In recent years, cannabis legalization has advanced in many states, but the landscape for philanthropic work in and around cannabis remains legally fraught. From policy advocacy to social equity grants, charities and nonprofits that engage with cannabis reform or support communities harmed by prohibition face unique hurdles. For supporters of cannabis reform—and for journalists chronicling the intersection of social justice, public health, and philanthropy—the terrain is complex and evolving.
One of the most fundamental legal challenges is the fact that cannabis, particularly anything containing THC, remains a Schedule I substance under U.S. federal law. That means activities involving cannabis can be viewed as illegal under the federal Controlled Substances Act, regardless of state-level legalization. This classification triggers what is often called the “illegality doctrine,” meaning that charities cannot pursue purposes that would be illegal or contrary to public policy—a doctrine sometimes used by the IRS to deny tax-exempt status.
One illustrative example: a nonprofit proposed to provide hardship grants to patients using THC or CBD therapies, educate health care providers on medical cannabis, and support research into cannabis-based treatments. The IRS refused its 501(c)(3) status under the reasoning that these activities “advocate and engage in” substances that remain federally illegal. In effect, even purely educational or support-oriented work tied to cannabis can be viewed as too risky under current federal law.
Because of that risk, many mainstream nonprofit organizations steer clear of accepting donations from cannabis-related businesses—even when those businesses wish to give—because taking such funds might jeopardize the nonprofit’s tax-exempt status or provoke negative scrutiny. Some nonprofit boards reject cannabis-industry donations for reputational reasons, or because they rely on federal grants that prohibit associations with federally illicit enterprises. In practice, cannabis companies sometimes resort to routing donations through intermediary organizations or limiting contributions to in-kind assistance, employee volunteer hours, or “round-up” campaigns tied to retail sales—with careful legal filters.
Another barrier is banking and financial infrastructure. Even in states where cannabis is legal, many financial institutions avoid working with cannabis businesses because of anti–money laundering laws and the risk that deposits might be treated as proceeds of illegal activity. That means cannabis-related funds often move in cash, which complicates audit trails, compliance, and transparency for charitable campaigns tied to cannabis. Some reformers hope that passage of federal legislation such as the SAFE Banking Act (or its successors) will reduce these obstacles.
Still another hurdle lies in the patchwork of state laws around “community reinvestment” or social equity programs funded by cannabis tax revenues. Many states set aside a portion of cannabis taxes to fund nonprofits in communities impacted by the war on drugs, providing funding opportunities. For example, in California up to $50 million annually flows to nonprofits supporting reentry services, mental health, and legal aid for communities harmed by prohibition. Illinois directs 25 percent of cannabis tax revenue to its “Recover, Reinvest, and Renew” program for nonprofit-based interventions. But to access those funds, nonprofits typically must navigate complicated grant applications, satisfy state-level certification, and maintain compliance with evolving cannabis regulations. These processes often require legal sophistication and resources that many small community organizations lack.
From a philanthropic perspective, cannabis reform and charitable giving have also benefitted from visionary donors willing to take risks. Philanthropists such as Hugh Hefner, George Soros, and Sean Parker backed early nonprofits such as NORML and the Drug Policy Alliance—using grants to pay for polling, advertising, advocacy, and public education. Their approach underlines the fact that controversial causes often need long-game support, flexibility, and unrestricted funding to adapt to shifting legal and political environments.
Yet such funding models don’t erase structural risk. Even advocacy nonprofits must tread carefully: 501(c)(3) organizations face strict limitations on lobbying or explicitly partisan activity, and those working in cannabis reform must calibrate their policy work to avoid triggering the “promotion of illegal activity” concerns from regulators.
Despite those challenges, many observers see opportunity at the intersection of philanthropy and cannabis policy. As states expand legalization and craft equity programs, new models of grantmaking, legal reform, and community partnerships are emerging. The authors of a 2023 study in the American Journal of Public Health suggested that long-term, consistent funding to community-based programs holds promise for remedying harms caused by both drug use and drug prohibition. Over time, bridging philanthropy with policy could help ensure that the promise of legalization includes meaningful reparative justice—not just commercial growth.
In summary, for a charity supporter or journalist watching this frontier, the story of cannabis and philanthropy is one of legal tension, creative financial workarounds, and high stakes. The plants are legal in many places, but at the crossroads of giving and reform, the question remains: how can charitable actors operate safely, strategically, and effectively when the law itself is still unsettled?