KEY POINTS:
- For over a decade, since the “Colorado experiment” in 2014, the Federal Government has maintained its prohibitive legal status of marijuana. Still, the pressures brought to bear by the multitude of state statutes that have locally decriminalized and regulated marijuana have gradually comforted business development.
- This has led to an ~ $40 billion industry (estimate by year end) that could reach well over $100 billion at maturity; Capital expenditures are in the billions of dollars, and the materialized economic benefits can no longer be ignored.
- Capital remains scarce, and the ability to continue as a going concern is a real issue for many cannabis enterprises. Most have halted payment of taxes associated with IRS Code Section 280E and seek refunds for past remittances. With few exceptions, most are unable to generate sufficient operating cash flow because of the ongoing headwinds of federal prohibition.
- Given the progression of new state markets over the past decade, it is unsurprising that we now stand on the cusp of a meaningful change to federal policy (with Schedule III). We would expect a new pro-cannabis Trump administration to expedite the process with a common sense business approach that recognizes the immediate need to eliminate the 280E burden through rescheduling (a meaningful first step). Failure is not the outcome that was likely envisioned when this movement to legalize cannabis began over a decade ago.