Legislation Analysis: What the Future Holds for the Cannabis Industry

The RSPA Cannabis Community helps members meet and network with others interested in the cannabis vertical and fosters business development opportunities for RSPA members, all in a vendor-neutral atmosphere. The community has grown to over 230 members ranging from Fortune 500 organizations to SMB VARs and software developers. To join or sponsor the RSPA Cannabis Community, email Membership@GoRSPA.org.

By: RSPA Cannabis Community

Accurately predicting the future of the legal cannabis industry in North America has proven to be a complex task for VARs and ISVs. To help RSPA members see what’s around the corner, the RSPA Cannabis Community recently welcomed featured guests attorneys Amber Littlejohn and Kristina Dahmann of law firm Miller Ice for a roundtable discussion. Littlejohn and Dahmann shared their perspectives on the latest legislative activities and what they could mean for the cannabis industry. Here are some of the discussion highlights:

  • We’ve seen a cannabis banking bill clear the Senate committee – the SAFER Banking Act. And then also the Department of Health and Human Services recommended that marijuana be reclassified from Schedule 1 to Schedule 3. It’s obvious that these are steps in the right direction. How big are these steps?
  • One year ago we started to see some strides, and there was so much excitement about what was then the SAFE Act. Everyone on the stage at MJBiz was like, “This is going to pass. We’re going to do it!”
  • I was very tempered at that time regarding it (the SAFE Act), and I’m actually still very tempered by what we’re seeing. It’s still really exciting because we’ve seen a lot of action happen in the House historically and now we’re seeing action happen in the Senate.
  • There’s many, many more steps that have to happen. Every indication is that this will not be successful with the current makeup of the House. We’ve heard specific indication with respect to that from key House members.
  • Now we have a more conservative composition in the House. The prospects for SAFER passing are narrow. Even the deal required to get it out of the Senate in its entirety is going to be challenging.
  • There were Republican votes that it took to get this bill out of committee. We are seeing attitudes at least about ancillary service providers and people tangentially associated with this industry start to shift.
  • There is movement on the Senate side, but I don’t see this moving anytime soon. We have a budget crisis looming again, we’ve got to fund defense. The chances of this sneaking in as a priority are somewhat limited. My optimism is somewhat limited.
  • We had a leak of the letter that HHS sent to DEA recommending that cannabis be moved from Schedule 1 to Schedule 3. Let me take a moment to talk about why that’s significant.
  • Schedule 1 means it’s a completely illicit substance. That means that there is a provision in the tax code that now applies to cannabis businesses that results in punitive taxes that are really meant to crush cartels and criminal enterprises.
  • You frequently end up with businesses that have effective tax rates of about 75%-95% that is absolutely common on the retail side.
  • If cannabis is moved to Schedule 3, the biggest impact that it would have on you and the biggest impact that it would have on people within the retail space is freeing up an extraordinary amount of capital that is currently going to the IRS.
  • And it would make it a lot easier for companies to invest in infrastructure, software support, system services, that they really can’t do right now because they are truly hanging on by a thread in many instances.
  • Rescheduling will not legalize cannabis. It does not at all change the legal status of cannabis as it is marketed today.
  • In a lot of spaces, especially ancillary companies, when you’re talking to funders and investors, the decisions to engage and how much to engage with cannabis companies is based on a spectrum of risk. You start to change the narrative.
  • The federal position on cannabis goes from “this is a dangerous illicit substance with no value” to the official federal government position being “some risk but a whole lot less than all of these other things.”