EXCLUSIVE: 'Investment By Multinational Industries Will Forever Change Cannabis,' Warns Expert

This week, President Joe Biden announced a landmark decision to reschedule marijuana, signaling a shift in federal drug policy. Biden declared in a video statement that this move is crucial for addressing past injustices and recognizing the medical benefits of marijuana.

The administration plans to reclassify marijuana from Schedule I to Schedule III, a change that acknowledges its medicinal value and eases current restrictions.

The DEA has initiated a 60-day public comment period following the proposal. This period allows interested parties to voice their opinions and request hearings. After any necessary hearings, the DEA will review these comments and issue a final order. This process could span several months to a year.

Tax Relief and Financial Implications

The rescheduling of marijuana is set to have profound implications for the $34 billion cannabis industry. One immediate benefit would be the removal of significant tax burdens. Currently, cannabis businesses cannot deduct ordinary business expenses due to IRS code Section 280E. The reclassification would change this, alleviating financial strains on these businesses.

Lou Magazzu, a seasoned New Jersey attorney specializing in cannabis law at Weiner Law Group LLP and an upcoming speaker at the Benzinga Cannabis Market Spotlight event, emphasized the importance of this development but warned against premature celebration.

“Before anyone takes a rescheduling victory lap, we should be mindful of the publication, public input, and litigation that will inevitably follow the proposed Rule change,” he said. These steps will delay any actual impact of this proposed change until after the next presidential administration.”

Magazzu also highlighted potential regulatory challenges. “If and when rescheduling is permanent, it will bring in more regulation via the DEA and/or FDA,” he noted. This added layer of regulation, combined with existing state regulations, could increase the industry’s operational costs.

New Regulatory Challenges

The rescheduling decision could also spur investment from large multinational industries such as pharmaceuticals, alcohol, and tobacco. Magazzu explained, “Investment by such large multinational industries will forever change the cannabis industry as we know it.” This influx of capital could drive further consolidation within the industry, making it more attractive to big players.

However, Magazzu cautioned that rescheduling might reduce the advantages enjoyed by early entrants in states that have already legalized cannabis. “Rescheduling may also reduce or eliminate the ‘first to industry’ benefits to those businesses located in states that allowed the legal sale of cannabis products,” he said.

Magazzu also pointed out that the move could bring serious interstate commerce questions, potentially resulting in oversight by the Department of Transportation. He stressed the importance of preparing for these changes, noting, “It is in the industry’s interest to prepare for eventual rescheduling by considering all negative and positive implications before we experience them.”

Preparing for Industry Transformation

As the cannabis industry braces for potential changes, the upcoming Benzinga Cannabis Market Spotlight in New Jersey will be a critical platform for discussion and networking. The event, scheduled for June 17, 2024, aims to explore New Jersey’s cannabis market potential, regulatory challenges, and the transition from illicit to legal markets.

The Biden administration’s rescheduling move represents a significant shift with long-term implications for the cannabis industry. However, the process will require careful navigation of regulatory hurdles and public input before the changes take effect. Magazzu aptly stated, “The possibility of such investment over the long term is undeniable. Investment by such trillion-dollar industries will forever change the cannabis industry as we know it.”

Cannabis rescheduling seems to be right around the corner. Want to understand what this means for the future of the industry? Hear directly for top executives, investors, and policymakers at the 19th Benzinga Cannabis Capital Conference, coming to Chicago this Oct. 8-9. Get your tickets now before prices surge by following this link.

Image: Courtesy of AJEL, lindsay fox by Pixabay