President Biden has recently directed the DEA to reschedule cannabis from Schedule I to Schedule III. This historic change is set to invigorate the industry by easing banking restrictions and opening new avenues for investment.
Understanding the Rescheduling
For over four decades, cannabis has been classified as a Schedule I drug, labeled as having “no medical value” and a “high potential for abuse and addiction.” This categorization, placing it alongside substances like heroin, has perpetuated prohibition and significantly restricted research and business activities related to cannabis. This rigid classification has created both philosophical and practical challenges, particularly as states began legalizing cannabis in the 2000s. It has also created a complex regulatory landscape, leaving sovereign nations in a difficult position regarding the establishment of cannabis enterprises.
In 2022, President Biden directed the Department of Health and Human Services (HHS) and the DEA to consider rescheduling cannabis. By August 2023, HHS recommended that cannabis should no longer be classified as a Schedule I drug. Following this, last month, President Biden formalized the rescheduling request, initiating a public comment period. Current indications suggest that cannabis will be officially rescheduled to Schedule III by the end of 2024.
Implications of Rescheduling
Tax Advantages
The rescheduling of cannabis brings exciting prospects for the industry, notably in terms of traditional business financing and tax benefits. Cannabis businesses will now have the ability to write off their Cost of Goods Sold on their profits, similar to other industries, substantially reducing their tax burden. This change eliminates the adverse effects of Tax Code 280e, which has previously placed undue financial strain on cannabis businesses.
Expanded Research Opportunities
The recognition of cannabis as having medical value will revolutionize clinical research, opening new doors for universities and businesses alike. With rescheduling, grant funding from resources such as the NIH and ARPA will become more accessible. This presents a unique opportunity for tribes to partner with research institutions or secure funding for commercial research at their tribal cannabis enterprises.
Seize the Moment
In light of the renewed investment opportunities and industry revitalization resulting from rescheduling, there is no better time to reassess your tribe’s cannabis strategies. Blue Stone Strategy possesses the expertise to assist your council or economic development corporation with comprehensive business modeling, feasibility studies, and business planning, all aimed at advancing your cannabis program initiatives.
Contact us today at info@bluestonestrategy.com or (949) 476-8828 to schedule a consultation and discover how we can help you capitalize on these new opportunities in the evolving cannabis landscape.