The recent surge in cannabis stocks across North America can be attributed to news that the United States Drug Enforcement Administration (DEA) is considering moving cannabis to a Schedule III controlled substance. This potential move, which has been a part of President Joe Biden’s agenda for years, has caused shares to increase by as much as 25%.
For the past 50 years, cannabis has been classified as a Schedule I substance under United States federal law, placing it in the same category as heroin and methamphetamines. Rescheduling cannabis to a Schedule III classification would categorize it among substances with “moderate to low potential for physical and psychological dependence,” such as Tylenol with codeine or anabolic steroids.
While the DEA’s announcement is still pending and could face potential obstacles, such as a hearing before an administrative judge and public feedback, the overall support for the reclassification of marijuana in the United States is evident.
The significance of this potential move lies in the implications it could have for cannabis stocks, particularly in terms of increasing institutional access to cannabis and potentially improving cash flow. Currently, legal cannabis companies face high tax rates on their net income, making it challenging for them to maintain profitability. The potential tax relief from rescheduling cannabis could provide much-needed financial support for these companies.
Although the actual implementation of the rescheduling may take time and faces uncertainties, investors are closely watching the developments in the cannabis industry. Companies like Canopy Growth, for example, stand to benefit from increased access to the United States market and potential tax incentives.
While cannabis stocks experienced a significant surge following the news, there may be fluctuations in the market in the coming days. However, investors are optimistic about the growth potential in the industry, especially with companies like Canopy Growth. This recent development could open up new opportunities for investors seeking growth in the cannabis sector.
