Cannabis Industry Update: 280E Profit Drain and Banking Challenges

Detected March 28th, 2026

Summary

This update from the ABA Legal News discusses the significant challenges faced by the cannabis industry, particularly the profit drain caused by Section 280E of the IRS code and difficulties in accessing banking services. It features insights from tax attorneys and a CFO on navigating these operational barriers.

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What changed

This ABA Legal News update highlights the ongoing struggles within the cannabis industry, focusing on the detrimental impact of IRS Section 280E, which prevents businesses from deducting ordinary business expenses, leading to a significant profit drain. The discussion also addresses critical barriers to successful business operations, such as limited access to traditional banking services. The content draws on perspectives from tax attorneys and a CFO experienced with distressed cannabis operators.

Compliance officers and legal professionals in the cannabis sector should be aware of these persistent challenges. While this document is an informational update and not a regulatory rule, it underscores the need for strategic planning to mitigate the effects of 280E and explore alternative banking solutions or financial management strategies. The insights provided can inform risk assessments and operational adjustments for companies operating in this highly regulated and complex market.

What to do next

Review current tax strategies in light of Section 280E limitations
Assess banking relationships and explore alternative financial services for cannabis businesses

Source document (simplified)

Update on Cannabis: How is the Industry Dealing With the 280E Profit Drain and Other Barriers to Successful Business Operations? The green rush is over. How will the cannabis industry survive? In today’s environment, how do cannabis companies deal with the 280E profit drain and other barriers to good business, such as access to banking? Test your cannabis legal knowledge during our cannabis legal trivia interludes and hear insights from leading tax attorneys advocating for change along with the perspectives of a CFO who has assisted distressed operators.

Participants

Jennifer Benda

Holland & Hart LLP

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Ani Galyan

Galyan Law, A P.C.

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Nathaniel S. Pollock

Nate focuses his practice on federal tax controversy, including tax litigation. Nate founded SouthBank Legal’s tax controversy practice and represents companies and individuals at all stages of a tax dispute...

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