Nearly one year ago (October 2022), Biden tasked the AG and HHS to review cannabis' schedule on the controlled substances act. It has been long speculated that the intention of the Biden administration has been to reschedule cannabis shortly before the 2024 election. Over the past few months, rumors emerged that the federal government is targeting schedule 3 for cannabis. Today, we received confirmation of that intention as well as seeing another domino fall in the process to remove cannabis from schedule 1 status.
Today's action is the most significant move on the federal level for cannabis reform since cannabis became schedule 1 back in 1970. The ball is now in the DEA's court. They typically respond to these review requests in ~3 months, which would set us up to see cannabis likely rescheduled in Q1 of 2024, lining up nicely with the election.
This would have tremendous impact on the US cannabis companies which currently face regulatory hurdles that are unheard of in other sectors. These companies are paying 70-80% tax rates as they are unable to deduct normal business expenses due to 280E, which only applies to schedule 1 and 2 substances. Schedule 3 would eliminate this tax burden and make many of these companies profitable overnight. It would also remove hurdles in terms of access to the federal banking system and would ultimately allow these companies to uplist to the major US exchanges such as the NASDAQ and NYSE. Currently these stocks trade on the CSE, a small Canadian stock exchange that is heavily manipulated and illiquid.
MSOS, the US-only cannabis stock ETF, is up over 20% today on this news.
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