President Joe Biden’s stunning announcement Thursday that his administration would review whether marijuana should remain a Schedule 1 drug sent shockwaves through the cannabis industry and fanned speculation that the move could lead to lower taxes for MJ businesses and more scientific research involving the plant.
Industry advocates and analysts also said it could pump renewed momentum into federal marijuana reform at a time when such measures continue to stall in the U.S. Senate.
“This is a path to federal rescheduling without Congressional action,” analysts at the Jefferies Group, a New York-based investment bank, wrote in a research note.
“Biden’s announcement today is initiating that process.”
Matt Hawkins, the founder and managing principal of Entourage Effect Capital, a private equity investment firm in Dallas, called the announcement “undoubtedly one of the most influential moves we have seen in years.”
Hawkins said the immediate reaction in the publicly traded cannabis market was one of excitement, with most stocks getting a significant boost in trading after the news.
In his announcement, Biden stopped short of calling for full marijuana descheduling, which Congress would have to pass.
The president added that the federal government must maintain limitations on trafficking, marketing and underage sales of marijuana.
The announcement comes at a time when three out of four voters say they favor marijuana legalization.
It also arrives less than five weeks before the all-important midterm elections, which will determine whether Democrats maintain control of Congress or cede power to Republicans.
Biden’s approval rating is around 44%, up from 38% in July.
But many voters are worried about the direction the country is headed, with soaring inflation cited as one major concern.
Descheduling versus rescheduling
Many marijuana industry advocates and executives would, of course, like to see marijuana completely descheduled rather than rescheduled.
Under Schedule 1, marijuana is classified in the same legal category as drugs such as LSD and heroin.
So rescheduling marijuana – while falling short of decriminalization – would be a win, according to industry executives.
Adam Goers, senior vice president of corporate affairs for New York-based multistate marijuana company Columbia Care as well as policy chair of the U.S. Cannabis Council, said that “this is a positive step, and it’s politics.
“Rescheduling opens a lot of avenues for the industry, including – but not limited to – Schedule 3 or below.”
Rescheduling at that level would remove the 280E tax penalty, which would be a tremendous benefit to the bottom lines of all plant-touching cannabis companies in the industry.
“The federal government’s lack of clear guidance on scheduling and the enforcement of (Section) 280E (of the tax code) has put the cannabis industry in a death spiral,” said Joe Caltabiano, founder of Chicago-based JSC Fund.
In their research note, analysts from the Jefferies Group said rescheduling could allow U.S. plant-touching companies to uplist to larger stock exchanges such as the New York Stock Exchange or the Nasdaq.
“Rescheduling, even if not descheduling, alongside SAFE Banking would, we believe, be enough to allow for uplistings and, in turn, significant inflows of new institutional capital,” the analysts wrote.
— Todd Harrison (@todd_harrison) October 6, 2022
Raj Grover, CEO of Canadian cannabis retailer High Tide, said he believes descheduling would mean Canadian marijuana companies could start selling cannabis in the U.S.
As the CEO of a company that is Canada’s largest non franchised cannabis retailer and also has significant e-commerce assets in the United States, I see today's announcement from @POTUS as a potential game changer.
— Raj Grover ?? (@RajGrover_HITI) October 6, 2022
U.S. Rep. Earl Blumenauer, an Oregon Democrat, said Biden’s announcement was a “significant boost” to marijuana reform efforts.
“The administration’s announcement is a welcome development, and it comes on top of unprecedented Congressional action and a Senate that is poised for the first time to be able to move on these items,” he added.
It would also open up the possibilities for wide-ranging, basic medical research into the cannabis plant.
Emphasizing the disproportionate impact on racialized communities across the U.S., Biden also pardoned all people convicted of simple marijuana possession under federal law – a group estimated to include around 6,500 people.
In addition, Biden called on state governors to pardon marijuana-possession offenses at the state level.
It’s something the industry has been requesting for many years.
For many cannabis executives and advocates, it made little sense that people remained incarcerated for marijuana possession in states with regulated marijuana programs – or in states bordering those that had decriminalized marijuana possession.
The implications of Biden’s announcement and the chances for other federal reform will be unpacked immediately after the midterm elections at MJBizCon, Nov. 15-18. Catch the post-election analysis for the inside scoop on what’s possible and the implications for cannabis business opportunities.
U.S. Rep. and Cannabis Caucus Co-Chair Barbara Lee, a California Democrat, said that “these pardons will give a fresh start to thousands of people convicted of low-level offenses and allow them to finally get a job, go to school, live their lives to the fullest.”
She added that the pardons remove many barriers that the federal government has in place for previously incarcerated individuals.
“It is incredible news to hear that President Biden is calling for the pardons of prisoners convicted and held on simple federal marijuana possession charges, a move that will impact over 6,500 individuals,” said Nancy Whiteman, CEO of Colorado-based edibles maker Wana Brands.
“This is an important step in full decriminalization and a meaningful way to begin to address the racial disparities around the arrests and convictions of BIPOC people.”
Scott Kenyon, CEO of Denver HR tech firm Wurk, agreed Biden’s decree is a step in the right direction.
“Removing criminal convictions for cannabis possession under federal law as part of a comprehensive marijuana policy has always been an absolute must,” Kenyon said.
“Too long have we benefited from a multibillion-dollar industry while innocent people have been incarcerated for a plant that has many potential medicinal benefits.”
While some members of the industry praise Biden’s announcement, others would like him to do more.
“In addition to pardoning prisoners who are locked up for an activity that the majority of Americans now have access to, we as an industry desperately need one simple bill passed: SAFE Banking,” Caltabiano said.
“You don’t have to dig deep past the daily headlines to find an industry mired in unfair taxation without representation.”
Bart Schaneman can be reached at email@example.com.