U.S. President Joe Biden’s comments on cannabis at the federal level earlier this month could have a longer-term impact on Connecticut’s budding cannabis industry.
USA Today reported Oct. 6 that more than 6,500 people nationwide will be affected by Biden’s announcement that he will pardon people with federal convictions for simple marijuana possession. He also asked for the Department of Justice and the Department of Health and Human Services to re-reevaluate how marijuana is scheduled, as it’s currently Schedule 1 under the Controlled Substances Act, which means it’s seen as having no accepted medical use, and high potential for abuse.
As towns in Eastern Connecticut try to build up the cannabis industry, business owners in the area don’t expect to see a short-term impact from this announcement, but said a long-term impact is possible.
Connecticut’s own processes for starting a business in the industry is a chief reason why Carl Tirella said he doesn’t think the impact will be immediate. Tirella is the Connecticut general manager for New York City-based Acreage Holdings, which is looking to build a recreational cannabis store in Norwich.
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“There is a limited licensing structure, so we expect that to hold true,” he said.
In the first round of applications, the state will only give a total of 12 licenses to recreational cannabis retailers, according to the CT.Gov Cannabis site.
Rescheduling cannabis will change how the industry banks
The long-term impact lies with Biden’s statement on reconsidering the drug scheduling for marijuana and, subsequently, banking and financing for the industry.
Currently, those in the cannabis industry are limited to working with state credit unions and state-chartered banks, rather than nationally-operated banks, due to marijuana’s federal illegality, said Ben Zachs, chief operating officer of the Fine Fettle chain, which operates in Massachusetts and Connecticut, and includes a Willimantic location that will sell both medicinal and recreational products when given the state approval.
“Federal banks won’t do business with us,” he said. “We can’t get a (federal) Small Business Loan, and the financing and access to capital is different than other companies.”
Another impact is that cannabis businesses might start making tax deductions for business expenses if there is a change in cannabis’ federal legality. 280E of the Internal Revenue Code is the section that prevents businesses dealing in Schedule 1 or 2 controlled substances from doing so.
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However, offering pardons is still a good sign for the future.
“The fact that people are in jail for consuming cannabis is insane at this point,” Zacks said. “The industry as a whole needs to right wrongs of the past, and there’s also systemic issues that need to be righted as well.”
With Connecticut’s legalization process, companies wanting to enter the state were encouraged to partner with a social equity candidate, who lived in an area disproportionally impacted by the War on Drugs for nine of their first 18 years of life, or the past 10 years, in order to access social equity licenses.
