Local cannabis industry leaders say move to reclassify weed will benefit businesses, customers

Local cannabis industry leaders lauded the U.S. Drug Enforcement Administration's plan to reclassify marijuana as a less dangerous drug, saying the move will be a boon to businesses and customers alike.

"It's giant," said Charlie Bachtell, CEO of Chicago-based weed giant Cresco Labs and chairman of both the National Cannabis Roundtable and United States Cannabis Council.

The DEA's proposal would recognize marijuana's medical uses and reclassify it from a Schedule I drug, alongside heroin and LSD, to Schedule III, alongside ketamine and some anabolic steroids, according to the Associated Press. However, it would not legalize marijuana outright for recreational use.

Section 280E of the Internal Revenue Code prohibits marijuana businesses from deducting what would be considered common business expenses — such as advertising and wages — from income associated with "trafficking" Schedule I or II substances. The move would remove that restriction.

"For this entire existence of this industry, we've all had to pay taxes at the gross profit level not actual profit. It's a crazy burden," said Bachtell, adding that at Cresco that amounts to $70 to $80 million in extra costs per year.

Bachtell said without the burden of that cost, smaller operators and social equity license holders — chosen with an eye toward increasing diversity in the industry — will have an easier time opening shops.

"Being able to take business deductions and hold on to more of the revenue and profit that comes into the business is going to be incredibly impactful," Bachtell said. "I think greater accessibility, greater number of operators, is all better for the consumer."

Reclassification would also make it easier to research marijuana, Bechtell said. It’s very difficult to conduct authorized clinical studies on Schedule I substances. It will also change legislative opinion, since some legislators are reluctant to pass laws on substances classified as Schedule 1, he said.

Dominique White, director of people and operations at Ivy Hall, the first dispensary to operate under Illinois' Social Equity program, said customers will benefit from the reduction of the extra costs associated with taxes.

"It'll make a huge difference in consumers' pockets and their ability to go into a store and get what they want," White said.

She said reclassification will also help further reduce stigma attached to pot, potentially leading to more customers and more Black- and brown-owned weed businesses.

Aaron Smith, co-founder and CEO of the National Cannabis Industry Association, said the reduction in taxes could be "potentially huge" for businesses.

"Right now, it's incredibly costly for legal businesses to produce cannabis in part because of 280E, and hopefully, it will allow business to provide product at a price that's more competitive with the underground market," Smith said. "I think it's going to be very good for consumers and the industry alike."

But Smith noted that much of the industry will remain the same because the drug remains illegal at the federal level, and rescheduling is a small step toward broader cannabis reform.

Tiffany Chappell Ingram, executive director of the Cannabis Business Association of Illinois, echoed Smith's thoughts in a statement applauding the DEA's move.

"While this decision does not legalize marijuana on a federal level, it recognizes the medical benefits of cannabis and eases the tax burden on marijuana companies by allowing them to take federal tax deductions," Igram said. "This is a huge step in the right direction for the cannabis industry and our society at large, and we hope this continues to pave the path towards federal legalization.”

Federal drug policy has lagged behind many states in recent years, with 38 having already legalized medical marijuana and 24 legalizing its recreational use.

That’s helped fuel fast growth in the marijuana industry, with an estimated worth of nearly $30 billion. Illinois pot shops sold more than $1.6 billion worth of recreational marijuana in 2023.

But among groups opposed to legalization, the plan to reschedule the drug is a step in the wrong direction. Kevin Sabet, president of Smart Approaches to Marijuana, a group that advocates for health and scientific guidance toward marijuana policies, said the move was made to benefit "deep-pocketed" investors.

“This industry, which has lobbied heavily to sell demonstrably harmful products, will now use this announcement to drive even more deliberate misinformation about these high-potency drugs to expand use and addiction," Sabet said in a statement.

The proposal to reschedule weed follows a recommendation from the U.S. Department of Health and Human Services. It would still have to be reviewed by the White House Office of Management and Budget.