On December 18, President Trump signed an executive order that could reclassify marijuana as a less dangerous drug. The AP reports the move could ease regulations and expand medical research by shifting marijuana from a Schedule 1 drug, like heroin, to a Schedule 3 substance, like ketamine. Journalist Andy Lyman with the Lesser Known New Mexico podcast spoke with the founder of Verdes Cannabis in Albuquerque, Eric Seegle, about what it means for his business.
ANDY_LYMAN: Rescheduling would potentially make it easier to write off expenses like any other normal business, right?
ERIC_SEEGLE: Yes, that's correct. We got our license on December 31st of 2010 back then we could not write off any expenses related to our business. I mean, none. And then in 2012 there was a court case in California called the CHAMP case, where he went up against the IRS, and they were able to successfully win cost of goods sold. So our industry can expense all expenses related to our production, to our cost of our goods. So that was a big win. It's still just a fraction of what a normal business can expense off their taxes. And so a lot of companies in our industry have an effective tax rate of over 100% because we have to pay tax on a loss, which is not a normal thing in business in our country. And so that puts a huge strain on all of the companies in my industry to be able to hire people, to be able to pay them well, to be able to expand, because we have this massive tax liability every year.
[This process] started under Biden. About two years ago, he told Secretary of [Health and Human Services] and the administrator of the [Drug Enforcement Administration] to get together and to figure out how to move this down to schedule three. And they did that. HHS determined that medical cannabis does have medical use, that it should not be a Schedule 1, which is defined as a substance that does not have any medical use. HHS found that there's medical use. Kicked it over to DEA and said, “Okay, this has medical use. Let's, you know, move it down the other schedule.” And DEA has kind of sat on it for a while, and it kind of stalled. And then the election happened, and then the new DEA administrator came in under Trump, and he was said, “Okay, let's just kind of stop this and let me take a look at it, and we're not going to do anything with it.” And so that was like in February that that was announced, and with everything going on in the administration, I just thought that this would never happen. This is just not a priority. And so, yeah, I was actually shocked to kind of hear that this was going to be happening really quickly. This is going to be a real benefit for the entire industry.
LYMAN: There's also this argument that now, if the [Food and Drug Administration] starts regulating this, and this becomes a pharmaceutical-type thing, does that change how you operate your business, if this were to pass? Do you anticipate, or are you sort of thinking that maybe this will change your business model?
SPEEGLE: Locally, I don't see any changes right away. I think really it just takes some burden off of us. We'll have more cash flow. We'll be able to pay our employees more. We'll be able to add employees to our roster, and I think a lot of other companies will be able to do that as well.
One area I think that the argument towards pharmaceutical companies falls apart is recreation. If we were medical only in the whole country, I think that I would be worried about the big pharma companies getting a real tight hold on it, but the fact that we have recreational adult use programs in these states, I think it kind of bypasses a lot of what pharma can do and really pharma can't do anything cheaply. When we were making the transition from medical to recreation, we had a lot of questions from our staff on to like, how we were going to do this, like, who are we going to be in this new industry or new market? And we just said “we're not going to change at all. We're just going to stay who we are.” We're going to stay with education being the forefront of the way that we talk and interact with all of our clients, because a lot of these products are mysterious. You know, we try to just cut through that mystery.