Cannabis History In The Making

Rescheduling Cannabis.

The potential rescheduling of cannabis from Schedule I to Schedule III of the Controlled Substances Act (CSA) is poised to have significant impacts on the cannabis industry. This shift is primarily influenced by recent recommendations from the U.S. Department of Health and Human Services (HHS), which noted cannabis’ accepted medical use and lower abuse potential relative to drugs in Schedules I and II.

Currently, cannabis remains a Schedule I substance under the Controlled Substance Act which was enacted into congress in the 1970’s by the Nixon Administration. By definition, Schedule I drugs are substances, or chemicals with no currently accepted medical use and a high potential for abuse. This puts cannabis alongside of substances such as heroin, lysergic acid diethylamide (LSD), 3,4-methylenedioxymethamphetamine (ecstasy), methaqualone, and peyote. Schedule III drugs, substances, or chemicals are defined as drugs with a moderate to low potential for physical and psychological dependence. Moving Cannabis to a Schedule III will put it alongside of Substances such as ketamine, anabolic steroids and some acetaminophen-codeine combinations.

So, the burning question, what does this mean for the future of Cannabis?

First and foremost, the reclassification of cannabis to Schedule III is expected to greatly enhance research and development in the field. This shift could simplify the process for researchers to obtain and study cannabis, potentially leading to an upsurge in scientific studies and collaborations. It’s anticipated that more federal funding would become available, which would support a wider range of cannabis research projects.

Let’s touch on the most anticipated change for the Cannabis industry, Tax Implications (Section 280E) and Banking.

Currently, cannabis businesses are hindered by IRC Section 280E, which forbids cannabis-related businesses from deducting otherwise ordinary business expenses from gross income due to the “trafficking” of a Schedule I substance. This has resulted in disproportionately high tax rates for these businesses, making them less competitive and profitable. 280E applies to all substances found in Schedule I & II. If cannabis is rescheduled to Schedule III, these businesses may no longer be subject to 280E starting from the effective date of the rescheduling, potentially retroactive to the beginning of the tax year in which the change is implemented. This change could dramatically reduce the tax burden on these businesses, making them more akin to other legal businesses in terms of tax treatment (The Marijuana Index) (Cannabis Biz Exec) (MJBizDaily) (Crowe).

In regards to banking, rescheduling might not immediately normalize banking relations across the board; banks may still hesitate to service the cannabis industry due to lingering federal-state legal discrepancies and other regulatory uncertainties. However, on the flip-side, it could encourage more financial institutions to engage with cannabis businesses, potentially expanding banking services to both medicinal and recreational sectors (The Marijuana Index) (Cannabis Biz Exec) (MJBizDaily).

What does this change me, the recreational consumer?

LOWER. COSTS. Yes, you read that right. This shift could lead to decreased prices due to lower taxation and operational costs for producers and sellers, making cannabis more accessible to a broader audience. With the reduction of legal risks, recreational users might find a more open and diverse market, along with greater social acceptance of cannabis use. Expect innovation and expansion of the strains and products produced by cultivators and manufacturers. This will bring you much more variety to explore!

The Uncertainties.

There are still a lot of uncertainties to this change and how they will affect the cannabis industry. Key challenges remain, such as whether the changes will apply equally to both recreational and medicinal markets and how federal and state laws will align to support these new regulations. Additionally, the implications for imports and exports of cannabis-related products are unclear, as are the impacts on pricing and taxation of cannabis. Stakeholders are also wondering whether banks and major financial institutions will begin to provide full services to cannabis businesses or continue to show hesitancy.

Let your voice be heard!

To actively demand changes in cannabis policies or any other legislative matters in New Jersey, you can directly contact your state legislators. Engaging with your representatives provides a platform to express your concerns, propose changes, and have a dialogue about the impacts of current laws and potential legislation.

You can find and contact your state legislators by visiting the New Jersey Legislature’s official contact page. This page provides access to contact information for all members of the New Jersey Legislature. You can search for your local representatives by district or name, and each legislator’s profile includes an email envelope icon for easy contact. Additionally, phone numbers and addresses for more traditional forms of communication are available if you prefer to call or write letters.

To start contacting your legislators and to find more detailed information about the legislative process, you can visit the New Jersey Legislature contact page here. This will guide you in effectively voicing your opinions and advocating for legislative changes in New Jersey.