Cannabis Knowledge & Insights

Cannabis Legalization vs Cannabis Decriminalization vs Cannabis Rescheduling

Cannabis legalization is a hot topic along with decriminalization and rescheduling of cannabis. 

You may have even seen the United Nations approves WHO recommendation to reschedule cannabis in a historic vote.

But when you hear those terms, do you know what each of them means and how it will impact both sides of the cannabis industry?

Need help with your legal cannabis business? Please reach out to us today or call 800-674-9050.

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In this video, we explore each of these topics, their impact on consumers, and their impact on cannabis businesses.

Here are some helpful spots to jump to in the video.

Video Transcript

Cannabis legalization, cannabis, decriminalization, and cannabis rescheduling. Now you hear these terms often they’re used in articles and blog posts and videos, podcasts discussions with your colleagues and friends, but what do they actually mean? And when you see the news interchangeably, is that actually correct? Well, in this video, we’re going to talk about what each of these actually are and what it looks like in practice, as well as the impact on consumers and the impact on cannabis business operators. Now, if you need help with improving the financial performance of your cannabis business, now please reach out to us via our website at GreenGrowthCPAs.com or give us a call at (800) 674-9050. Let’s hop right into the presentation.

So again, our topic today is the discussion and the difference between legalization, decriminalization, and rescheduling. We’re gonna explore what each is and how it affects consumers and how it affects cannabis businesses within the industry. And this presentation is brought to you by GreenGrowth CPAs. Now, before we get started, I need to let you know that the information contained in this presentation is meant for guidance purposes only, and not as professional legal or tax advice in further, it does not give any personalized legal tax investment or any business advice in general. So with that out of the way, let’s review what we will cover in this presentation. So first we’re going to start off discussing with the Biden Harris administration is looking at for cannabis reform. Next, we’re going to talk about Cannabis prohibition and regulated markets and how you have an illegal product actually operating legally in certain States in them.

We’re going to jump into the meat of the presentation, discussing federal cannabis, legalization, federal cannabis decriminalization in federal cannabis rescheduling. Again, what each of those are the impact on consumers and the impact on cannabis businesses. So first let’s talk about the Biden Harris administration projected cannabis reform. Now, the big question is how does the Biden administration want to reform cannabis? Well, president elect Joe Biden has a relatively middle of the road position on cannabis reform, the Biden Harris administration, omitted cannabis reform proposals while including other criminal justice plans that were talked about during the campaign as they presented what they’re going to do for their rollout and transition plan. Now it should be noted that cannabis bills are currently moving through Congress, including a comprehensive legalization bill (MORE Act). That’s expected to get a house vote this month, December, 2020. And it would not mandate that States and criminalization or adopt specific regulations to create a cannabis market.

Rather, the legislation advocates are pushing for would federally de schedule marijuana and let States enact their own laws without interference. But what the upcoming Biden administration is looking to do with cannabis is decriminalize it nationwide. Although we have yet to see any details of their plan, it will likely serve to eliminate criminal penalties for those caught in possession of small amounts of cannabis and ensure that none of these people are being incarcerated. It will probably take it a step further by allowing those with minor cannabis convictions to have their criminal records expunged. Now, the measure would not legalize cannabis at the federal level. There would not be a retail system in place, nor would it apply to any other substance or drug. He seems to be against full legalization, but did say that I don’t believe anybody should be going to jail for drug use.

They should be going into mandatory rehabilitation. That’s what Biden said earlier this year, essentially, he’s looking at decriminalization. So this leads us to the question. Can a president such as Joe Biden or anyone else that’s president really legalize marijuana all by themselves without Congress kind of sort of. Presidents can make cannabis less illegal with many caveats, they can reschedule it. They can encourage more research. They can issue pardons or commutations and they can tell the veterans administration or the VA to ease up on restrictions, creating problems for military veterans seeking cannabis, but to fully legalize it, Congress must act. So now that you know where the Biden Harris administration sits on cannabis reform, let’s talk about cannabis prohibition and regulated markets. So you may ask why can cannabis dispensaries and other cannabis businesses operate legally in a state, but be illegal when looking at federal laws?

Well, it started with the war on drugs, failing massively and ruining lives of many regular, everyday people who just needed access to their medicine. So stay started to create laws, giving medical cannabis, a safe Haven to operate and give the state’s ability to regulate cannabis and earn tax and licensing revenue off of it. And as you would guess, the feds were not the happiest people when this started to happen. You know, it, wasn’t very pretty in the early days of cannabis legalization and the DEA and local sheriffs would come bust in the doors of these state legal cannabis dispensaries, and grow operations. Now this was a cat and mouse game for a very long time. And the mice, which is the cannabis really beat the cat badly, which was the authorities. So cannabis legalization started with those medical programs. And once the box was opened, there was no closing it.

Recreational cannabis was legalized in Colorado by vote in many other States have come online since then. Now cannabis prohibition has been challenged in the courts before and some federal courts have given cannabis businesses, some relief, for example, a 2015 ruling in California, affirm that the federal government can’t shut down state-legal medical cannabis. dispensaries so long story short, the authority under which cannabis businesses continue to operate despite the substance’s absolute prohibition under the controlled substances act is a flex of the state government’s powers and a series of memoranda issued by the US department of justice. These memos, including the Cole and Ogden memos allowed state heavily regulated operations to exist so long as they don’t violate certain areas of the department of justices concern such as selling to minors or engaging with drug cartels. Now, the feds were told by their leaders to stop wasting federal funds on something as harmless as cannabis.

But with that said, there are still raids and things like that happening, but not to the scale they used to be at in the early days of the more mature markets such as California. Now the drawback of a quasi-legal industry with no federal legalization is that it has created enough cover for a very large illegal market. That looks legal, right? These are dispensaries that look like legal dispensaries, but are not to actually take hold in places like California. And that puts an incredible amount of pressure on the legal operators. These illegal businesses are not paying taxes. They’re not following the same regulations. So it makes that illegal cannabis business very, very profitable. So here we are, we’re in the limbo of paying taxes, but not allowed to bank as a legal cannabis business. You can sell the same plant medically, but not recreationally to the same citizen.

And you’re considered essential during a crisis. But the licensing for your business is incredibly limited in scope for most jurisdictions and too expensive for most everyday people to access. So now that you understand how these businesses are operating, when cannabis is in a prohibition phase, let’s talk about federal cannabis legalization first, what does federal cannabis legalization look like? Well, when a substance like cannabis is legalized, the laws typically opened up a taxed and regulated market in which the substance can be manufactured and sold to adults 21 and older laws that prohibit personal use and possession of cannabis are completely eradicated. This is essentially de scheduling cannabis, which is removing it from the government’s list of banned or controlled substances entirely and understand this would not prohibit the federal government from making laws restricting who can buy or sell the cannabis or in what quantity and States can also participate in certain laws and regulations in their respective jurisdictions.

An example of federal cannabis legalization is like this, right? You have a legalized market for alcohol and tobacco consumption and production of this product are legal, regulated, and taxed. Someone can openly brew beer and you can openly as a consumer go to the store and purchase it. If you meet the age qualification. Now, an example of state or local government regulation would be dry counties where they don’t serve any alcohol state, minimum liquor prices and time restrictions around the purchase of alcohol. So with federal cannabis legalization, what would be the impact on consumers? Well, if we legalize cannabis federally, sure. There are often possession limits. You can’t just go buy a pound of cannabis, but as long as the person does not exceed the legal limit or violate other consumption laws, then there is no risk of any hassles from law enforcement, as well as there are no required drug rehabilitation classes, no fines indefinitely, no jail.

As long as the laws are obeyed. Now let’s look at the impact of cannabis legalization on cannabis businesses. Well, if we had federal cannabis legalization, this gives businesses the ability to work with the open market in the light and not operating in the shadows. It puts business into the hands of reputable individuals and not others. Hands of gangs and cartels. Now, yes, there will be some type of underground markets still, just like there is for other substances that are legal, but having a significant amount of legal options to purchase cannabis would significantly reduce the illicit market share. Also with federal cannabis legalization, you would see massive job creation. You will also see massive tax revenue for cities and States, but that’s still pressure on businesses paying taxes versus the smaller yet still existing illegal market that does not pay taxes. And to round it out.

Federal cannabis legalization also gives access to banking, interstate cannabis, commerce, institutional investors, as well as advertising on major platforms like Google and Facebook. Now cannabis legalization is the golden option that most cannabis businesses are looking to have happen. So now that you understand cannabis legalization, let’s talk about cannabis decriminalization. So what is this? And what does it really look like? Well, cannabis decriminalization occurs when criminal penalties enforced on personal consumption are relaxed or removed. In this instance, police officers tend to ignore minor cases when people are caught for possession of tiny amounts of cannabis that were only intended for personal consumption. When cannabis is decriminalized, it also means that the sale and production are still unregulated. But if you do get caught by law enforcement, you are still subject to civil penalties instead of harsh criminal charges. And at its core cannabis, decriminalization is there to prevent drug users from going to jail.

And anyone busted for dealing drugs of any kind or cannabis in this instance will still suffer the same consequences that they do now. And decriminalization does not require cannabis to change schedule on the controlled substances act. An example of decriminalization is that you see decriminalization recently in Oregon, where they decriminalized the possession of all illegal substances, including psilocybin. Again, the goal with the criminalization is to alleviate the pains of the failed war on drugs, keeping the average users out of jail and just get a fine or seek treatment to improve their lives. So think about how many people are in jail for nonviolent low-level cannabis possession right now, and what an amazing impact cannabis decriminalization could be. If it also comes with blanket pardons across the country. Now you hear the other rhetoric. The other side, some officials believe decriminalization only makes the drug problem worse in that without harsh penalties, more people will use drugs recreationally and eventually become full-blown addicts.

But that hasn’t been the case in places that have implemented a full decriminalization policy. For example, in Portugal, they decriminalized the possession of all illegal drugs in 2001 it’s 19 years ago. So a lot of time to see how this experiment works out and the country still isn’t having any of the problems it once had. Instead HIV infections and drug-related deaths are down and drug use has not suffered an increase. In fact, Portugal’s drug use rates are well below the European average. Now what’s the impact on consumers with cannabis decriminalization? Well, you no longer go to jail for having cannabis for personal consumption, or it will just be simply a fine or potentially a drug treatment program that you must attend. There could be potentially pardons and commutations, which is something that should happen no matter what, especially for nonviolent low-level cannabis crimes and the impact on cannabis businesses with cannabis decriminalization.

Well, since cannabis decriminalization, doesn’t really legalize the production of cannabis. The illegal market will boom, even more than it is now. Users don’t get in trouble, but sellers still can get in trouble. This is the perfect market for organized crime and another important impact of cannabis decriminalization on those businesses is that two 80 is still around. So those legal cannabis businesses, your taxes are still going to be a pain in the neck to deal with. And lastly, let’s talk about federal cannabis rescheduling first. What is this schedule thing that we keep talking about? Well, there is a controlled substances act that has different schedules or classes of substances, and it was put together in the seventies. Now schedule one substances are considered those of no medical value, a high potential for abuse and illegal. In all circumstances, examples of this are heroin, GHB and cannabis or cannabinoids.

Well, one of those doesn’t seem to fit with the others and schedule two substances are cocaine and fentanyl schedule three are things like ketamine and anabolic steroids. So now the understand what the controlled substances act is. What is cannabis rescheduling? Well since the drug enforcement administration or the DEA is part of the US department of justice, the DOJ, and part of the executive branch of the government. The president can instruct the attorney general to reclassify cannabis into a different category of controlled substances, essentially move cannabis from schedule one to maybe schedule two or even schedule three. So what would be the impact on consumers? If we had cannabis rescheduling, if cannabis becomes a schedule two or schedule three substance, then you could potentially see the FDA get involved with product development and approval of those products. This could drastically reduce your options as a consumer and will likely increase prices, essentially going to become a pharmaceutical industry.

For example, it’s highly unlikely that the FDA would ever approve smoked whole flower cannabis, even after rescheduling it. Instead, cannabis pharmaceuticals will come in the form of tablets or liquids made by isolating individual cannabinoids or compounds of cannabinoids. Now, what would be the impact on cannabis businesses? Well, if we move to schedule two, you still have 280E. So your taxes are still going to be a pain in the neck to deal with, but there’s an even bigger concern. There’s a concern that moving cannabis to schedule two will shut down the current legal and recreational markets. Since anything in schedule two would require all products to be removed from the market until FDA approval is granted. And of course, clinical drug testing and the FDA approval process often takes years and hundreds of millions of dollars, if not more in research, something that cannabis businesses currently as they stand, or most of them can’t afford and time that medical marijuana patients don’t have.

But some considerations to think about when looking at this concern, the Obama administration has deprioritized the enforcement of the controlled substances act for cannabis in certain States under certain conditions. But your current attorney general bill BARR has been harassing cannabis businesses. So we’re not really sure how this would play out, but schedule two does have implications for the future of medical cannabis research. There are fewer obstacles to conducting research on drugs or substances in schedule two than there are for schedule one in all likelihood, though, there is so much money in cannabis right now with the current model that so much lobbying would not allow this to get to that worst case scenario, where products come off the shelf and you have to go through the whole FDA pharmaceutical process. Yes, rescheduling could create hiccups, but that’s par for the course in the cannabis industry.

Now, if we move to schedule three, this would remove 280E restrictions from cannabis businesses since IRC 280E only limits businesses that deal with the first two schedules of the controlled substances act. And in both scenarios, moving to schedule two or to schedule three rescheduling alone would almost certainly not allow cannabis businesses to use banks and particularly not. If they continued to violate the controlled substances act in any way, which is what all dispensaries in all States would be doing if president Biden or any other president only rescheduled cannabis. All right. So we covered a lot of information here, so let’s go over some key takeaways. First legalization is going to create a regulated market with the most access for consumers and D schedules. Cannabis is the best option for consumers and for businesses. Next, you have decriminalization. This helps keep the average users out of jail, but it creates a perfect opportunity for the illegal market to flourish and operate.

And it does not require rescheduling of cannabis to a different schedule moving from schedule to potentially schedule two or schedule three. And lastly, rescheduling moves cannabis from schedule one to schedule two or schedule three, maybe even lower, and it can create issues with product development. And two 80 is still a threat. If cannabis is still a schedule two substance, but it’s better off for research of cannabis. If it’s moved off of schedule one. Now, hopefully this presentation has brought you some value and helped you to understand the difference between cannabis, legalization, cannabis, decriminalization, and cannabis rescheduling. Now, if you need help with improving the financial performance of your cannabis business, then please reach out to us via our website at greengrowthcpas.com or give us a call at (800) 674-9050. We have hundreds of cannabis business clients throughout the country and throughout the world. We’ve helped them with anything cash and cannabis-related. So again, if you need help with improving the financial performance of your cannabis business, then please reach out to us via our website at greengrowthcpas.com or give us a call at (800) 674-9050. Have a great day. And we’ll talk to you soon.

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