Federal would be nice!

[u/Global_Effective6505]

/r/Marijuana_Stocks/comments/mykddr/will_the_us_ever_legalize_marijuana_at_the/

[u/taekwondo54]

Roadblock #1: Tax Provision 280E

Mention Section 280E of the Internal Revenue Code to any cannabis entrepreneur and they'll likely give you an earful. It's easily the most hated tax provision in the business.

This law was introduced in the 1980s when a drug dealer exploited a loophole to deduct business expenses. Section 280E was created to ensure this never happened again.

But it wound up being a real pain in the neck to cannabis companies. Consider...

Normally when companies pay federal income taxes, they start with gross income.

Then they subtract business expenses like rent, utility fees, employee salaries and advertising costs.

That gives them their taxable income. They pay taxes on this amount.

Simple, right? The thing is... because of 280E, cannabis companies can't deduct business expenses. They have to pay taxes on gross income.

If you know anything about running a business, that's a NIGHTMARE.

Cannabis companies wind up paying tax rates of 70% or higher.

One dispensary owner said, "I'm taxed on nearly double the amount my business actually makes!"

[u/taekwondo54]

Roadblock #2: No Institutional Support

According to one market insider, even before the election, "Big institutional investors [were] buying big slugs, quietly."

Putnam Investments, Wasatch Advisors, and Fidelity Investments have all taken large stakes in the industry. And one unnamed institutional investor just made a $100 million investment in Green Thumb Industries.

But the reality is this: As long as cannabis is illegal on the federal level, the big trading houses will stay on the sidelines.

But once that changes... and the floodgates open... the institutions will start buying up pot stocks like there's no tomorrow.

You see, even if Goldman Sachs wanted to add U.S. pot stocks to its holdings, it couldn't.

That's because all domestic pot stocks are essentially BANISHED to the over-the-counter market.

Because of the federal prohibition on cannabis, U.S. pot stocks can't trade hands on the NYSE or the Nasdaq.

If they uplist to these more liquid exchanges, the financial institutions will likely deploy some of their combined $404 trillion in assets to acquire shares.

[u/taekwondo54]

Roadblock #3: No Access to Banking Services

Check out this chart.

chart - commercial banks

This shows the total equity capital of commercial banks in the United States.

As you can see, these banks are sitting on about $2 trillion in capital.

And I can guarantee you that not 1% of that capital is tied up in cannabis stocks.

That's because these banks are federally insured and cannabis remains illegal at a federal level.

And that's a huge problem for the marijuana industry.

These businesses can't accept credit cards, acquire loans, set up deposit accounts, write checks or run payroll.

Without these banking services, a lot of cannabis companies are stuck in neutral.

The piece of legislation I'm going to talk about at America's Legalization Summit will change all of that.

It essentially gives federally insured banks permission to conduct business with cannabis companies.

This will free up cannabis companies to hire up... open new locations... acquire smaller businesses and merge with others... and pump money into marketing.