The Cannabis Industry Is Entering Its Due Diligence Era: What Does It Mean? 

By Kevin Hart, CEO, Green Check Verified

The cannabis industry has spent the better part of a decade telling itself that its capital problem was a perception problem and that once the stigma lifted, the institutional money would follow. It believed once legalization spread and rescheduling happened, lenders would come around and the financing environment would normalize.

Rescheduling happened on April 22, 2026. The financing environment has not normalized, and the reason why tells operators more about what actually needs to change than any policy update has or will.

Capital is not scarce in cannabis, and trust is the thing that has always been. Trust, in the context of institutional finance, is built through demonstrated operational maturity, defensible reporting, and the kind of financial infrastructure that makes a business underwriteable. The industry is entering a phase where that distinction separates the businesses that can access institutional capital from the ones that cannot, regardless of what the regulatory calendar says next.

What Rescheduling Actually Changed

The April 22 order was real and consequential, but it was narrow. FDA-approved products containing marijuana and marijuana tied to qualifying state-issued medical licenses moved to Schedule III. Adult-use, synthetic THC, and unlicensed bulk marijuana remained in Schedule I. Hemp was left untouched.

The most immediate financial consequence was 280E relief for rescheduled products. Under 280E, cannabis businesses could only deduct the cost of goods sold. Rent, payroll, marketing, insurance, and legal fees were non-deductible, pushing effective tax rates above 70 percent for many operators. For products that now sit in Schedule III, normal business deductions apply. On a $4 million medical operation with a 50 percent gross margin and $1.5 million in operating expenses, the difference between 280E treatment and standard corporate tax treatment is roughly $500,000 in annual federal liability. That changes the investment thesis for compliant medical operators in a meaningful way.

What most operators have not fully reckoned with is that rescheduling did not simplify the operating environment.

For the majority of licensed businesses, it complicated it.

Many licensees operate on both sides of the schedule simultaneously. State-licensed medical product lines sit in Schedule III. Adult-use and non-qualifying lines remain in Schedule I. The books, the compliance posture, and the banking relationship all need visibility into which SKUs sit where, because the tax treatment, the regulatory obligations, and the lender evaluation are different for each.  Again, more complications.

The IRS has not yet issued full transition guidance on expense apportionment for mixed operators. Building the systems to support that separation now, before the guidance arrives, is the difference between being ready and being behind. Clean separation between Schedule III and Schedule I product lines, properly apportioned and allocated expenses, clearly documented revenue by category, and audit-ready records will be a massive competitive advantage.

The Shift From Access to Underwriteability

Banking access, for a long time, was the defining challenge. Getting an account, keeping it, and finding an institution willing to engage without charging prohibitive fees or closing the relationship without warning were the goals. 

That challenge has lessened, but it is no longer where the real constraint lives. The CLIMB Act, reintroduced in March 2026, would extend safe harbor to lenders, open securities exchange access, and expand SBA loan eligibility. Lender interest in compliant cannabis operators is already accelerating regardless of where CLIMB lands, and the reason is not a softening posture toward the industry. Lenders who have developed real expertise in cannabis banking relationships have built evaluation frameworks that go well beyond revenue. 

Financial visibility, reporting consistency, transaction-level traceability, operational controls, and the quality of the accounting infrastructure underneath the numbers all factor into how risk gets assessed. Strong revenue sitting on top of fragmented financial systems reads very differently to an underwriter than strong revenue backed by clean, defensible books. Disconnected systems force lenders to reconstruct what should already be visible, introduce doubt about whether the numbers can be trusted, and create friction at every stage of underwriting. As the saying goes. “Is the juice worth the squeeze?”

Making underwriting straightforward requires clean books separated by product schedule, transaction records that can be traced from point of sale through the financial statements, documentation that does not require preparation under pressure, and reporting that reflects how the business actually operates rather than how it was convenient to record it. This is the baseline that institutional capital now expects.  It needs to be the starting point.

Accounting Infrastructure Is Becoming Strategic

Managing both Schedule I and Schedule III product lines simultaneously is fundamentally an accounting architecture problem, one that requires systems most cannabis operators lack today. Separating revenue, cost of goods sold, and operating expenses by product schedule requires systems built to track SKUs by regulatory classification and produce transaction-level visibility that holds up when an auditor looks closely. A spreadsheet and a quarterly review will not get an underwriter there.

What auditors are increasingly finding inside cannabis businesses is a consistent pattern: financial systems assembled for operational convenience rather than reporting discipline, with interoperability failures that make it difficult to trace a transaction from the point of sale through the books with any confidence. That failure is manageable when the standard of scrutiny is low. It becomes a significant liability when institutional lenders, auditors, and sophisticated investors are the ones asking deeper questions, because those audiences have no tolerance for ambiguity and no incentive to give the benefit of the doubt when it is their capital at risk

CPAs and accounting firms with cannabis expertise are becoming critical infrastructure partners in this environment because the operational complexity of managing a mixed-schedule business correctly requires accounting involvement at a depth most operators have not historically needed. Treating that relationship as a strategic asset rather than an annual compliance task is one of the clearest distinctions between the businesses that will be ready for institutional scrutiny and the ones that will not.

Building for the Next Phase

Build clean reporting now. Separate Schedule III and Schedule I product lines at the transaction level, not at the end of the quarter. Apportion expenses by schedule with the same discipline applied to revenue. Invest in accounting infrastructure that produces visibility rather than reconstructed approximations. Engage accounting partners who understand the specific complexity of a mixed-schedule cannabis business and can advise on IRS guidance when it arrives.

The divide that is forming in cannabis is between the businesses whose infrastructure can withstand the scrutiny that institutional capital brings and the ones whose infrastructure cannot. Operational maturity has become a financing strategy in the most direct and absolute sense. Building it now, before a capital need forces the issue, is the positioning decision that will matter most over the next several years.

A reset federal baseline is the starting point. What follows is the harder work of building systems that make the business worth trusting regardless of what Washington does next.

Attendees at the Chicago Cannabis Capital Conference on June 15–16 will have the opportunity to hear directly from Kevin, who will be discussing how rescheduling, accounting infrastructure, tax strategy, and institutional underwriting standards are reshaping the cannabis industry.

As operators prepare for a more sophisticated capital environment, understanding these issues may prove just as important as understanding the next regulatory development.