Just one in four marijuana businesses are profitable, according to a new survey. Yet optimism about the future of their enterprises has increased on the heels of the Biden administration’s push to reschedule marijuana.
The new survey data from Whitney Economics, which was partly detailed in a public comment on the federal government’s pending marijuana rescheduling proposal submitted by the Minority Cannabis Business Association (MCBA), paints a mixed picture for the state of the marijuana industry in the current policy limbo stage.
On the one hand, just 27 percent of businesses that were surveyed this month said they are profitable. That’s slightly up from 2023 (25 percent) but still significantly lower than the 2022 figure (42 percent).
In 2024, 41 percent of marijuana companies say they’re breaking even, while 32 percent say they’re losing money. But the report also highlighted another issue: racial disparities in business profitability, with 34 percent of white operators reporting that they’re making profits compared to just 18 percent of minority-owned operations.
For context, data from the U.S. Chamber of Commerce shows that, overall, 65 percent of all small businesses in the country are profitable.
“The cannabis industry is under economic distress, primarily due to the confluence of heavy federal taxes, lack of access to financial services and heavy state and federal regulation,” Whitney Economics Beau Whitney said in a press release.
“Although states have programs dedicated to social equity in cannabis, the fact that most regulators do not track data related to social equity’s impact makes it difficult for regulators to know what is working and what is not,” he said. “State legislatures will need to support and fund regulators to collect this type of data.”
Despite the current economic conditions that the marijuana industry currently faces under federal prohibition, the survey shows sizable confidence about the future, at least among mid- and large-sized cannabis companies. About 66 percent of those businesses say they’re optimistic about their future success.
There’s more uncertainty among small marijuana businesses, just 28 percent of which say they’re confident about their future prospects. Another 58 percent put their odds of success at 50-50.
In their public comment submitted to the federal docket, MCBA explain the divide by pointing out that, compared to larger companies, small marijuana businesses “often lack access to capital, which is necessary to pay debts and reach profitability.”
Rescheduling could help resolve that, Whitney said, stating that moving cannabis from Schedule I to Schedule III of the Controlled Substances Act (CSA) “would be a stimulative monetary policy allowing operators a greater chance to achieve profitability and enable them to invest back into their communities.”
The main reason for that is because the rescheduling action would free up licensed marijuana businesses to take federal tax deductions they’ve been barred from under an Internal Revenue Service (IRS) code known as 280E.
With the 280E restriction in place, the marijuana industry has paid an estimated $2.2 billion in tax overpayments compared to other sectors of the economy, the report says.
Moving cannabis to Schedule III and the resulting relief would significantly increase employment opportunities, adding 55,500 jobs by 2030, the report says. That, in turn, would mean an up to $2.7 billion in additional wages and $5.6 billion in new economic activity by that time.
The survey involved interviews with 206 marijuana business owners across 32 states from June 11-July 3, with a +/-6.5 percentage point margin of error.
MCBA’s comment that included the initial findings from the Whitney Economics report was directly responsive to what the Justice Department requested in the Federal Register when the proposed rule was published in May. The agency said it wanted input on the “unique economic impacts” of its marijuana rescheduling proposal given that state-level legalization has created a “multibillion dollar industry” that stands to benefit from possible federal tax relief under the reform.
In another public comment on the proposed rule, a group representing state-level cannabis regulators recently called on the Biden administration and DEA Administrator Anne Milgram to provide a clear explanation of how rescheduling marijuana would affect federal enforcement priorities and the U.S. government’s interaction with jurisdictions that regulate cannabis products.
Meanwhile, Sen. Bill Cassidy (R-LA) is condemning the Biden administration over what he describes as repeated refusals from federal agencies to brief Congress on its plans and justification for rescheduling marijuana, which he argues fuels speculation that the proposed policy change is politically motivated.
Similarly, 25 GOP congressional lawmakers sent a public comment letter earlier this month opposing the Biden administration’s planned rescheduling of marijuana, specifically alleging the government’s recommendation was based on politics rather than science.
At the Republican National Convention last week, multiple GOP lawmakers spoke with Marijuana Moment about their own views on how cannabis policy issues such as rescheduling could be impacted if former President Donald Trump wins the November election. They generally deferred to the nominee, but there were mixed opinions about what they would like to see happen.
Rep. Andy Harris (R-MD), for his part, said at the event that “I don’t care” whether rolling back the Biden administration’s marijuana rescheduling move under a potential Trump presidency would hurt the Republican party, because he feels more strongly that the modest reform would endanger public health.
Also, bipartisan congressional lawmakers are now seeking to remove a controversial section of a spending bill that would block the Justice Department from rescheduling marijuana—one of several cannabis- and psychedelics-related amendments to appropriations legislation that have been filed in recent days.
GOP senators have separately tried to block the administration from rescheduling cannabis as part of a standalone bill filed last September, but that proposal has not received a hearing or vote.
Meanwhile, two separate analyses of tens of thousands of public comments filed about the federal government’s plan to move marijuana to Schedule III indicate that the bulk of submissions on the proposal came in support of cannabis reform. In fact, most commenters said marijuana should be removed from the CSA completely instead of just being rescheduled.
H/T: MarijuanaMoment.com
