." And this is what's happening now.
[43:10] Brian Fitzpatrick: He's coming back, circling back quickly and fixing this issue. This support—Trump's position is he supports full-spectrum CBD access for patients. He wants Congress to fix this problem that was basically created in this last month bill. He wants them to update the overly restrictive definition of hemp and get a focus on therapeutic, non-intoxicating products.
[43:45] Brian Fitzpatrick: That's a clear signal that he's saying McConnell and Harris restrictions went way too far. Got to come back. Got to fix this. That's really what's happening here.
[44:09] Brian Fitzpatrick: Dr. Oz, who is the CMS administrator—what is CMS? CMS is basically the administrator of the Centers for Medicare and Medicaid Services. That's what CMS stands for. Center for Medicare and Medicaid Services. That's essentially what he runs. Why was he standing behind the president and why did he talk? Because Medicare beneficiaries could receive up to $500 per year for hemp-derived CBD products.
[44:37] Brian Fitzpatrick: So not only is he signaling that this stuff, we've got to get it right, we've got to get it good, but we should make it accessible to people for wellness purposes. Currently, the 0.4 milligram restriction is scheduled to take effect November 2026. He's directed this to get fixed before then. And I think they're trying to fix it before April.
[45:01] Brian Fitzpatrick: Keep in mind folks, we are in a midterm election year. So it doesn't give us full 12 months to fix a lot of things. He's pushing this through. He knows this. He's pushing this through. He's trying to get this done. It was rushed to get this fixed.
[45:29] Brian Fitzpatrick: In the final analysis, we do expect to see a smaller but more regulated and more clearly wellness, medical, and wellness-oriented hemp and CBD industry. There's also a lot of talk about—well, that just killed this California sober thing of hemp beverages. There's a lot of talk about that as well.
[45:51] Brian Fitzpatrick: What's going to happen to hemp beverages? I can tell you what I think is going to happen to hemp beverages based on everything I see. First of all, the alcohol industry has been fighting against hemp beverages. Who specifically in the alcohol industry? Well, the manufacturers don't like it. The distributors do like it.
[46:18] Brian Fitzpatrick: Think about that. What do the distributors know? What's being sold and why is it being sold? Why all of a sudden are these hemp beverages becoming mainstream? It's called California sober. It's happening, folks. This is not speculation. The numbers show it—less and less people are drinking alcohol and they're moving towards these other things.
[46:38] Brian Fitzpatrick: So you go to Total Wine, you see it. You go to Target, you see it. Go to Circle K, you see it. Big alcohol has been fighting it on the manufacturer side, not on the distributor side. Don't you think that the government's going to recognize that? And when we say we have a better alternative to getting smashed and getting drunk, yeah, we do. It's called the hemp beverage. I'm a big fan of it.
[46:59] Faith: Okay.
[46:59] Brian Fitzpatrick: But I'm a big fan of it if it's controlled. And it should be controlled like alcohol, but we have to give good guidance. What I really believe is going to happen based on everything I see and read is that we're going to see delta-9 low-dose beverages. This 0.4 milligram cap is not going to work for that industry.
[47:02] Brian Fitzpatrick: So you'll see things—and by the way, the industry pretty much today is already in this two to five milligram per can type of thing. And the way I look at it is even if it's 2.5 milligrams, the hemp beverage company should like that because now you've got to drink two cans for what you used to get in one. I don't know, just seems better for sales to me.
[47:37] Brian Fitzpatrick: What I really think is going to happen here is if Congress adjusts the cap—they've got to address that 0.4 cap to something rational—the most likely survivor there on that side is going to be the low-dose delta-9 drink. That's going to be 2 to 5 milligrams per can. I hope that's what we see.
[48:03] Brian Fitzpatrick: There'll be restrictions in retailers on age-gating, just like you do if you buy a six-pack of beer, labeling and testing. But the high-dose and synthetic stuff either moves behind the dispensary counter or disappears entirely. Let's keep an eye on that.
[48:27] Brian Fitzpatrick: I've seen some good legislation out there. We've talked to Senator Wyden's office of Oregon. We've been in discussion with Congressman Morgan Griffith's office of Virginia and they have some great ideas there. This isn't just stuff they just pulled out recently. They've been working on this for months and months and months. They have some great ideas.
[48:48] Brian Fitzpatrick: Keep an eye on Morgan Griffith. He is a Republican. Senator Wyden is a Democrat out of Oregon. Both very, very good components in both of those plans. And there's some others. I'm just focusing on those two for now. Keep an eye on those things.
[49:14] Brian Fitzpatrick: In closing, what you need to know, the bottom line from today's discussion, and the big picture. We've moved from denial to recognition. Cannabis has medical value. It's been admitted on paper after 50 years. The federal government is working to fix this problem.
[49:38] Brian Fitzpatrick: This is now the first domino falling to help with banking reform, research, and eventually broader legalization. So for those who are saying this does nothing, that's not true. It does a lot. This is how change actually happens in America, folks. It's not revolutionary, okay? It's evolutionary. And I always say that about technology businesses, but the same is true in American politics.
[50:03] Brian Fitzpatrick: The conversation has shifted from should we to how do we do this safely? And that's progress. Keep in mind, keep an eye out for all the things we talked about. This is all positive. This is all progress. We're going to continue to update you and bring on some smarter people than me going forward as we watch for this.
[50:28] Joy: No, that was amazing. That was super helpful. And I think we're going to be kind of translating this into some articles here at the end of the year to make sure people have good insight into what's going on. It's so broad, right? And it feels like change has just been cascading. Even in Q4, I feel like it's just been kind of this barrage of uncertainty and change and all of that.
[50:51] Joy: And the one thing that we do know is that there will be more rules and we will have to follow them. And that's why Qredible exists, right? We're here to create pathways for people. And the sooner businesses who are serious about enduring and surviving this volatility can get compliant and learn to follow the rules, the longer they'll last. And so I think it's exciting. It's an exciting time for us as a business to have these tools in the market that so perfectly fit the imperatives that are coming. And it's just exciting. It's exciting that we're going to have so many great clients who are going to be thriving.
[51:16] Brian Fitzpatrick: Absolutely. I couldn't have said it better myself. Thank you for that. That is why we're in business and we're helping the banking system. We're going to be there for Visa, Mastercard, American Express, and their banks and their ISOs underneath of that to help get this right and be able to do product-level validation and verification electronically—as well as validating everything else around them and giving the merchants the tools that they need to be in the fire prevention business and not in the firefighting business.
[51:43] Brian Fitzpatrick: Thanks for joining us at Qredible Live. Stay informed. That's important. It's okay to be skeptical because we're going to keep tracking this along with you as the story develops. And we'll see you next time, which we've got a few weeks off. We're back mid-January, I think it is.
[52:06] Joy: Put up the announcements and we'll see you soon, everybody. Have a good holiday week.
[52:06] Brian Fitzpatrick: Have a great holiday.
The cannabis and hemp industries are entering a pivotal period of regulatory change. Subscribe to Qredible Live to stay updated on policy developments, banking reform progress, and compliance best practices that will help your business thrive in this shifting environment.
