Marijuana's reclassification is 'long overdue' by the DEA: Curaleaf CEO

Following urgings by the U.S. Department of Health & Human Services, DEA officials could reclassify marijuana's drug status to that of a Schedule III substance. Curaleaf (CURLF) CEO Matt Darin joins Yahoo Finance Live to discuss what new regulation could mean for the cannabis industry and certain banking system oversights.

"We think this is going to be a massive catalyst," Darin describes. "The biggest impact from a financial standpoint will be the removal of the draconian 280E section of the tax code that has really become untenable for our regulated industry."

Darin outlines the higher tax rates cannabis distributors incur, emphasizing the fact that the U.S. government "collects more state taxes from cannabis than they do from alcohol." He comments on the outlook and expansion of the cannabis industry on marijuana's potential reclassification.

Video Transcript

BRAD SMITH: Cannabis has largely been in debates, with some thinking it was a gateway drug classified as a Schedule I drug like that of heroin. Now, its popularity and use is growing. As seen in a recent Gallup poll in August and in early 2022, the more act was passed in the House, which, if made law, will decriminalize marijuana federally again.

Let's bring in Matt Darren, the CEO of Curaleaf, to give us his insights into running one of the biggest cannabis companies in the world and in the US and the future of the industry here. And Matt, perhaps we just start off with what this reclassification would mean for your business.

MATT DARIN: Look, this is really a historic development that is extremely encouraging to see Health and Human Services make the recommendation to the DEA to reschedule cannabis into a Schedule III drug. It's long overdue because most Americans have known for a long time that cannabis, in fact, does have medicinal value and should not be on par with substances like heroin and ecstasy. But it's encouraging to see the federal government now coming around to this determination. And we're optimistic that the process is going to move forward here soon.

RACHELLE AKUFFO: And for people who aren't familiar what some of the things that come under Schedule III, that includes things like Tylenol and codeine as well there. I do want to ask you because obviously there's two parts. There's the criminalization part, and then there's the banking legislation part that have really been some of the biggest hurdles for the cannabis industry, really waiting for that catalyst to be overcome there. How much of a catalyst do you think this is going to be if the DEA does give its final say?

MATT DARIN: We think this is going to be a massive catalyst. The biggest impact from a financial standpoint will be the removal of the draconian 280E section of the tax code that has really become untenable for our regulated industry. Regulated cannabis companies today pay effective tax rates in many cases in excess of 70%, which has really become unsustainable as our companies have grown. So it's going to be a huge catalyst to remove the 280E tax and allow companies to really put those dollars to use into research and development, more investments into capacity improvements, and hiring and creating more jobs across the country.

BRAD SMITH: What type of immediate investment into scaling up your business would you need to make?

MATT DARIN: Well, we continue to expand in a number of very critical markets in the 20 states that we operate in. So this would certainly give us the ability to continue to invest in cultivation and processing capacity as you have major markets continuing to expand, markets like New York and Florida and Pennsylvania and Ohio that are on the horizon as well for adult use legalization. It would allow us to continue to invest in research and development, which is a huge part of the industry, and there is so much untapped potential understanding the science of the cannabis plant and all the various medicinal benefits.

It would ultimately allow us to hire a lot more people, which we would love to do.

RACHELLE AKUFFO: And as you mentioned, there some of the economic impact that we're actually seeing potentially from the industry, I mean, jobs, you talk about growers, what this could really open up here. For people who don't understand just how much the cannabis industry contributes to the economy, how would you sort of phrase this argument?

MATT DARIN: Cannabis has become a huge industry in the United States. People estimate the overall cannabis industry in the regulated market and the illicit market is at least $100 billion, which puts it on par with other industries such as beer and wine, et cetera. So today, the regulated market is only a fraction of that as more states continue to legalize, 21 states that have legalized for adult use. 39 states for medical. We're continuing to see a movement where cannabis use is coming into the regulated market where it can be safely distributed, manufactured, and ultimately taxed.

And so it's become a huge industry, and states like Illinois today collect more state taxes from cannabis than they do from alcohol, which I think is really misunderstood.

BRAD SMITH: And so Matt, when we think about the accessibility, I mean, what type of accessibility difference would people see if this was reclassified to Schedule III?

MATT DARIN: Well, we think the federal government recognizing cannabis as a Schedule III drug, I think there's still more questions than answers today in terms of all the various effects that will come from it, but there's no question that the federal government providing legitimacy and recognizing that this is a legitimate industry that is here to stay is going to ultimately provide a lot of support for the industry as more states continue to legalize for medical and more states transfer from medical to adult-use as well as many adult use markets that are still in the early stages and that have a lot of room to grow as more distribution outlets open up and as more capacity comes into the market.

So, we're still very much in the early stages of this industry. And it's been held back by things such as the 280E tax. So this move will, ultimately, I think, provide so much support to the industry to allow it to really grow and prosper, which it already has, but has really been inhibited by some of these draconian laws that have been in place.