Federal change on marijuana could bring major benefits to weed retailers: Here's 5 things to know

As President Donald Trump considers an executive order to change the legal status of marijuana nationwide, local cannabis businesses and industry experts say the impact could be profound.

For more than 50 years, cannabis has been listed as a Schedule I drug under the Controlled Substances Act of 1970, which puts the plant under the same umbrella as heroin, according to the Drug Enforcement Administration.

But according to recent reports from Washington, Trump, as early as this week, is poised to reduce cannabis’ drug status to Schedule III. That includes drugs like ketamine, anabolic steroids and products like Tylenol that contain "less than 90 milligrams of codeine per dose," according to the DEA.

Reuters reported late Monday that the president was considering signing the executive order. "We are looking at that very strongly," Trump told reporters in the Oval Office on Monday.

To James Mallios, co-founder of Southampton dispensary Charlie Fox, cannabis reclassification could be "game-changing" for Long Island’s legal retailers. A lower tax bill, less stigma, more banking options and, hopefully, lower banking fees would all be beneficial byproducts of a potential cannabis rescheduling, he said.

"Imagine, you were a small business, and you're operating with one hand tied behind your back, in an industry that is emerging, that already has stigma, and that has a lot of regulation that is expensive to comply with," Mallios said. "This really just opens up the door to real legitimacy."

Here are five things to know about a potential reduction in cannabis’ federal status.

Will this change make marijuana recreationally legal nationwide?

No. It's also not expected to impact how New York State enforces cannabis possession or unlicensed sales under the state's laws, said Taylor Randi Lee, press secretary for the New York State Office of Cannabis Management.

However, because some criminal penalties are tied to the Controlled Substances Act and its drug schedules, a change to Schedule III would reduce potential sentencing lengths or financial penalties, according to the DEA.

"It doesn't become less illegal," said Jason Little, a partner at Farrell Fritz and the law firm’s cannabis practice group leader. "It becomes less punishable."

While sentences going forward may be impacted, advocates for Americans who have been imprisoned over marijuana convictions said the change doesn't go far enough.

"Rescheduling is a peripheral change that signals the reevaluation of cannabis, but not the release of cannabis prisoners or relief for those who continue to be burdened by the lasting consequences of the carceral system," Adrian Rocha, director of policy at the Last Prisoner Project, said in a statement.

The Denver-based nonprofit pushes for policy changes to help those impacted by marijuana-related convictions.

"In short, this announcement represents progress but not justice," Rocha said.

Will a schedule change help local dispensaries?

A change in schedule could serve as a major launch point for cannabis retailers nationwide, said Kim Stetz, a psychotherapist and co-owner of Southampton dispensary Brown Budda.

Because of cannabis’ status as a Schedule I drug, banks and other lending institutions across the country avoid lending to or working directly with marijuana retailers. A change in federal schedules could open up new waves of needed capital for operators, Stetz said.

"Working capital allows for a sustainable business," Stetz said.

Additionally, cannabis’ Schedule I status prevents local retailers from writing off most day-to-day business expenses like storefront rent on their taxes, Little said. If marijuana became a Schedule III drug, local businesses could see much lower tax bills, he added.

Charlie Fox’s Mallios said he estimates he would save between $1 million and $2 million on his tax bill, including accounting expenses, if cannabis becomes a Schedule III drug.

Cannabis industry analyst Frederico Gomes, director of institutional research and life sciences at ATB Capital Markets in Toronto, said the biggest benefit to cannabis retailers would be the tax implications.

"If you reschedule cannabis, the industry becomes more profitable," Gomes said.

With an increase in potential sources for capital, as well, operators of cannabis businesses should see more favorable terms when borrowing from institutional investors, Gomes added.

"If you have more capital available, you’re going to have more competition between the capital providers," he said. "So these operators are going to be able to access capital at lower costs with maybe more flexible conditions."

Higher profitability also could encourage more investors to fund or start their own retail shops, said Lee of the OCM.

"The shift could also make the industry more attractive to investors," Lee said. "Overall, a lower tax burden helps stabilize the industry, supports growth across the supply chain, and strengthens long-term viability."

How might the change impact consumers?

Mallios and Stetz both said that under the Schedule I status, and banks' avoidance of the industry, cannabis retailers can’t currently take credit card payments from customers. Changing the drug’s status would enable easier transactions with consumers, the owners said.

Reclassifying cannabis also could help Long Islanders feel more comfortable trying the drug, said Yuvraj Singh, CEO of Strain Stars, a retail chain with locations in Farmingdale and Riverhead.

"Cannabis-curious users may feel a little bit more accepting that this is not as bad as it once was," Singh said. With federal recognition that marijuana is not as dangerous as heroin, a change in schedule could be enough to encourage those on the fence about trying cannabis, he said.

Are municipalities who opted out of recreational marijuana statewide impacted?

While recreational marijuana is legal statewide, municipalities throughout the state had until the end of 2021 to opt out of allowing "adult-use cannabis retail dispensaries and/or on-site consumption licenses from locating within their jurisdictions."

For municipalities that already opted into allowing cannabis sales, a schedule change is unlikely to have an impact, Little said. However, there is the possibility that some that have opted out might consider opting in, he said.

In Huntington, a town that opted out of recreational cannabis sales in 2021, news of the president's consideration came as a surprise.

"We need to look at it," said Christine Geed, director of communications for the town, said on Tuesday. "We are an opt-out town ... but with this new information, we need to see what [the executive order] says."

Once the president signs an order, Geed said the town would "be able to take a deeper look" to see if a schedule change would affect their decision.

"I personally have no plan to change my position," Angie Carpenter, Islip Town supervisor, said Tuesday in a statement regarding Trump's consideration.

Will a rescheduling change cultural views on cannabis?

Mallios said the cultural change in a reduction in marijuana’s drug scheduling "can’t be understated."

Rescheduling of the drug not only would lead to greater financial opportunity for businesses and lower criminal penalties for offenders, but it also would give legitimacy to a substance that long has been maligned as no different than crack cocaine or heroin, Mallios said.

Still, concerns about the safety of the drug have grown, with recent studies cited by the American College of Cardiology showing higher risk of heart attacks among marijuana users.

With the advent of higher-potency cannabis products have also come warnings from the medical community that cannabis dependence is becoming more widespread, with doctors warning that daily use "can cloud memory, disturb sleep, intensify anxiety or depression and trigger addiction," according to reporting from The Associated Press.

Correction: Jason Little’s first name was misspelled in an earlier version of this story.