The potential rescheduling of cannabis at the federal level is generating significant buzz within the industry, with experts dissecting the potential financial ramifications for cannabis businesses. One key aspect of this regulatory shift is the potential impact on access to traditional banking services and capital markets.
Laurie Parfitt, founder and CEO of LKP Impact Consulting and an upcoming speaker at the Benzinga Cannabis Capital Conference, offers a nuanced perspective on how rescheduling might affect the industry. A critical point of discussion is the potential elimination of federal tax provision 280E, which currently prohibits cannabis businesses from deducting ordinary and necessary business expenses. Parfitt believes that eliminating 280E could lead to a substantial increase in profitability, potentially boosting bottom lines by 20-25%. However, she cautions that the federal government might not fully abandon this revenue source without introducing an alternative, such as an excise tax, which could still present challenges for the industry.
Parfitt emphasizes that rescheduling alone might not fully address the industry’s need for safer banking and more traditional capital access. She clarifies that rescheduling does not equate to federal legalization, stating that while it might boost investor confidence, it won’t resolve all the financial hurdles cannabis businesses currently face.
While rescheduling could open the door to more comprehensive research and education about cannabis, Parfitt also highlights potential challenges. She believes that rescheduling would likely lead to more extensive research and better education for medical professionals, particularly concerning cannabis’s medical benefits and the endocannabinoid system. However, she advises caution, especially for companies that have made poor financial decisions. She notes that some might view rescheduling as a “panacea,” leading to a false sense of security. Additionally, she raises concerns that rescheduling could delay federal legalization, prolonging the regulatory complexities businesses currently navigate.
As the cannabis industry anticipates possible regulatory changes, Parfitt’s insights highlight the mixed implications of rescheduling. Her thoughts and other industry leaders will be part of the ongoing discussions at the upcoming Benzinga Cannabis Capital Conference in Chicago, scheduled for Oct. 8-9, 2024. The event will bring together critical voices from the cannabis industry to explore the potential impacts of these evolving regulations.
