This announcement of the DEA on cannabis will cover you

It is quite possible that legal cannabis is one of the fastest growing industries by 2030. Almost all weed industry analysts have called for a compound growth rate double digit, which is one of the main reasons for inventory since 2016.

But it is also a very heterogeneous industry.

Source of the image: Getty Images.

The US Federal Government remains opposed to the legalization of marijuana

In our north, Canada has become the first industrialized country in the world to give marijuana the go-ahead. The adoption of the cannabis law and the official sale of dried cannabis flowers for recreational purposes on October 17, 2018, ushered in a new era for the marijuana industry. .

But in the United States, things happen as usual at the federal level. Although 33 states have legalized marijuana to some extent for medical purposes, 11 of which permit the use and / or sale of marijuana for recreational purposes, the federal government has remained steadfast in its belief that cannabis is a substance of its own. Appendix I. This means that it is totally illegal, considered to be subject to abuse and that it is considered to have no recognized medical benefit.

This classification of marijuana poses a number of challenges to the industry. On the one hand, pots-based businesses are largely excluded from the banking sector. Although the federal government takes a regulatory approach to regulation, financial institutions ultimately fall under the jurisdiction of the Federal Deposit Insurance Corporation. As such, they do not want to risk legal or financial problems by upsetting federal law. This means that the weed landscape in the United States is dominated by money, which is both a security issue and a drag on growth.

Marijuana companies are also subject to ridiculously high tax rates, thanks to the US tax code 280E. Implemented in the early 1980s to prevent traffickers from reducing their taxes, 280E prohibits companies that sell Schedule I drugs from making normal business deductions, with the exception of the cost of goods sold. This has often led to unusually high effective tax rates for profitable businesses in the marijuana sector.

Even with a record number of Americans favoring legalization, the federal government has firmly maintained its cannabis classification.

Source of the image: Getty Images.

This DEA decision is more important than you probably realize

There are a number of reasons why marijuana remains entirely illegal at the federal level. At the forefront of these are the generally more opposite views of Republicans on cannabis, compared to Democrats and Independents.

But it's not just the political lines that have kept cannabis illegal. The US Drug Enforcement Agency (DEA) had the opportunity to reprogram or reprogram marijuana in the summer of 2016 in response to two petitions, but chose to take no action.

However, last week's DEA news may indicate that the regulator is changing its tone, or at least softening its position, on marijuana.

As reported by Forbes, the DEA has requested an annual crop quota of 3,200,000 grams (approximately 7,055 pounds) for 2020, which will be used in scientific studies to examine the risks and benefits of the cannabis plant. What is significant about this figure is that it is 621% above the quota of 443,680 grams requested by the DEA in 2018, and nearly 31% more than the 2.45 million grams requested in 2019. In other words, it appears that the DEA is beginning to seriously eliminate the main obstacle to federal legalization in the United States by creating a risk-benefit profile for marijuana.

As further evidence of this change in DEA policy, the number of people registered by the DEA to conduct research on cannabis, extracts and derivatives has increased by 41% in the last two years.

This announcement also comes just a month after the agency announced that it would finally begin processing license applications for new crop farms used in federal research. For decades, the University of Mississippi has been the only source of legally federally produced cannabis for research purposes, which in itself is a constraint on research capacity. Although these applications were received three years ago, the DEA has finally failed to approve new licensed producers for federal research.

Source of image: GW Pharmaceuticals.

Is this a tipping point?

The increase in the DEA's cannabis quota also comes at a time when the agency is trying to reduce opioid consumption. The DEA has announced plans to reduce fentanyl production by 31%, hydrocodone by 19%, hydromorphone by 25% and oxymorphone by 55% over the next year. For the moment, although purely speculative, cannabis has been proposed as an alternative to opioids for the treatment of various conditions, mainly because cannabis overdoses do not cause death, while opioid-related overdoses have been more prevalent. of 47,000 victims in the United States. in 2017 alone.

The FDA (Food and Drug Administration) approved the first cannabis derivative drug in June 2018. GW Pharmaceuticals& # 39; (NASDAQ: GWPH) Epidiolex ultimately reduced the seizure frequency by 30% to 40% from baseline in late-stage trials in patients with two rare types of early epilepsy. Given that GW Pharmaceuticals' main drug is cannabidiol (CBD) -based and that many other clinical studies are underway, the company is trying to demonstrate that cannabis and / or its cannabinoids have medical benefits.

That's not to say that marijuana is a panacea. Despite the success of Epidiolex, GW Pharmaceuticals has also seen Satifx, a cannabinoid-based oromucosal spray approved in more than a dozen countries outside the US, in a Phase 3 clinical trial for the treatment of cancer pain in the United States. Nevertheless, the first signs indicate that cannabis and its cannabinoids are promising in the treatment of certain conditions.

We hope that this increase in DEA's research activities, coupled with ongoing studies approved by the FDA, such as GW Pharmaceuticals, will allow regulators to create a comprehensive benefit / risk profile for marijuana. The lack of an adequate security profile has been used by congressional legislators as a scapegoat for failing to advance marijuana reform measures. Depending on the results of this research, it could be a rush to the environment in the United States in the not-too-distant future.