Industry Players Respond To DEA’s Rescheduling Announcement
May 7, 2024Last week, the Drug Enforcement Agency announced a rescheduling for cannabis, moving the drug from Schedule I to Schedule III. The move was immediately celebrated among advocates for reform and those working in the cannabis industry. The onerous restrictions placed on Schedule I drugs hampered the cannabis industry, preventing companies from taking advantage of standard tax deductions and restricting their state-level legal businesses from behaving like producers in other industries, like alcohol.
In the wake of the announcement, share prices for companies across the cannabis industry shot up, with the hopes that cannabis being treated as a Schedule III drug would expand the industry and allow cannabis companies to operate more normally. “Rescheduling could trigger the removal of Section 280E, which has inhibited cannabis operators from accessing ordinary business tax deductions. This will help further legitimize the sector and allow all legal cannabis businesses to participate more equitably within the U.S. economy,” Matt Darin, CEO of multistate player Curaleaf, told SNDC. “For Curaleaf, removal of 280E could equate to savings of more than $150 million in excess tax contributions.”
David Goubert, president and CEO of Ayr Wellness, echoes Darin’s sentiment, noting that currently, cannabis businesses are taxed on gross margin, not profit. “The impact of that at the current rate is $50 million a year,” he says. “It’s the difference between trying to make money and making money, frankly.”
In addition, Goubert explains, rescheduling cannabis will open up the opportunities for researchers at the university, pharmaceutical, and business levels to further study cannabis. Robert Vanisko, vice president, public engagement at Ayr, adds that while there is limited research happening now—including Ayr’s own research partnership with the Lake Erie College of Osteopathic Medicine—rescheduling cannabis exponentially increases researchers’ opportunities. “I think now you actually get a chance to have more fulsome research, especially with this being liberalized for many universities and funding allowed to actually flow,” says Vanisko. “Now you’re able to get into much more specific use cases.”
Curaleaf’s Darin and Ayr’s Goubert agree that while rescheduling is an important step for the industry, it is still just a step. “We’re hopeful that following rescheduling, lawmakers will advance and pass the SAFER Banking Act, which would allow cannabis operators to access normal banking services and create a safer, stronger, and better-regulated industry,” says Darin. “These two crucial steps would put us on a stronger pathway toward federal permissibility.”
“We don’t think that rescheduling is going to, for example, get us directly to be able to be on the NASDAQ or anything like that,” says Goubert. “The SAFER Banking Act is something that we’ve been asking for—that the whole industry is after—as a way to better protect our teams, our customers, and our patients.”
Pointing to potential positives, Vanisko says that rescheduling will likely cause on-the-fence lawmakers to liberalize their opinions, noting that he’s spoken with many federal and state politicians who said they would not vote for pro-cannabis laws until the drug is no longer Schedule I.—Shane English
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