The Biden Administration's Latest Move Makes This Cannabis Stock a Buy
The Biden administration announced recently that it would reclassify cannabis from the most restrictive drug enforcement category to a lesser one. Despite many states legalizing the drug over the last decade, cannabis has remained a Schedule I drug, alongside heroin and cocaine, at the federal level. The reclassification to Schedule III is, as President Biden stated in his announcement, "monumental" and has major implications for the U.S. cannabis industry.
As a Schedule I drug, the cannabis industry faces major hurdles to running a profitable business. First, when paying taxes, a business involved in the sale of cannabis or cannabis products can't deduct basic expenses; they pay taxes on their gross income, not net. After reclassification, cannabis businesses will see a substantial bump in their bottom lines.
Second, banking is difficult, if not impossible. Although rescheduling won't change this on its own -- Congress still has to pass a bill known as the Secure and Fair Enforcement Regulation Banking Act (SAFER Act) -- its passing seems more likely after the move. As it stands, most banks won't work with cannabis operators, barring them from accessing services essential to running a business, like opening a line of credit. Only about 10% of banks will deal with cannabis at all, and many tack on big fees to offset compliance costs. Passing the SAFER Act would mean a seismic shift in the financial operations of U.S. cannabis operators.
Source Fool.com
