Reclassifying Cannabis as a Schedule III Substance

With the recent news of the government reclassifying cannabis from a level 1 drug to a level 3 drug clearing the way for Federal approval vs state by state approval of cannabis, please see the video from Key Investment Partners about the current state of the marijuana industry and the potential growth moving forward.

Implications of Reclassifying Cannabis as a Schedule III Substance

Over the course of the past year, FDA scientists conducted an eight-factor analysis (8FA) wherein the scientists concluded that marijuana has less potential for abuse than other Schedule I or II substances and has a clinically accepted medical use in the United States. Following these findings, on August 29^th, 2023, HHS recommended the DEA reschedule cannabis to a Schedule III substance and today, it appears the DEA has followed their recommendation. The reclassification of cannabis by the DEA is a landmark moment for the industry which has many far-reaching implications for cannabis companies and their investors, which I’ve summarized below:

1. Rescheduling cannabis as a Schedule III drug means that Section 280e of the US tax code will no longer apply to cannabis businesses, which allows these businesses to pay taxes based off net income as opposed to gross profit. We expect this to create a domino effect of industry growth fueled by increased free cash flow.
2. Rescheduling opens new avenues for research and medical uses, results in lighter criminal penalties for cannabis-related violations of the CSA, and will likely attract more investors, researchers, and entrepreneurs into the cannabis space.
3. Scientists will now have significantly greater access to resources to research cannabis legally for the first time since 1970, making it easier for cannabis companies to research and develop cannabis-based drugs and receive FDA approval for them.

If you would like to discuss further how this could assist you and your financial goals, please schedule a call below.