Cannabis Community and Investors Respond to DEA’s Decision to Reschedule

Cannabis advocates, industry leaders, and investors are celebrating the recent decision by the Drug Enforcement Administration (DEA) to reschedule marijuana under federal drug laws. This development has sparked enthusiasm nationwide and caused a surge in cannabis stock prices. However, the celebrations are tempered by the acknowledgment that this decision falls short of the full marijuana legalization that advocates have sought for decades.

On Tuesday, the Associated Press reported that the DEA had decided to follow a recommendation from the U.S. Department of Health and Human Services to reschedule cannabis under the Controlled Substances Act (CSA). According to five unnamed sources, marijuana will be moved from Schedule I, the strictest classification, to Schedule III, which includes drugs like Tylenol with codeine and testosterone.

This landmark decision to reschedule cannabis is expected to facilitate research into the plant’s medicinal benefits, potentially leading to new treatments for various physical and mental health conditions. Previously, as a Schedule I drug, cannabis research was hampered by stringent federal regulations, hindering significant medical advancements.

Rescheduling cannabis will also have profound effects on the regulated cannabis industry. The change will improve access to banking services and exempt licensed cannabis companies from IRS rule 280e, which currently prevents businesses selling Schedule I substances from claiming most standard business deductions.

Cannabis Advocates Applaud DEA Decision

The DEA’s decision to reschedule cannabis was welcomed by policymakers, cannabis activists, and entrepreneurs as a historic milestone in U.S. drug policy reform. In Colorado, one of the first states to legalize recreational marijuana in 2012, Democratic Governor Jared Polis praised the move.

“I am thrilled by the Biden Administration’s decision to begin the process of rescheduling cannabis, following the lead of Colorado and 37 other states that have already legalized it for medical or adult use, correcting decades of outdated federal policy,” Polis stated. “This action is good for Colorado businesses and our economy, it will improve public safety, and will support a more just and equitable system for all.”

Chuck Smith, president of the board of directors for Colorado Leads, an alliance of cannabis business leaders, noted that “reclassification under Schedule III will address the 280e tax issue that has unfairly forced state-legal cannabis businesses to pay a far higher effective tax rate than other legal businesses. Allowing marijuana businesses to start deducting ordinary business expenses will enable Colorado companies to retain more revenue, employ more workers, and further invest in their surrounding communities.”

Ali Garawi, co-founder and CEO of California cannabis operator Muha Meds, emphasized the positive impact on company growth. “Like many in cannabis, we have had to think creatively about financing. At Muha Meds, we’re entirely self-funded, which has required us to be very strategic with growth. Without the constraints of 280e Tax Regulations leftover from the war on drugs, we will be able to utilize funding that we didn’t have access to before,” Garawi told High Times. “We are looking forward to tremendous growth opportunities and eased restrictions in running our business.”

Bob Groesbeck, co-CEO of Planet 13, a multistate operator with the world’s largest dispensary in Las Vegas, highlighted the benefits of easier access to banking services. “Rescheduling cannabis should pave the way for much-needed safe banking solutions. Safe banking in the cannabis industry provides a secure environment for financial transactions, granting access to essential services like checking accounts and loans,” Groesbeck noted. “It ensures transparency, reduces costs associated with cash handling, and offers consumers safe and convenient payment options. Overall, safe banking is crucial for industry growth, regulatory compliance, and enhancing consumer experiences.”

Activists Push for More Comprehensive Reform

Despite the positive reception of the DEA’s rescheduling decision, activists argue that it does not achieve the full legalization of cannabis they have long pursued. Paul Armentano, deputy director of the National Organization for the Reform of Marijuana Laws (NORML), believes marijuana should not be regulated by the CSA at all. He noted that commonly used but potentially dangerous substances like alcohol and tobacco are readily available to adults.

“The goal of any federal cannabis policy reform should be to address the existing, untenable divide between federal marijuana policy and the cannabis laws of the majority of US states,” Armentano said. “Rescheduling the cannabis plant to Schedule III fails to adequately address this conflict, as existing state legalization laws — both adult use and medical — will continue to be in conflict with federal regulations, thereby perpetuating the existing divide between state and federal marijuana policies.”

Sarah Gersten, executive director of Last Prisoner Project, a nonprofit advocating for the release of individuals incarcerated for cannabis offenses, expressed the need for broader reform. “Last Prisoner Project believes that complete descheduling and full legalization of cannabis is a necessary step towards correcting past injustices and creating a fair and equitable criminal legal system,” Gersten said. “We will continue to work tirelessly to ensure that individuals burdened with past cannabis convictions have their records expunged and that all cannabis prisoners are released, regardless of the federal scheduling decision. Despite not achieving full legalization, we must use this historic moment to push the fight for cannabis justice forward, and we intend to do so by leveraging this reclassification for broader criminal legal reforms.”

Cannabis Stocks Surge

Even though the rescheduling decision stops short of full legalization, it has spurred significant gains in cannabis stock prices. Multistate operator Trulieve’s stock surged nearly 30% on Tuesday afternoon, according to CNBC, while Curaleaf jumped 19% to a 52-week high.

MarketWatch reported that Toronto-based TerrAscend saw its stock rise by over 25%, while Green Thumb Industries Inc. increased by more than 22% and Cresco Labs Inc. climbed nearly 14%.

Emily Paxhia, co-founder of cannabis investment firm Poseidon Investment Management, expects a “surge in liquidity as sidelined capital enters the market, drawn by the potential for legal businesses to thrive” as regulated cannabis companies compete with the unlicensed market.


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