Cannabis industry insiders had a somewhat mixed reaction to news of an administrative law judge putting the brakes on the federal marijuana rescheduling process for at least three months, with some praising the move as a way to get a level playing field and others lamenting that it’ll mean more time subject to punitive federal tax laws.
Best possible outcome
Attorney Shane Pennington, who has been the tip of the spear in the cannabis industry’s pushback against what’s been seen as unfair handling by the Drug Enforcement Administration, said the delay is unquestionably a positive development that will help get more pro-reform voices heard during the coming policy hearings.
“It’s a very good and essential first step to having a fair and transparent process,” Pennington said. “if we went into the hearing as things are now, without any intervention, it was going to be trouble, for a number of reasons, the main one being that the DEA has been working behind the scenes with these prohibitionist parties.”
Pennington said it was becoming increasingly unclear as to whether the DEA was putting a thumb on the scales against the rescheduling move altogether, but he noted that it made zero sense for the agency to admit a prohibition state like Nebraska into the upcoming policy hearing, but to deny participation from Colorado, the first state in the country to stand up a recreational marijuana market back in January 2014.
“It just stinks to high heaven,” Pennington said. “This is a huge victory, because … the status quo was a disaster. We were going to get railroaded.”
That meant a delay was likely the best possible outcome, Pennington said, so that the industry and pro-cannabis stakeholders could get a fair say.
Adam Goers, a senior vice president with multistate operator Columbia Care and a spokesman for the Coalition for Cannabis Scheduling Reform, echoed Pennington’s stance, and called the ruling a “positive development.”
“We think it’s worth” the 90-day delay for the hearing that the judge has now ordered, Goers said. “The Trump administration, I don’t think, is going to play ball with bureaucrats that are standing in the way of their policy.”
Goers said that all signs have thus far pointed to the incoming Trump administration polishing off the rescheduling process that was begun under President Joe Biden, despite the partisan acrimony between the two commanders-in-chief. And, he said, Trump officials are perhaps even more likely to get it across the finish line than Biden, who never seemed to throw his full political weight behind cannabis reform.
“Every indication out of Trumpworld is … Trump’s going to get done what he has promised. Promises made, promises delivered. We think this will be part of it,” Goers said.
‘Major setback’
On the flip side, the delay also means that cash-strapped marijuana companies will have to wait even longer for federal tax relief, given that the new ruling throws into question the entire timeline for when rescheduling will be completed. So when cannabis companies will begin seeing the material tax savings that they’ve been expecting since the rescheduling move began remains a big question.
The Internal Revenue Service said last year that it will continue enforcing the 280E provision of the federal tax code on state-legal marijuana companies until rescheduling is formally completed.
“The decision to not move forward with rescheduling cannabis from a Schedule I drug to a Schedule III drug is a major setback for the cannabis industry,” Sasha Nutgent, vice president of retail at New York-based Housing Works, said in a statement. “This decision also harms the legal cannabis market by limiting profitability due to the constraints of IRS code 280E.”
Dotan Melech, CEO of marijuana financial firm CTrust, echoed that point.
“This delay is going to have a substantial impact on the industry. As 280E will remain enforced, we will likely see further profit compression and increased delinquencies across the industry,” Melech said in a statement. “We must be prepared for all scenarios.”
Others, including California-based Embarc CEO Lauren Carpenter, suggested that it almost doesn’t matter what happens next because marijuana reform has come too far in the past few decades for any prohibitionist to roll back what more than half of the states have accomplished with their cannabis markets.
“The toothpaste is out of the tube when it comes to Americans understanding the value of cannabis access. Now it’s a matter of when, not if, we see movement,” Carpenter predicted.
[[{“value”:”While some say the delay levels the playing field, others brace for continued pain from 280E.
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