What Would Rescheduling Mean for Cannabis?
How would rescheduling change the U.S. cannabis landscape for patients, business owners, investors, and the industry at large? Read on to learn more about what rescheduling would mean for America’s cannabis industry and consumers.
What Would Schedule III Mean for U.S. Regulated Marijuana?
At Schedule I, marijuana is currently categorized alongside cocaine, heroin, and other drugs that are treated as having a “high abuse potential” with “no accepted medical use,” despite the fact that cannabis has been legalized in two-thirds of the country since the CSA was enacted. This outdated classification of cannabis has clearly become obsolete at the state level, but because cannabis remains federally illegal, its Schedule I status has created countless difficulties for legitimate cannabis businesses, while preventing access to basic banking services and tax deductions due to federal and regulatory scrutiny.
If cannabis is moved to Schedule III, it will be classified alongside other drugs–such as prescription ketamine (Spravato), anabolic steroids, and certain barbiturates–with low abuse potential and accepted medical uses.
This class of drugs is far less strictly regulated, and would relax restrictions that have hampered the industry and its consumers by limiting access to banking, raising taxes, and imposing various other challenges that the industry has faced since its inception.
Rescheduling and Elimination of IRS 280E
One major benefit that would emerge from cannabis’ rescheduling is the elimination of IRS 280E taxation. IRS 280E prohibits cannabis operators from deducting otherwise ordinary business expenses from income associated with the “trafficking” of Schedule I or Schedule II substances.
Under IRS 280E, cannabis businesses are prohibited from deducting ordinary expenses granted to virtually all other business types, which, combined with excessive sales taxes upfront–which in some states have reached nearly 40%–has dangerously narrowed margins for legitimate cannabis operators throughout the country.
New Opportunities for Cannabis Research
Marijuana’s reclassification as Schedule III would also create new opportunities for cannabis research. At present, cannabis researchers are forced to undergo a complicated series of legal and regulatory authorizations before conducting studies, including registration with the DEA.
By simplifying the process of conducting research and clinical trials on marijuana’s potential health benefits, the rescheduling of marijuana would allow scientists to further investigate new and unexplored therapeutic uses for cannabis, benefiting patients and the cannabis community worldwide.
Criminal Justice Reform
Prioritization of SAFE Banking Act to Follow
Without the SAFE Act, many companies such as Mastercard and Twilio have cut ties with cannabis businesses for fear of regulatory or federal scrutiny, leaving financial analysts to suggest that Visa and other companies would continue to take similar actions until SAFE went into effect.
This has left cannabis businesses desperate to find solutions for banking, communications, and other essential services. But if the SAFE Act is passed, credit card companies and financial institutions will be able to resume industry relationships without the fear of regulatory scrutiny or complications with federal law, restoring access to essential banking services for cannabis businesses nationwide.
What’s Next? A Promising Future, Pending DEA And Senatorial Action
If these changes take effect, they will allow the industry to thrive and cause stocks to skyrocket. According to Bottomley, if cannabis is in fact rescheduled and the SAFE Banking Act is passed, it will become “more and more likely that institutional capital that otherwise wouldn’t be invested in the space starts entering the space.”
