How Rescheduling Marijuana Could Help, and Hurt, Dispensaries
Marijuana has been a Schedule I controlled substance for 50 years. That means the government views it as having a high potential for abuse but no recognized medical value. Now it appears marijuana will be moved to Schedule III at some point in the not-so-distant future. The move could be both good and bad for industry players, particularly dispensaries.
Moving marijuana to Schedule III is in acknowledgement that it has a low potential for abuse and some legitimate medical value. The change, when it finally happens, will have been a long time coming. Marijuana’s medicinal value is no longer a subject of debate. So it’s time.
However, rescheduling will lead to a cascading series of events that will please some while disappointing others. That takes us back to the idea of retail dispensaries or, in the case of a medical-only state like Utah, medical cannabis pharmacies.
How It Will Help
Rescheduling marijuana could prove to be a boon for pharmacies and dispensaries. According to Utahmarijuana.org operators, marijuana and medical cannabis businesses are currently subject to a strict federal tax code that does not allow them to write off typical business expenses. That means they pay federal taxes on every penny of revenue – not just profit. Rescheduling will change that.
Right off the bat, rescheduling converts more of a retailer’s revenue into profit. It also gives pharmacy and dispensary owners more money to put back into their businesses. But that is not all.
Moving marijuana to Schedule III would also eliminate the barriers that currently prevent marijuana and cannabis businesses from gaining access to traditional banking services. Both recreational marijuana dispensaries and medical cannabis pharmacies could move beyond cash-only transactions. Business owners could also access small business loans and other lines of credit.
How It Could Hurt
It is pretty clear that rescheduling marijuana will help main street businesses to some degree. Both recreational marijuana dispensaries and medical cannabis pharmacies will be able to operate like any other type of legitimate business. But doing so does have a downside, a downside that could completely transform retail sales.
Rescheduling marijuana to Schedule III also removes most of the barriers that currently make it difficult for companies to operate across state borders. Utah is an excellent example of what could happen with rescheduling. Right now, all medical cannabis consumed in the state must also be grown, processed, and sold within state borders.
The in-state restrictions are due largely to the fact that marijuana is currently a Schedule I controlled substance. It cannot be legally transported across state lines without risk of federal intervention. But federal prohibitions against interstate transport go away with rescheduling.
Ultimately, local pharmacies and dispensaries could find themselves competing with corporate entities and their much deeper pockets. No doubt some of them will sell just to get their money out before the inevitable happens. I expect to see considerable market consolidation once rescheduling takes place.
Regulation Could Save the Day
Of course, states could alter their regulations in hopes of protecting local businesses. Some might even try to do so initially. But in the long run, using regulation to artificially protect small businesses at the expense of larger corporations rarely works out. The corporations have deep enough pockets to get regulations changed in their favor.
Rescheduling marijuana will ultimately be good for the broader market and all of the customers it serves. It will certainly be good for medical cannabis patients. But the big losers in rescheduling are likely going to be the growers, processors, and retail outlets. Dispensaries and pharmacies will suffer the most.
