We asked local and regional stakeholders to get specific about the potential impact of rescheduling
With major changes reportedly coming to the classification of cannabis in this country, industry stakeholders have been sharing hot takes on the topic from various angles all week.
We’re among those who are guessing about what comes next, and since we’re not sure what it will actually mean for Massachusetts if weed is finally recognized for its medicinal might, we asked some companies and community friends how a much-ballyhooed rescheduling could resonate in the Bay State. Here’s what they said …
Derek Gould (Monarch Emulsions)
New potential avenues for operators to sell/distribute the surplus of flower and other [marijuana-infused products] within the state. Could this impact [adult-use] dispensary sales if there are other medical/pharma “brick-and-mortar” storefronts? It will be interesting to see how this also impacts the illicit market depending on how medical/pharmacy dispensing licenses are given and if this will be overseen by a regulatory body other than the [Massachusetts Cannabis Control Commission].
Cara Crabb-Burnham (CCB Consulting LLC)
I think this move is just a Band-Aid on a bullet wound. This will help the operators pay less taxes via 280E, and may move the needle toward interstate commerce, but that will inevitably only help the MSOs and large-scale operators. I don’t see how this gets anyone out of prison, and it won’t affect state laws. I would love to have seen this descheduled and left in the hands of the states. I hope MA keeps out-of-state products out of state without in-state testing (regardless of my personal feelings about our current testing situation).
Adam Terry (Cantrip)
I’m sure you’ll get this from everyone, but the simple and easy answer is that rescheduling to Schedule III will eliminate 280E (as that tax code only applies to Schedule I and II narcotics), thus dramatically reducing the tax burden for marijuana companies. Lower tax burden means better profitability and cash flow for operators which hopefully means that we can reduce this bubble of slow invoice payments, lower consumer prices, and increase marketing/innovation in the dispensary channel.
Tom Regan (Root & Bloom)
The rescheduling of cannabis could have profound impacts even in states like Massachusetts, where recreational and medicinal use is already legal. This policy change could significantly bolster the local economy by creating more job opportunities not only within the cannabis industry itself but also in ancillary businesses. For higher education institutions in Massachusetts, rescheduling opens up new realms of academic freedom. Universities and colleges could expand their research into cannabis, exploring its medical benefits, economic impacts, and social implications more deeply than ever before. This could position Massachusetts as a leader in cannabis research, attracting students, scholars, and investments from around the globe. Overall, rescheduling could enhance Massachusetts’s pioneering status in the cannabis sector, providing broader economic benefits and reinforcing the state’s reputation as a hub of innovation and education.
Jeff Barton (Bountiful Farms)
The move to rescheduling is obviously a great step in the right direction for the cannabis industry as a whole and shows continued momentum for all of us. Doing away with the restrictive 280E tax regulation treats cannabis companies like any other industry; it significantly reduces our tax burden and will directly result in higher profits. What needs to happen next is the passage of the Safer Banking Act, which will open up financial opportunities for cannabis companies—again, like any other industry. Of course, completely descheduling cannabis is the true, right answer, as it would allow us to more easily compete throughout the US and even internationally—once again, like any other industry. Overall, a positive outlook, but there’s still a lot of unknown and more work to be done.
Andy Westerkamp (Real Isolates, LLC)
We all know that [accounts receivable] and collecting debts is a big issue for many companies. If 280E is no longer an issue, and there is more cash on hand, then I suppose we might see more people paying their vendors ,which could create a healthier cannabis economy?!
Jacob Carlson (EzHire Cannabis)
It will allow cannabis businesses to operate, aka write-off services, like any other business. I might be hyper-focused on its effects on my company, but knowing that a business in MA will be able to “write off” our software fees is a massive win for our industry. As someone who is a cannabis “realist” and cries for the usage of common sense, this is a step in a direction I wouldn’t have chosen but a step in the right direction overall.
John Nathan (Bay State Extracts)
If you are [saying] that weed will only be available at Walgreens and that the move to S3 means pharma is taking over the adult use market, respectfully, stop. The insinuation that the states are going to topple their domestic cash cows, undo the will of their voters, toss out the millions spent on regulatory framework and destroy thousands of jobs within their voting districts all because of some nonexistent mandate or rule that says all S3 be pharmaceutical is ridiculous. You get more likes and engagement by posting fear, doom and gloom, so many of these folks will ignore legal opinions and repeat some nonsense they heard on a podcast.
Steve Reilly (Insa)
We are motivated by the DEA’s recommendation for reclassification of cannabis from Schedule I to Schedule III. This moment represents a significant shift in not only the localized cannabis industry, but also in the way our country views the nation’s entire cannabis enterprise. Our goal at Insa is to help bring people all-natural, high-quality products, educational experiences, and a unique retail environment to patients and consumers in the states we operate in—and the DEA’s recommendation for reclassification will help us further deliver premium cannabis products, education, and awareness to new and existing consumers. We are also eager for the medical research opportunities this may lead to.
Jon Napoli (Boston Gardener, Quincy Cannabis Co.)
280E should be a thing of the past. Everyone in the cannabis industry should be filing taxes like a normal business with normal deductions. Our tax bills are outrageous.
Jon Levine (MariMed, Inc.)
The impending announcement of the DEA’s decision to recategorize cannabis from Schedule I to Schedule III under the Controlled Substances Act is historic. The positive impact this will have cannot be overstated. Our industry, the millions of consumers and patients we serve, and the individuals and communities that have been ravaged by the War on Drugs, all will see positive benefits. So too will those investors who have supported this industry for many years, patiently waiting for a major federal catalyst such as this.
As a company whose mission is to improve the lives of people every day through cannabis, we are thrilled to see this decision! Under Schedule III, the many benefits from cannabis will be significantly easier to research, opening the door to further product innovation and credibility for the plant’s medicinal value. It’s a monumental step forward in mainstreaming cannabis and will confirm something our company has known for over a decade—that our industry produces products that are safe and effective in treating a wide range of health and wellness issues. Consumers are the biggest winners here.
Shaleen Title (Parabola Center)
Moving marijuana to Schedule III is primarily about a tax break. It has exactly one clear benefit: it would provide a tax break to our state’s struggling small businesses. But despite the misleading rhetoric from the Biden Administration, rescheduling makes no changes to the federal criminalization of marijuana.
My biggest concern with rescheduling is the demonstration that the industry, not our communities, are driving reform. The tax savings for the largest companies are estimated as high as $150 million a year, but not one person will be released from prison or saved from arrest or deportation for their use of marijuana. Is this really a step in the right direction?
Dr. Marion McNabb (Cannabis Center of Excellence)
Should the DEA move forward in rescheduling cannabis from a Federal Schedule I to a Schedule III, this has the potential to open some doors for cannabis research funding and provide business tax relief. But, rescheduling does not address the core issues left and continually perpetuated by the war on drugs. The move to reschedule will allow for fair tax treatment for cannabis companies by eliminating 280E, providing great relief for these businesses. Additionally, the potential of rescheduling cannabis can open up long awaited avenues for research and research funding into the risks and benefits of cannabis.
However, we should be mindful to ensure the future research funding investments are not monopolized by pharmaceutical giants who also have caused or contributed to the war on drugs, including the devastating opioid epidemic. From 2000-2018, research that showed that research studies which aimed to show the harms of cannabis received 20 times more US Government funding than research studies that aimed to examine the therapeutic benefits in addition to the risks of cannabis.(1) With over 30 years of cannabis research funding dedicated to showing the harms, we do not need a new flipped and biased investment of billions of dollars into pharmaceutical giants pockets. Such monopolization could lead to funding cannabis research approaches, studies, and models that are designed with for-profit, patent-driven motives at the core.
While I support the expansion of possibilities of cannabis research funding and tax relief for cannabis businesses, I still stand in support of fully de-scheduling cannabis. Rescheduling continues to allow the criminal penalties for recreational and medical cannabis to continue, which disproportionately impacts black and brown communities and continues to perpetuate the war on drugs, harms our communities, and negatively impacts patient access.
Dr. Keith Saunders (NORML)
Someday, we will have a federal drug policy that recognizes a very large proportion of drug use is not medicinal, and will accommodate for it. If this is real medicinal legislation, then nothing changes in the agricultural cannabis market—marijuana is still illegal to possess in any amount, and all the state-licensed operators are in violation of federal law. If this is to mean that cannabis will be treated like all other schedule III drugs it will mean only those with DEA licenses will be allowed to produce it, it will not be permitted in organic form, and it certainly will not be smoked. No current products, other than dronabinol and Sativex (both currently schedule II), are affected, and as previously-approved pharmaceuticals they were open to rescheduling without any special changes to policy.
Theoretically, it will allow state-licensed cannabis businesses to begin to take 280e tax write-offs, but that depends on the IRS, not the DEA. And since none of those state-licensed operators hold DEA licenses the IRS could still call it laundering for a bank to touch money that once touched plants. The federal government will likely maintain the hands-off approach to state-legal markets. It offers a nudge toward a general legalization.
What stands out to me most about policy and culture is the former matters less than the latter. While the 2024 model Biden is talking more sensible cannabis policies and over 70% of Americans prefer legalization, it only takes the type of cultural shifts that led to the waves of legalization (or to the rise of MAGA) for us to have a White House that operates more like the 1988 model Biden, who loved mandatory minimums. Until cannabis is removed from the CSA, there will be underlying tensions that keep it from being treated like those other substances that are not under the CSA: alcohol, caffeine, and nicotine.
Looking ten years down the line, there will be multiple pharmaceutical patents on the processes that synthesize the minor cannabinoids like THCV, CBC, etc., which are not produced in large volume via agriculture. They will be creating cannabinoid cocktails for treatment and maintenance that will be prized for their relative safety and effectiveness. They will also be covered by medical insurance so we can be sure their price per milligram will be astronomical. Pharma does not like competition, so just like we have MSOs lobbying against personal cultivation, we will also see pharma try to push agricultural cannabis products out of their markets. We are going to see a new version of the Medicinal vs. Legalization battles of the early 21st century.
Jonathan Ferguson (Green Valley Analytics)
Green Valley Analytics feels as though there are both potential positive and negative impacts to the industry in Massachusetts. This change does open the door for some tax benefits (ie: 280e), which should help the profitability of cannabis companies, and also means additional research would be easier to conduct, it could also open the door for larger (pharma) companies to swoop in and try to take the whole thing over.
Ultimately, the industry seems pretty split on whether this is a good thing or a bad thing. This also could just be some election year noise used to prop up a candidate and get support from the younger voters. Time will tell! It really depends on what the federal government decides to do as far as implementation and enforcement, which again, will take time to see how it unfolds. Personally, I feel as though cannabis shouldn’t be scheduled at all. Ultimately, I think it needs to be fully legalized, regulated and taxed, like any other commodity.
David Ullian (Vicente)
For the Massachusetts cannabis industry, rescheduling cannabis to Schedule III would result in substantially reduced tax burdens for licensed cannabis businesses because they would no longer be subject to Section 280E of the Internal Revenue Code. Section 280E has prohibited cannabis businesses from deducting standard business expenses when calculating their pre-tax profits, and if 280E no longer applies, cannabis businesses will save hundreds of thousands of dollars in excessive taxes. This will increase cash flow and profitability and enable businesses to expand their operations. More profitability for cannabis businesses will also reduce the financial risk for institutional lenders and should increase the availability of financing as well.
There is obviously much more to discuss, but elimination of 280E I believe would have the biggest positive impact for Massachusetts cannabis businesses.
Gregg Weiss (Happy Valley)
Rescheduling would remove the 280E tax burden that all cannabis business are hit with and is a critical step towards SAFE banking and federal legalization. Cannabis should have never been included on Schedule 1 with heroin and LSD to begin with
