After Trump’s move to reclassify cannabis, here’s what Wall Street is thinking
The cannabis industry has been abuzz with excitement in recent weeks, following a proposal from former US President Donald Trump to reclassify the plant from a Schedule I controlled substance to a Schedule III controlled substance. This change would have significant implications for the industry, including the potential for tax relief and expanded research opportunities.
While the move has been met with enthusiasm from many in the industry, analysts are now focused on the when, rather than the if. With the Biden administration still in power, the reclassification process is expected to be a lengthy and complex one, with many stakeholders vying for a seat at the table.
One of the key beneficiaries of the proposed reclassification is the cannabis industry itself. Currently, cannabis businesses are forced to operate in a grey area, with access to limited banking services and significant tax liabilities. A Schedule III classification would allow cannabis companies to access more traditional banking services and potentially reduce their tax burden.
‘The reclassification of cannabis from Schedule I to Schedule III is a game-changer for the industry,’ said Sarah Schauer, a cannabis industry analyst at Cowen. ‘It would provide much-needed clarity and certainty for businesses, allowing them to invest and grow with more confidence.’
But the benefits of reclassification would not be limited to the industry itself. Expanded research opportunities would also be a major winner, as scientists and researchers would be able to study the plant in greater detail and unlock its full potential.
‘Cannabis has been a Schedule I substance for far too long,’ said Dr. Roger Pertwee, a renowned cannabis researcher. ‘By reclassifying it, we would be able to conduct more rigorous and comprehensive research, which would ultimately benefit patients and the broader public.’
The reclassification process is not without its challenges, however. The DEA (Drug Enforcement Administration) would need to issue a new scheduling order, which would require input from a range of stakeholders, including the FDA (Food and Drug Administration), the NIDA (National Institute on Drug Abuse), and the DEA itself.
Given the complexity of the process, many analysts are predicting a lengthy and contentious debate. ‘This is a multi-stakeholder issue, and it’s going to take time to work through,’ said Schauer. ‘But in the end, it would be a major step forward for the industry and for patients.’
The implications of the proposed reclassification are far-reaching, and would have significant impacts on the broader economy. A report by New Frontier Data estimates that the cannabis industry could generate up to $30 billion in tax revenue annually, were it were to be fully legitimized.
‘The economic benefits of reclassification are substantial,’ said John Kagia, Executive Vice President of Industry Analytics at New Frontier Data. ‘We’re talking about tens of billions of dollars in new tax revenue, as well as the creation of thousands of new jobs.’
As the debate over reclassification continues to unfold, one thing is clear: the cannabis industry is at a critical juncture. With the potential for tax relief and expanded research opportunities on the horizon, the industry is poised for significant growth and development.
What to Watch Next:
- The DEA’s scheduling order: The DEA will need to issue a new scheduling order, which will require input from a range of stakeholders. This process is expected to take several months, if not longer.
- Congressional action: The reclassification process may also require Congressional action, which could further complicate the timeline.
- State-level legalization: As the federal debate continues, states are moving forward with their own cannabis laws. This could create a patchwork of regulations, which could be challenging for businesses to navigate.
Conclusion:
The proposed reclassification of cannabis from Schedule I to Schedule III is a major development for the industry, with significant implications for tax relief and expanded research opportunities. While the process is complex and contentious, the potential benefits are substantial. As the debate continues to unfold, one thing is clear: the cannabis industry is at a critical juncture, and the future is full of possibilities.
