"Finally Some Good News" On Cannabis, says Wedbush 2023-08-30 03:23:23 PM ET (MT Newswires)
03:23 PM EDT, 08/30/2023 (MT Newswires) -- Today, in what was "very encouraging news" for the sector, the U.S. Dep't of Health and Human Services (HHS) officially recommended to the U.S. Drug Enforcement Administration (DEA) that cannabis be moved from its current Schedule I to Schedule III of the Controlled Substances Act, Wedbush said Wednesday.
Following its scientific review of cannabis, the HHS now believes cannabis should be moved to a lower schedule (Schedule III) within the Controlled Substances Act, given it is currently marked as a Schedule I drug. Wedbush noted while the recommendation is not binding, and the decision will ultimately depend on the DEA's ruling, the HHS' analysis will likely influence the DEA's decision.
Wedbush said: "While cannabis would still remain federally illegal as a Schedule III drug, rescheduling it to a lower Schedule would have significant, industry wide implications, chief among which would be the relief from punitive 280E tax provision, arguably the most penal of all regulatory hurdles facing multi-state operators (MSOs), which effectively requires operators to pay effective tax rates between 60-90%. To be sure, rescheduling cannabis from Schedule I to Schedule III would be materially beneficial from a profitability and cash flow perspective, at a time when all MSOs are focused on cash preservation."
In its take, Wedbush said it views today's news as "very encouraging" for an industry that has seen no meaningful regulatory progress over the past few years, and particularly since the failure of lawmakers to pass SAFE during last year's lame duck session. "While the recommendation has yet to be confirmed by the DEA, we view this as a positive development, which materially increase the odds of a rescheduling to Schedule III, which as mentioned would be a boon for the industry," it added.