In a move that could potentially breathe new life into California’s struggling cannabis industry, the U.S. Drug Enforcement Administration is considering reclassifying marijuana as a less dangerous drug.

This reclassification could significantly lighten the tax burden for licensed pot companies in the state and provide a much-needed boost.

DEA’s Proposal for Reclassification

The DEA’s proposal involves shifting marijuana from the Schedule I drugs list, which includes substances like heroin and cocaine, to the Schedule III drugs list, which includes substances like ketamine and anabolic steroids. This proposal is still subject to review and endorsement by the White House and public comment.

“We’ve been anticipating this,” said Meital Manzuri, an attorney specializing in the cannabis industry. “This is big for the industry.”

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The reclassification could allow cannabis businesses to take standard tax deductions that other businesses enjoy.

“The biggest change is going to be how the industry does business,” said Paul Armentano, deputy director of the National Organization for the Reform of Marijuana Laws.

Despite the potential benefits, the reclassification would not make marijuana legal under federal law for recreational uses. It would, however, recognize medicinal uses for marijuana and require the drug to be sold and regulated on the federal level similar to other Schedule III drugs.

Remaining Financial Challenges

However, other financial benefits, such as banking and insurance, would still be out of reach for many businesses, especially those operating for recreational use.

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“Reclassification moves the needle but doesn’t cross the goal line to making cannabis legal and thus acceptable to banks and the credit and debit card industry,” said Scott Talbott, executive vice president of the Electronic Transactions Association.

Despite these challenges, industry insiders are hopeful about the potential benefits of reclassification.

“Rescheduling won’t legalize cannabis or let a doctor prescribe it, but it will allow existing marijuana companies to be taxed like any other business,” said Adam Terry, CEO of Cantrip, a THC-infused drink company.

Read more at the Los Angeles Times.