By Cannabis advocates, business executives and investors this week celebrated the Drug Enforcement Administration’s decision to reclassify marijuana under federal drug laws, a development that drew cheers from around the world. Stock prices soared. But the celebrations were dampened by the reality that the decision fell short of the full legalization of marijuana that determined activists have been calling for for decades.
On Tuesday, the Associated Press report The DEA has decided to follow the U.S. Department of Health and Human Services’ recommendation to reschedule marijuana use under the Controlled Substances Act (CSA), the agency said, citing five anonymous sources familiar with the matter. Under this recommendation, marijuana will be moved from Schedule I of the CSA, the strictest classification for drugs with no medical value and a high potential for abuse, to Schedule I, a group that includes the drug Tylenol, which contains codeine and testosterone. Changed to III.
The landmark decision to change the schedule of cannabis use will spur research into the plant’s medicinal properties that could lead to new treatments for an unknown number of physical and mental health conditions. As a Schedule I drug, cannabis research is subject to the most stringent regulatory conditions under federal law, hindering research that could lead to meaningful medical advances.
The rescheduling of cannabis under federal drug laws will also have a major impact on the regulated cannabis industry. Perhaps most importantly, this change will give cannabis businesses easier access to banking services and free licenses from IRS Rule 280e, which denies most standard business deductions to businesses selling Schedule I substances. That’s it.
Pot advocates praise DEA decision
After the DEA’s decision to reschedule cannabis was reported Tuesday by the Associated Press, the move was hailed as a historic milestone in U.S. drug policy reform by policymakers, cannabis activists, and entrepreneurs. In Colorado, one of the first two states to legalize recreational marijuana in 2012, Democratic Gov. Jared Polis hailed the historic moment.
“Following the lead of Colorado and 37 other states that have already legalized marijuana for medical or adult use, we are correcting decades of outdated federal policy and beginning the process of finally rescheduling marijuana.” “I am excited about the Biden administration’s decision,” Polis said in a statement. statement. “This action is good for Colorado’s businesses and economy, improves public safety, and supports a more just and equitable system for everyone.”
Chuck Smith, chairman of the board of Colorado Leeds, a coalition of cannabis business leaders founded to educate the public and policymakers about the importance of a safe and regulated cannabis industry, said, The classification would address 280e tax issues.” As a result, state-legal cannabis businesses are unfairly forced to pay much higher effective tax rates than other legal businesses. Allowing marijuana businesses to deduct regular business expenses will allow Colorado businesses to generate more revenue, hire more workers, and invest more in their surrounding communities. ”
Ali Gharawi, co-founder and CEO of Muha Meds, an independent California cannabis operator, said changing the schedule for cannabis sales would replace funds currently earmarked for taxes. He said he would be able to invest in the company’s growth.
“Like many companies in the cannabis industry, we have had to think outside the box when it comes to financing. Muha Meds is completely self-funded, which means we have an incredible opportunity to grow. “We will no longer be bound by Section 280E tax laws left over from the drug war and will be able to tap into funds to which we were not entitled before,” Ghalawi wrote in an email. high times. “We look forward to significant growth opportunities and some relief from restrictions on business operations.”
Bob Groesbeck, co-CEO of Planet 13, a multistate operator that owns what is billed as the world’s largest dispensary in Las Vegas, said the DEA’s decision will force cannabis companies to rely on traditional banking services. He said it will be easier to access. For the past decade, regulated cannabis advocates in Congress have proposed legislation that would allow banks to service marijuana businesses, but the Senate has so far failed to approve any legislation.
“Rescheduling cannabis should pave the way for much-needed secure banking solutions. Secure banking in the cannabis industry provides a secure environment for financial transactions, ensuring that checking accounts and It allows access to important services such as loans,” Groesbeck said. “It ensures transparency, reduces costs associated with handling cash, and provides safe and convenient payment options for consumers. Overall, secure banking contributes to industry growth, regulatory compliance, and consumer experience. is extremely important for improvement.”
Activists call for further major reforms
While the cannabis rescheduling was welcomed by many in the cannabis community, the DEA’s decision does not achieve full legalization of cannabis, which has been fought over for decades, and activists are calling for more sweeping reforms. It had become. Paul Armentano, deputy director of the National Organization for the Reform of Marijuana Laws (NORML), said marijuana should not be regulated by the CSA at all, and that commonly used but potentially dangerous drugs such as alcohol and tobacco should not be regulated at all. He pointed out that it is easily available even for adults.
“The goal of federal cannabis policy reform should be to address the unsustainable gap that exists between federal cannabis policy and the cannabis laws of the majority of U.S. states,” Armentano said. stated in a statement From the group. “Rescheduling cannabis factories to Schedule III does not adequately address this conflict. Existing state legalization laws for both adult use and medical use continue to conflict with federal regulations and This would perpetuate the gap between state and federal cannabis policy.”
Sarah Gersten, executive director of the Last Prisoner Project, a nonprofit that works to secure the release of everyone incarcerated for cannabis offenses, said her group will continue to advocate for broader reforms. said.
“The Last Prisoner Project believes that fully de-scheduling and fully legalizing cannabis is a necessary step to righting past injustices and creating a fair and impartial criminal legal system. We believe that,” Gersten said in a statement from the group. “We will continue to work tirelessly to ensure that the records of individuals with past cannabis convictions are expunged and all cannabis inmates are released, regardless of the federal government’s scheduling decisions. Complete Although we have not yet reached full legalization, we must use this historic moment to advance the fight for cannabis justice and the broader criminal law reforms outlined here. We intend to do so by leveraging this reclassification to
Rise in weed stocks
Despite not legalizing cannabis, the DEA’s decision to reschedule the move sent cannabis stocks significantly higher in trading on Tuesday. Multi-state operator Trulieve soared nearly 30% on Tuesday afternoon, according to CNBC. report meanwhile, Curaleaf rose 19% to a 52-week high.
market watch report Toronto-based TerrAscend Inc. rose more than 25%, Green Thumb Industries Inc. rose more than 22% and Cresco Labs Inc. rose nearly 14%.
Emily Paxia, co-founder of cannabis investment firm Poseidon Investment Management, said that as regulated cannabis companies confront entrenched unlicensed cannabis, “legal businesses are drawn to the possibility of thriving, and sideline capital is moving into the market.” “We expect liquidity to increase sharply by entering the market,” he said. market.
