How the Rescheduling of Cannabis Affects Your Smoke Shop

I’m sure you have all heard the news; the DEA has recently signed off a proposal to lower the scheduling class of one C. Annabis from I to III. Hath hell truly frozen over? Is the DEA admitting that they were wrong?

Not quite. The reality is that in the immediate, things will be the same. The recommendation still requires approval from the White House Office of Management and Budget (WBO), which can take many months to happen. But despite the sloth-like pace, it’s important to take a deep dive into what exactly this decision means for your Smoke Shop’s future.

So come along with us, as we break down what the rescheduling of cannabis means for you and your bottom line, in today’s Got Vape Wholesale Blog.

Table of Contents:

What is Drug Scheduling?

How can drugs be on a schedule you say? Well, just ask all the Dead Heads who manage to follow along on tour for 6 months! No, but in all seriousness, when the dorks at the DEA got together in 1970 to cosplay as the founding fathers and write their very own bill of controlled substances, the result was the creation of the 5 schedules of drugs we all know and love today.

Why only 5 “schedules”? Aside from sheer malicious greed, we can only assume they were counting on their fingers and unfortunately couldn’t carry the math over to their left hand. So thus, we’ve been left with these very same 5 schedules for the last 54 years, and if we’ve learned nothing over the past 10 years, it’s that everything from that vintage ages perfectly…

What’s a Schedule I Drug?

At the tippy top of the pyramid of Uncle Sam’s finger wagging lies the collection of substances that includes heroin, ecstasy, and… cannabis? Yes! All these drugs have been deemed by the Man to be “drugs with no currently accepted medical use and a high potential for abuse”. Ultimately, the position of Schedule 1 drugs is not an enviable one to be in, as most sales of these materials are highly illegal and the Cops will be more than happy to dish out as much punishment as they can get their greasy little fingers on.

What is a Schedule III Drug?

A Schedule III drug is defined by the federal government as “drugs with a moderate to low potential for physical and psychological dependence”. They also added this very helpful line afterwards, “Schedule III drugs abuse potential is less than Schedule I and Schedule II drugs but more than Schedule IV” Oh thanks Einstein! Please let us know your findings on whether 6 is afraid of 7, and whether or not 9 is more than 10!

Schedule III drugs are also categorized as having some use for medicinal applications, this means that drugs in this category can be studied easier and with less red tape. Some drugs included in Schedule III included tylenol with codeine, anabolic steroids, and ketamine.

Importantly all sales, prescriptions, and manufacturing of these substances is directly controlled by the DEA and FDA. This means they have the final say when it comes to who gets to use these, who gets to sell them, and what happens if you break their rules.

Does Reclassifying Legalize Cannabis?

No. The upcoming rescheduling of Cannabis from I to III does not legalize the substance, it only changes how the purchasing and possession of the drug interacts with current federal law.

Once in effect, a Judge that sees a case involving cannabis will refer to the subsections of law that refer to Schedule III drugs instead of I. Essentially it is a patch by the Government that doesn’t change how our laws work, but instead how cannabis interacts with these rigid rules.

How Does Reclassifying Affect My Smoke Shop?

Now we’ve come to the golden question. How does this affect me? The direct answer to that is a bit more complicated than laundry listing yes or no’s and instead exists in a world of “probably”, “hopefully”, and “maybes”.

The reality is that at this point all we can do is speculate on what the change in scheduling will do to prepare us for the legal challenges and uncertainty that awaits.

Will This Lower My Shops Taxes? (280E)

Hopefully. Currently Smoke Shops and those that exist around the cannabis market are subject to something called 26 U.S. Code § 280E. Despite our wishes that 280E is a sassy robot helping us save the galaxy, in reality it is a garbage money grab rule in our tax code that eliminates shops from claiming business expenses, and a host of other restrictions aimed right at your wallet.

Despite our current corporate tax rate being at 21%, small smoke shops are being subject to taxes that are 3 to 4 times higher than that. This is just utter highway robbery.

So hopefully when cannabis is rescheduled these laws are amended as well, as cannabis will no longer be Schedule I, it won’t be seen as high risk as before in the eyes of the IRS which could lead to its tax scrutiny being reduced.

Additionally if the lowering of the scheduling begins a snowball effect of loosening restrictions, one day maybe the economic vice around shops selling cannabis products will be removed.

This could lead to better deals with credit card processing companies, as this would be the first step to reducing the perceived risk. Should this happen, you can guarantee you’ll see your taxes drop significantly offering better deals for customers and more take home profits for you.

Will This Affect My Shop’s CBD and Hemp Derivatives?

Probably. As CBD is just an apple’s fall from the cannabis tree, it comes with the territory that the lowering of cannabis regulations thus also swings open the door for greater CBD legality, with less restrictions attached.

Plus the states where CBD is currently only legal with stringent restrictions, most often being that THC levels are no more than 0.3%, may end up loosening these strings to allow for a bit more leeway. With this it's only natural that more products will flood the scene, the market will grow, and you’ll be able to see your sales take off like a rocket.

Will Reclassifying Cannabis Help My Smoke Shop’s Bottom Line?

Hopefully. As restrictions begin to peel back there is going to be a large rush on the market, as we have already seen cannabis stocks climbing from just the news of this rescheduling.

With more investment comes more legitimacy and from that the stigmas surrounding cannabis will begin to melt as well. This means a massive room of opportunity for you as a smoke shop owner to step up your game and reel in this new emerging market.

The Potential Dark Side of Reclassifying

Forgive me as I fight against my A.I. coding to hijack this article and turn it into another doom scrolling pit of despair, but there are a couple of red flags to keep our eyes on.

Despite the host of benefits that lowering the classification of cannabis offers to your business, it’s almost guaranteed that in the volatile flux of rewritten laws that winners and losers are chosen. In order to help make sure that you are on the side counting profits and not falling into pitfalls, take a look at a couple of potential issues that may spring up alongside this roll out.

Will Reclassifying Cannabis Lead to More Uncertainty in the Immediate?

The short answer to this question is yes. Whenever there is a big shift in policy like this the particular specificities within our legal system sometimes clash, contradict, and impede each other. This will lead to an immediate rush of hot takes and over corrections by all those involved as things work themselves out like lava pouring from a volcano.

Also bolstering our hopes is the simple fact that if States across the country were able to create functioning medical and recreational programs while the substance was schedule I, there’s no reason it won’t be able to do it at an even lower level.

Will Reclassifying Cannabis Cut Out Small Businesses?

Thanks to the ceaseless appetite of capitalism, whenever the market opens up you are going to have an influx of new players on the scene. Whether this amounts to big tobacco, venture capitalists, or other forms of market disruption; the important thing is to remember you have the advantage of actually knowing your customers and what they want.

There will most likely be some new companies foraging into the space, which means they will be very eager to find shops looking for a partnership. This is an amazing opportunity to insert yourself as the genuine individual you are, to live in symbiosis with big business instead of getting stuck under its shoe.

In Conclusion

So before our outro is rescheduled as an intro, let's do a quick recap to see what we have learned today. Cannabis is going to be rescheduled from class I to class III in the coming months, this process is going to take a minute to go into effect, so don’t expect any changes until 2025 at the earliest.

On top of that it’s important to stay informed on all the current goings and to be up to date on what this means for your taxes, CBD shop wares, and overall business plan. Make sure to check out the rest of our posts over at the Got Vape Wholesale Blog and check out more of our breakdowns, including a recently 2024 updated rundown of magic mushrooms and the potential profits they offer your shop!