The Department of Justice has officially reclassified state-licensed medical marijuana and FDA-approved cannabis products from Schedule I to Schedule III under the Controlled Substances Act – a historic shift in federal policy that could be a boon for branded merchandise companies.
The order, which was issued on April 22 and initially proposed under the Biden administration, not only makes licensed medical marijuana less strictly regulated but also gives licensed operators a major tax break.
Under Schedule I, cannabis companies couldn’t deduct ordinary business expenses, such as rent or salaries, from their federal taxes. This change alone will free up substantial cash for dispensaries to invest in more branded merchandise, according to Ryan Tickle, vice president of sales at St. Petersburg, Florida-based supplier Cannabis Promotions.
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“This long-overdue change makes perfect sense, as cannabis is a product that many people use for medicinal purposes,” Tickle says. “It’s unfortunate that it took so long, but we and the industry are very excited for the change. This shift will positively impact numerous key aspects of cannabis businesses and drive significant industry growth.”
Changing Consumer Perception?
Reclassifying to Schedule III could also lower barriers to traditional banking, enabling cannabis companies to access loans, credit lines and standard payment processing.
Currently, many operate on a cash-only basis and pay premiums for credit card services, Tickle says. With improved access to banking and reduced costs, these companies will have more capital to allocate toward advertising, including branded merch.
Ryan Tickle
VP of Sales, Cannabis Promotions
“From the beginning, we’ve experienced rapid and steady growth as more states legalize cannabis, and this rescheduling will accelerate that momentum even further,” Tickle says.
“Distributors supplying products to cannabis-related companies should prepare for a surge in sales. Not only will the above changes propel these businesses forward by providing extra funds for promotions, but they will also boost investor confidence, leading to increased capital infusions and further expansions.”
One such distributor is poised to capitalize. Justin Herman, president of Sylvania, Ohio-based OnPoint Promotions, an affiliate of iPROMOTEu, PPAI 100’s No. 6 distributor, already generates about half of his business from customers in the cannabis space.
Justin Herman
President, OnPoint Promotions
“These customers will also now have a stronger argument that their use in commerce is ‘lawful,’ enabling federal trademark registration and increased advertising opportunities,” Herman says.
“This allows companies to formally protect their logos, product names and brand identity, increasing the value of the branded assets they purchase from us. The consumer perception of cannabis products as safer and more trustworthy will likely increase now, leading to higher adoption of branded apparel and merchandise.”
