Cannabis Investing: How Conflicting Federal Stance and Tax Code 280E Create Huge Institutional Dilemma

by | Jun 1, 2021

Written by Amanda Stern

Amanda Stern got her start in the Colorado cannabis industry and transitioned to New Mexico in 2021. She has a passion for natural, plant-based alternatives, herbs, and psychedelics.

It is no secret that the cannabis industry suffers tragically as it remains a Schedule 1 controlled substance and illegal on a federal level. But how is the status impeding cannabis investing opportunities and industry growth? We speak with Matt Carr at the Oxford Club.

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De-scheduling of cannabis and the Safe Banking Act would lift these current restrictions, opening the floodgates to new funding and a probable boom in business.

Matthew Carr is the Chief Trends Strategist at the Oxford Club and editor of Strategic Trends Investor, The VIPER Alert, Dynamic Fortunes, Trailblazer Pro and Profit Trends. Two decades of financial experience has broadened his expertise from classic industries to the cutting-edge, including cannabis.

Delve into the world of cannabis investing and its roadblocks.

Federally, Cannabis is in Limbo

In a recent article in Profit Trends, Matt highlights three major roadblocks the cannabis industry has faced since its inception – all of which could be bulldozed out of the way with the de-scheduling of cannabis, impacting the industry to a degree we have never seen before.

Discover how the ‘nightmare’ tax provision affects cannabis investing and banking

Written in the 1980s amid the United States’ declaration of the war on drugs, Internal Revenue code 280E was created to prevent illegal businesses, i.e., drug dealers, from exploiting a loophole allowing them to deduct business expenses.

Therefore, cannabis companies pay taxes on their total gross income, with no basic business deductions like payroll or utilities. Doubling, in many cases, what they would pay otherwise to upwards of 70%, hence the nightmare.

cannabis investing

No Institutional Support

Big trading houses have been forced to sit on the sidelines, watching hungrily for the Fed to give its nod of approval so the exchanges can open up to the U.S. Pot Stocks. Until then, the combined financial institutions’ $404 trillion in assets cannot be used to acquire cannabis shares.

Confidence is building that cannabis legalization will take place. In that respect, we are seeing big institutional investors taking large stakes, albeit somewhat quietly. Access to more capital would grow the market beyond what we could even currently foretell.

Revolutionizing cannabis investing through banking services

The Safe Banking act would allow the cannabis industry to become scalable. This huge step forward would allow access to all of the banking services that the greater business world takes for granted. Services like credit card acceptance, deposit accounts, payroll would be game-changing on their own.

Consider then the industry’s ability to change. We will see expansions in R&D, opportunities for businesses to merge, companies could invest in their marketing, the list goes on. With access to funding and banking services, cannabis will enter a whole new era.

Anticipating a brighter future for cannabis investing

When the pin is finally pulled, and cannabis becomes descheduled, the opportunity and growth within all areas of the industry will certainly be exponential, possibly overwhelming, and well overdue. It seems that all of the pieces for federal legalization are being put together, and with great anticipation, all we can do is hurry up and wait.

Tune in to the podcast to hear Matt’s candid take on the real impact of these roadblocks. What he says will happen with cannabis companies’ profitability and just what the market potential looks like for cannabis once the veil of scheduling is lifted.

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