Investor Presentaiton
Federal legalization
Marijuana remains illegal at the federal level, creating a conflict with the dozens of states with legal medical and/or adult use cannabis regimes. In
addition, cannabis businesses face a number of disadvantages related to access to capital, tax treatment, and jurisdictional confusion as a result of
federal illegality.
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Notably, it is currently illegal to transport cannabis for sale at retail or wholesale - meaning that every state's cannabis retail market is captive to the
product grown and produced in that state. Obviously, federal action on this issue has been halting at best; in the near-term, it seems like the best chance
for any federal action is the potential reclassification of cannabis under the Controlled Substances Act - though it is unclear the extent to which this
would impact the permissibility of the interstate commerce of cannabis.
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This particular change would represent an immediate and existential threat to licensed growers in our state as surplus inventory from Colorado,
California, Oregon, and potentially Canada, Mexico, and/or Southeast Asia could flood the regulated market virtually overnight.
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This is a long-run consideration but likely the one with the most significant risk to the domestic market in Rhode Island; the Commission should begin
preparing for this eventuality within the next three to five years.
The best prospect for near-term federal action remains passage of the SAFE Banking Act, which would make it easier for financial institutions to offer
services like bank accounts and small business loans to companies in the cannabis industry. SAFE Banking has passed the House multiple times since
2019 but has yet to garner the necessary support in the Senate to become law.
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Another recent notable federal development: FDA has recommended rescheduling of cannabis from Schedule I (heroin, LSD) to Schedule III
(ketamine, anabolic steroids). Notably not a meaningful step towards outright federal legalization (interstate commerce) but would eliminate 280E tax
disadvantage for cannabis businesses. Industry continues to advocate for total descheduling.
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