Rescheduling Cannabis and Its Impact on the Cannabis Industry

Bill Murray once said, “I find it quite ironic that the most dangerous thing about weed is getting caught with it.” President Biden’s recent announcement on May 16, 2024, is set to change the narrative. The administration is taking steps to reschedule marijuana under federal law, with a proposed rule to move cannabis from Schedule I to Schedule III of the Controlled Substances Act. This decision acknowledges that marijuana has less potential for abuse compared to substances like heroin.

This “monumental” decision will allow state-legal cannabis businesses to finally take tax deductions previously prohibited under 26 U.S. Code § 280E. This section prevented businesses from deducting established expenses associated with the “trafficking” of Schedule I or II substances, impacting all state-legal cannabis businesses.

Colorado’s legal-cannabis industry, which has made over $15.86 billion in sales, stands to benefit significantly from this change after being constrained by 280E for the past decade. The DEA will be welcoming public comments on the proposal before issuing the final rule.

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