What Rescheduling Marijuana Means for California’s Cannabis Industry

California‘s cannabis industry suffers from a seemingly unending list of problems: high taxes, prohibitionist cities, a related lack of retail licenses and oversupply of non-retail licenses, a monster illegal market with no end in sight, burdensome and often senseless regulations, and so on. Unfortunately, rescheduling won’t solve most of these problems–at least not directly. Today I want to look at what rescheduling could mean for California’s cannabis industry.

If you’re not already up to speed on rescheduling, check out my colleague Vince Sliwoski’s explainer of the DEA’s notice of proposed rulemaking to move marijuana from schedule I (where it sits next to heroin) to schedule III, or any of the following posts of ours:

With that out of the way, let’s look how rescheduling could affect (or not affect) California’s cannabis industry.

First and foremost, rescheduling does not mean that state-legal cannabis markets will be federally compliant. In other words, all California cannabis businesses will still violate federal law. The biggest change would be that  IRC § 280E – which prohibits cannabis businesses from making standard federal tax deductions – will go away. But the statewide cannabis industry won’t be federally “legal.”

What that means is that rescheduling will have

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