Rescheduling: 7 Reasons To Worry

On May 2, I wrote about why RIII was transformational for the cannabis industry as well as medical consumers.  

However, cannabis developments rarely lead to clear binary outcomes. One can welcome and appreciate RIII and still have worries about its gaps, risks and implications, both for enterprises and the sector.  

Let’s consider some of the potential watch outs:

1. The final implementation date is unclear

RIII could be put to bed in as early as 30 days but it will probably take much longer given politics and bureaucratic practices.  Fact is, the implementation date is anyone’s guess right now.  This uncertainty will create planning, cash management and operational uncertainties.

2. Rescheduling's impact will differ for each MSO

This is not surprising given that the influence of 280E (say, taxes paid as a % of sales) on each company varies.  In fact, some MSOs may end up with limited benefits after everything is said and done.  Be mindful of the hype and 'know thyself.'

3. The taxman hasn’t left the building

Governments don’t easily walk away from tax revenues especially when their fiscal house is in disarray and we are talking ‘vice’ products.  Count on the taxman coming back in some form to reclaim much or all the lost tax revenue.

4. States still matter

Rescheduling won’t affect States authority over cannabis in key areas like access, fees and licensing.  Not surprisingly, we will continue to see different regulations by jurisdiction, which ultimately lead to higher costs, market imperfections and hassles.

And RIII has little influence in the design and passing of game-changing Interstate Commerce legislation.   

5. The Law of Unintended Consequences

It is not clear what will come out of RIII's confirmation process and the FDA’s regulatory imprint. As they say in the software industry 'never confuse the install with the sale.' I don’t have confidence that the government will get it right in terms of striking the right balance between business, consumer and FDA needs.

6. What’s missing still matters a lot

RIII is not full legalization nor does it include the financial reforms found in the SAFER Act.  The hope that RIII will lead to more US uplistings remains theoretical at this moment.  RIII will also do little to overcome stigma and inertia, particularly among institutional investors and asset servicers.  They want to see full legalization before jumping in.

7. Its still about running a great business

Human nature being what it is, RIII will result in some companies taking their foot off the gas and banking the cash. Don't. Most of your competitors will be getting the same tax savings as you. Your priority remains doing better on strategy and operations.  

#rescheduling #MSOS #regulations #ScheduleIII #280E #FDA