Last week saw the Department of Health and Human Services (HHS) nudging the Drug Enforcement Agency (DEA) to reconsider the stringent constraints placed on marijuana. This comes amid a renewed evaluation of its standing under the Controlled Substances Act.
This move might prove to be a watershed moment for the industry that has long been stifled by federal oversight, even as more states lean towards its legalization.
Consequently, several cannabis-related stocks experienced an upward trend. Notable names such as Aurora Cannabis, Canopy Growth, and Tilray Brands all witnessed a surge in their share prices, with consecutive boosts on Wednesday and Thursday.
Historically, since the ’70s, marijuana has been categorically aligned with potent drugs like heroin and LSD as Schedule I substances — these are deemed by officials as having no medical merit and are considered highly addictive. Intriguingly, despite mounting scientific evidence and evolving state regulations endorsing marijuana, it still maintains this controversial classification, even being ranked above drugs like fentanyl and cocaine.
However, there’s a glimmer of hope. The DEA is now contemplating downgrading marijuana to a Schedule III status. This would position it alongside substances like ketamine and testosterone, which are seen as having a moderate addiction risk. It’s noteworthy that this proposed shift wouldn’t lead to the outright de-scheduling of marijuana.
Despite the potential shift, cultivating, producing, and selling marijuana would still be federally illicit, though it’s medically approved in 39 states and recreationally in 23.
What’s Looming for Marijuana Regulation?
HHS, as part of their suggestion, undertook a comprehensive scientific and medical assessment which will be instrumental in the ultimate decision on the matter.
Before the 2024 presidential elections, a resolution is anticipated, as per insights from Roth MKM analyst Scott Fortune. Fortune notes, “Historically, the DEA has been consistent in adhering to the HHS’s scheduling suggestions.”
The DEA’s reconsideration will be anchored on three main pillars: addiction risk, medical applications, and safety concerns. Historically, regulators have leaned on marijuana’s lack of accepted medical use for its Schedule I classification. However, Fortune highlights that with almost 40 states now recognizing medical marijuana, this stance might be untenable.
Upon making a decision, the DEA will advance its recommendation to the attorney general, who will then make the definitive call.
Implications for the Cannabis Business Landscape
Should marijuana be transitioned to a Schedule III substance, this promises relief from numerous existing impediments. The most significant shift will be seen in tax structures. Currently, businesses involved in Schedule I substances can’t avail tax deductions based on the IRS’s 280E provision.
This rule has hamstrung many in the cannabis industry, especially when sales have plateaued. Jeff Schultz, a noted cannabis lawyer, opines, “Discontinuing the 280E will revolutionize the financial trajectory of every player in this field.” The proposed change also bodes well for inter-state trade and furthering research. Moreover, it may rejuvenate investor interest and buoy public cannabis stocks.
However, a key challenge remains — banking access for the cannabis sector. As it stands, due to its federal status, traditional banking remains elusive for the industry. While Schedule III drugs still pose a challenge for banks under the current legal framework, there’s some hope on the horizon with the SAFE Act, currently being deliberated in Congress.
Is Complete Legalization in Sight?
Senate Majority Leader Chuck Schumer voiced his perspective, stating that while this is a commendable stride, the ultimate aim remains the cessation of federal prohibition. Schumer commented, “The DEA should act swiftly in line with the HHS’s directive. However, there’s a longer journey ahead in dismantling overarching federal constraints on cannabis.”
Leading figures in the industry resonate with Schumer’s sentiments. David Goubert, helming the multi-state dispensary chain Ayr Wellness, expressed, “This is a monumental stride towards renouncing the outdated war on cannabis. Federal cannabis reforms have been long-awaited, and it’s high time they’re addressed.”
Lets’ take a look at some of the stocks that are running in wake of this recent development.
Tilray Brands Inc (NASDAQ: TLRY), Aurora Cannabis Inc (NASDAQ:ACB), Curaleaf Holdings Inc (OTCMKTS:CURLF) and Canopy Growth Corp (NASDAQ:CGC).
One stock that just announced news that’s worth noticing is Sibannac, Inc (SNNC). SNNC announced Revenue Through Sales of Its Kratom Energy Shot with New York City and Las Vegas Distribution.
Sibannac, Inc., through its newly acquired subsidiary brand – Letz Go Energy – the flagship brand of the Company’s Immersive Brand Concepts, is thrilled to announce its exciting debut in the Big Apple and Las Vegas Nevada, partnering with the esteemed distributors, AH80 and Hygeia Distribution. To mark this revenue milestone, Letz Go Energy introduces its revolutionary Kratom Energy Shot, a game-changing product infused with natural ingredients and unique catalyst properties designed and known to elevate mood, provide pain relief, and enhance focus. Read More at: https://finance.yahoo.com/news/sibannac-inc-announces-revenue-sales-120000536.html
As always, follow traders vigilance and conduct your own due diligence.
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