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Finance and Investments in the Legal/Not Legal Cannabis Business

Lack of access to financial institutions and tax breaks, as well as volatile market valuations, challenge the cannabis industry’s ability to expand.

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Because flowering marijuana remains a Schedule I controlled substance, it is illegal at the federal level regardless of state legality. And though legal marijuana markets are allowed to operate at the state level without federal interference, interstate commerce is strictly prohibited.

According to PMMI Business Intelligence’s white paper, “Cannabis Market Update: Unique Packaging Challenges for THC and CBD Products,” there are three types of cannabis legality in the U.S. Fully legalized states allow adults over the age of 21 to purchase cannabis products at licensed dispensaries for recreational use. Medical states allow the legal purchase of cannabis products at a dispensary with a doctor’s prescription, and decriminalized states (or cities within states) prohibit the possession of large quantities, sale and cultivation of cannabis, but do not consider the possession of a small amount to be a criminal offense.

Selling a product that is classified as a Schedule I drug by the federal government means cannabis businesses do not have wide-spread financial support by banks and financial institutions, nor are they able to deduct normal business expenditures on their federal taxes. These restrictions challenge the expansion of the cannabis market in the U.S., but some states are addressing these challenges by allowing operations such as cannabis credit co-operatives to boost investment in the industry.

Said one Business Systems Consultant at a Processor and Packager of Hemp CBD, “We are hesitant to invest much in capital equipment until there is a market shift financially and we can actually have a bank account; it’s a Catch 22 situation being restricted from traditional funding.”

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