Skip to main content

Will Cannabis Rescheduling In The U.S. Impact The International Cannabis Industry?

united states flag united states flag

News broke yesterday in the United States regarding the cannabis plant’s status at the federal level. After decades of outright cannabis prohibition at the national level in the U.S., the DEA agreed to reschedule cannabis from its current Schedule I status to Schedule III.

Arguably the most significant domestic impact that should arise out of the rescheduling if/when it is implemented is the end of the 280E issue that most cannabis companies face in the United States. A provision of U.S. tax law (280E) prohibits businesses from leveraging many basic tax write-offs if a Schedule I substance is part of their business.

U.S. businesses that ‘touch the plant,’ such as cannabis cultivators and cannabis retailers, pay significantly more in federal taxes every year compared to other agricultural and retail businesses because of 280E. For U.S. businesses that are subjected to 280E, rescheduling to Schedule III may be like winning a lottery. Researchers estimate that ending 280E for the United States cannabis industry would lower the industry’s federal tax burden by over $2 billion per year.

“Today, the Attorney General circulated a proposal to reclassify marijuana from Schedule I to Schedule III,” Justice Department Director of Public Affairs Xochitl Hinojosa said in a statement to Marijuana Moment on Tuesday evening. “Once published by the Federal Register, it will initiate a formal rulemaking process as prescribed by Congress in the Controlled Substances Act.”

“Facilitating research and reducing burdens on medical cannabis patients, providers, and the businesses that serve them” are other benefits of the proposed policy change according to the Marijuana Policy Project.

Cannabis advocates in the United States were hopeful that cannabis would be de-scheduled completely, removing all federal criminal penalties for cannabis and leaving the issue largely up to individual states. A move to Schedule III would still keep state-level businesses in the U.S. in conflict with federal policy, and federal criminal penalties for cannabis activity would remain in place.

The emerging international cannabis industry will be a big winner if/when the United States reschedules cannabis, albeit perhaps not in direct ways. Rescheduling in the United States does not replace international agreements that prohibit certain forms of cannabis commerce, including the same type of commerce that is occurring in much of the U.S. However, the butterfly effect of U.S. rescheduling could be substantial.

First and foremost, the symbolism of the United States updating its federal cannabis policy for the first time in over 50 years is significant. The United States once led the charge at the global level to prohibit cannabis in the first place, with many nations adopting parts of the United States’ harmful policies decades ago. The U.S. rescheduling to Schedule III will never right all of the wrongs of prohibition, but it does send a very loud message to the entire world that prohibition is a failed public policy, that it is a new era, and that it’s time for a more sensible approach.

The United States is obviously an important player in the world banking system, and as the cannabis industry continues to go global, entities will need proper access to that system. Jamaica’s Trade Minister previously indicated that his nation’s medical cannabis export industry was experiencing “major roadblocks” when trying to gain access to banking, pointing to federal policy in the United States as contributing to the issues. Perhaps financial institutions will be less hesitant to work with cannabis companies once the U.S. reschedules cannabis. Only time will tell.

Cannabis stocks in North America could be in for a wild ride in the coming years, particularly in the case of Canada. The entire landscape for Canadian and U.S. stocks could be overhauled because U.S. cannabis companies that ‘touch the plant’ are currently prevented from being listed in major U.S. exchanges due to cannabis’ Schedule I status.

Additionally, since cannabis is legal at the national level in Canada, Canadian companies are allowed to be listed on major U.S. exchanges, and many of them also have footprints in other countries. Will a North American stock listing shuffle occur due to rescheduling? A lot of things are still murky, but it’s definitely something to keep an eye on, as a tectonic shift could be coming in the not-so-distant future.

United States cannabis companies may still be hindered in many ways if/when cannabis is rescheduled to Schedule III. However, if 280E goes away, and if more U.S. cannabis companies can be listed on major exchanges, some U.S.-based companies will presumably turn their eyes toward the emerging international cannabis industry and develop plans for expansion. For years Canada has held a clear advantage over the United States and other countries on the global stage, but that could be changing to some degree with so much more money flowing through the U.S. industry.

An undeniable winner for everyone across the planet is a looming boost in cannabis research in the United States. Cannabis research in the United States was always hindered by the Schedule I status, presumably by design. A move to Schedule III would remove some of the hurdles that researchers and scientists have historically come up against. Research that is conducted anywhere on Earth, including in the United States, benefits people everywhere by increasing our collective understanding of the cannabis plant and how it can be best utilized by humans.

united states