Good morning.
Well, Trump finally did it:
After weeks of holding our breath, the President finally signed an executive order calling for cannabis to be moved to Schedule III.
So what does it mean? We don’t yet know the full ramifications — but it’s a historic step. We have a webinar on Monday at 3 pm Eastern to unpack some of it: Banking Implications of Cannabis Rescheduling: What’s Next? Join us.
Plus, Jeremy will be What a Day with Jane Coaston today to discuss this morning. Tune in.
-JB, JR, ZH
This newsletter is 1,024 words or about a 7.5-minute read.
💡 What’s the big deal?
SCHEDULE III
Trump signs Executive Order to reclassify cannabis. What’s next?
Driving the news: Trump finally did it.
On Thursday, he signed an Executive Order directing Attorney General Pam Bondi to “expedite” the process to reclassify cannabis from the most restrictive Schedule I to the far less restrictive Schedule III, a process initiated by the Biden Administration.
But the devil, of course, is in the details. Trump can’t unilaterally reclassify cannabis himself. And remember, we’ve been here before: The administrative process to actually publish the rule fell apart in January after hearings on the issue were postponed, and ultimately cancelled.
The biggest prize: Of course, the biggest win in all this for the industry is a tax cut. Once the rule change is implemented, the 280E tax immediately goes away.
That’s a massive free cash flow boost for cannabis firms, and will allow them to invest, create jobs, and do deals to fuel growth in profound ways. It’s also a symbolic win that may make Wall Street, wary of violating federal law, start to re-engage with industry, sources tell me.
Rescheduling wouldn’t magically allow US cannabis firms to list on the Nasdaq, but it could force exchange regulators to rethink their rules and come up with comprehensive policy.
What’s in the Executive Order: Besides the top-line reclassification, the order also directs relevant federal agencies to research the medical benefits of CBD, a non-intoxicating cannabis compound. Notably, it does not include any provisions around expunging records for those convicted of cannabis offenses, nor does it acknowledge the long, sordid history of the Drug War.
And you are all undoubtedly aware that reclassification is far from legalization, and that just because Trump signed the order, does not mean this is a done deal.
Still, the step goes further than just symbolism.
It would give cover to fence-sitting Republicans in Congress to support the SAFER Banking Act, a cannabis banking bill and it could even push other countries to weigh cannabis reform as well. Despite Trump’s insistence on isolationism (unless it’s an oil-rich socialist country), as the US goes, so does the world.
What they’re saying: Trump was very clear that the order is focused only on medical cannabis.
“I have friends that are really, really sick... and they realize that this is something that makes them feel better, without all of the side effects,” Trump told reporters in the Oval Office.
“I want to emphasize the order does not legalize marijuana in any way shape or form or sanction its use as a recreational drug.”
The industry reacts: “Cannabis has widely accepted medical uses and low abuse potential. It never belonged at Schedule I. After more than five decades, this untenable status quo is finally coming to an end,” Cresco Labs CEO and US Cannabis Roundtable Chair Charlie Bachtell said.
And: “Moving cannabis to Schedule III represents a fundamental shift in how the federal government and society at large view the plant, transforming the way the cannabis industry operates,” Dutchie CEO Tim Barash said.
“This change will empower the 425,000 people working in the US cannabis industry and bring in new talent, capital and awareness to an industry that has a positive impact on millions of people's lives.”
But the markets: The face-ripping rally in cannabis equities fizzled as investors sold the news. The AdvisorShares Pure Cannabis ETF $MSOS ( ▲ 8.69% ), dropped 27%.
What’s next: We haven’t yet gotten a look at the executive order. We’ll know more in the coming days and we’ll keep you updated.
One thing we do want to call out: The path to getting the SAFER Banking Act passed this Congress just got a lot wider.
-JB
📣 Quotable
“This is a step in the right direction—but more work must be done to decriminalize cannabis, ease overly restrictive banking regulations that stall industry progress in states where it is legal, and rectify the harms done by the War on Drugs,” Senate Minority Leader Chuck Schumer said.
“I remain committed to the SAFER Banking Act and the Cannabis Administration & Opportunity Act to accomplish these goals.”
✍️ Apply today
With the President’s action on rescheduling, hearing from leaders in Congress about how they are viewing cannabis rescheduling, and what it means for further reforms, like SAFE Banking, is essential.
That’s why we’re proud we’ll have US Senator Kirsten Gillibrand with us on January 29th when Gotham and Cultivated host our inaugural event: The Highrise.
The Highrise goal is to host an event where attendees represent the full breadth and depth of the cannabis industry in New York and throughout the country.
To do that, we are asking would-be attendees to apply to attend.
Only by identifying leaders throughout the industry can we truly create a representative group of attendees for The Highrise.
So, get your application in today » thehighrise.nyc
📺 In case you missed it
Jeremy joined CNN to chat about what Trump’s move means for cannabis and the country and what happens next.
Watch it:
🤝 Deals, launches, partnerships
Tilray announces U.S. expansion 📈
Canadian cannabis firm Tilray $TLRY ( ▼ 8.91% ) announced a plan to incorporate a medical cannabis affiliate focused on the US market, in light of Trump’s announcement. Expect to see a lot of Canadian firms make similar moves.
📰 What we’re reading
Legalize it | The Washington Post
Minnesota Licensing Secondary Market Emerges | CRB Monitor News