Los Angeles, California – The cannabis industry is on the brink of a significant milestone as the process of rescheduling cannabis from DEA Schedule 1 to Schedule 3 progresses. A key date to look out for is July 22, marking the end of the public comment period for the proposed rescheduling rule. With the final rule expected to be published in the Federal register around August 22, there is anticipation that rescheduling could potentially take effect as soon as September 22.
The regulatory timeline for rescheduling cannabis is subject to potential delays if a full administrative hearing is necessary, or if lawsuits are filed by anti-cannabis groups. However, with the 2024 national election looming, there is a strong push from the Democratic Party, led by the Biden administration, to advance pro-cannabis legislation given the widespread support for legalization among Americans. President Biden’s involvement in the rescheduling process highlights the political advantage for the administration, especially before the upcoming election.
Rescheduling cannabis from Schedule I to Schedule III is crucial for the industry as it would allow companies to deduct most business expenses on tax returns, reducing the burden of high income taxes. This shift could unlock significant financial benefits for cannabis companies, such as Verano, as mentioned by founder George Archos. While the impact of rescheduling on tax liability may vary, the overall benefit is expected to strengthen US cannabis companies by improving sales volume and profitability.
Investors looking to capitalize on the potential re-rating of cannabis stocks around the time of rescheduling are advised to consider companies with strong management and a history of success in the industry. Green Thumb Industries emerges as a top player among peers, with positive earnings per share (EPS) and a consistent track record of generating operating cash flow. The company’s prudent financial management, including controlling long-term debt and shares outstanding, sets it apart in the cannabis market.
Despite the risks associated with potential delays in the rescheduling process or changes in business strategies, investing in cannabis stocks like Green Thumb offers long-term growth potential. While short-term market volatility may favor more speculative stocks, a strategic investment approach focused on companies with proven management and sustainable profitability is recommended for long-term gains in the evolving cannabis industry. Investors should conduct thorough research and consider the financial stability and growth potential of cannabis companies before making investment decisions.
