Cannabis Professionals Predict Exciting And Bumpy Ride For Industry In 2024
Cannabis Industry Predictions for 2024: Rescheduling, M&A Surge, and Regulatory Drama.
As the legal cannabis industry entered the post-pandemic age in 2023, the downturn that shadowed so many companies, gave way to a ray of light as more U.S. markets legalized, a Senate Committee had finally reviewed and marked up a long-stalled cannabis banking bill and the U.S. government announced it was seriously considering rescheduling cannabis.
Suffice it to say it was a very fraught, action-packed year. What's in store for 2024? Several industry leaders are weighing with their predictions. Based on their forecasts, punctuated by the fact that next year will be an all-important presidential election, the industry may be in for a whole lot of turbulence.
For Ed Schmults, CEO of California cannabis company StateHouse Holdings Inc., the Health and Human Services recommendation that the Drug Enforcement Agency reschedule cannabis from a Schedule 1 narcotic to a lower-risk category was welcome news but unfortunately, it came a decade late. Still, he did express measured optimism that the federal government will take the steps necessary to make this change.
“We see an implementation of 12 to 18 months as being a bit more reasonable than the six-month timeline mentioned by some,” said Schmults. “…Schedule III will be a big step in the right direction, though outright descheduling is a far cleaner path for the cannabis industry."
David Goubert, president and CEO of multistate cannabis operator AYR Wellness, felt that his corner of the industry, MSOs, will be focusing on the financial health of their companies in 2024, prioritizing cash flow generation while fostering leaner, more efficient operations.
“If rescheduling and 280E relief occurs as anticipated, annual tax expenses would decrease, allowing companies to pay down debt and reduce annual interest expense,” said Goubert. “This coupled with the prospect of adult use in Ohio, Pennsylvania and Florida has the potential to result in significant deleveraging by 2025.”
Morgan Paxhia, co-founder of Poseidon Asset Management, a San Francisco-based cannabis investment firm, foresees 2024 as the most exciting and eventful year ever in the history of the legal cannabis space. That doesn’t presuppose all will be rosy.
Although he does predict that cannabis will be reclassified as a Schedule III controlled substance, Paxhia also sees Congressional hijinks to ensure following such a landmark development with certain politicians jockeying to seize credit while other lawmakers may attempt to stifle it and impose “an egregiously high 14% excise tax.” Yikes.
Regulatory changes will transpire, continued Paxhia but not without much drama and legal machinations.
“I believe hemp-derived Delta-9 THC products and other naturally occurring intoxicating hemp-derived cannabinoids will be forced into regulated channels, closing the Farm Bill loophole,” said Paxhia. “Unfortunately, we will see no SAFER Banking Act progress. Instead, a Garland memo-like protection will be introduced alongside Schedule III in response to the Boise Schiller Flexnor lawsuit against Attorney General Merrick Garland on behalf of several cannabis companies, creating enthusiasm throughout the industry. Rescheduling alone or the rescheduling/memo combo will result in a new wave of liquidity, a surge in M&A activities, equity issuance and refinanced debts that will bail out many who may not survive otherwise… By the time the ball drops [at the end of 2024] and welcomes in a New Year, we will look back at what has been a wild ride..."
Indeed. Batten down the hatches.
