Biden's Proposal to Boost Cannabis Industry and Research

By: Cyrus Oommen

Currently, marijuana is classified under the Drug Enforcement Association as a Schedule 1 drug, meaning it has no medicinal value, and it is highly addictive. This classification dates back to the 1970s, and has been disproven in more recent years. Not only have scientists and researchers found ample medical usage for marijuana, like treating pain, but they have even proved that marijuana is much less addictive than originally perceived. With this knowledge, it feels obvious to move marijuana out from Schedule 1, and to a lower class. This is why Biden has recently proposed the reclassification of Marijuana as a Schedule 3 drug. Biden has stated that he would like to remove the harsh penalties imposed by getting caught with Marijuana possession, and moving the drug to Schedule 3 is the first step to decriminalization in states where it is not legal. On top of that, reclassification would also lead to an increased ability to conduct research on marijuana. 

What does this mean for businesses?

There are a few things.

First of all, moving marijuana to Schedule 3 will facilitate more research, which could potentially expand its uses, making the market larger for marijuana dispensaries and businesses, yielding more profits for these companies. It would also make it easier to get a prescription, increasing the demand for marijuana. Second, through a reclass of the drug, cannabis companies would be taxed significantly less than they are now. This is because of  IRS code Section 280E, which states that businesses that sell either Schedule 1 or Schedule 2 drugs, cannot deduct their expenses before getting taxed. Regularly, if a company is not selling schedule 1 or 2 drugs, they are able to remove their expenses, before getting taxed 33.33%, but cannabis companies have to instead get taxed 33.33% of their entire revenue, including their expenses, which means they are paying much more to the government than they would if they were classified as a Schedule 3 drug. Ultimately, as Biden’s proposal for a reclassification of marijuana gets closer to getting passed, the profit margins for cannabis dispensaries could likely skyrocket, businesses reaping the benefits.