Tilray posted record quarterly revenue of about US$193 million, but its US business remains hamstrung by federal law, chief executive Irwin Simon said. He told investors reclassifying cannabis to Schedule III would open the stock to institutional investors, ease banking constraints and allow Tilray to deploy overseas proceeds into US medical operations. Health authorities have recommended moving cannabis out of Schedule I, which would remove firms from the strictures of Section 280E; the Drug Enforcement Administration must still act.

What the change would mean - Under current US law cannabis is listed as a Schedule I substance, alongside drugs such as heroin. That classification prevents companies from claiming standard business deductions under Section 280E of the Internal Revenue Code. - Moving cannabis to Schedule III would put it in the same federal category as certain steroids and some prescription drugs and would remove the 280E tax barrier that reduces many cannabis companies’ margins. - The Department of Health and Human Services has recommended reclassification; the Drug Enforcement Administration must consider that recommendation before any final decision. - Immediate fiscal and financial effects: firms could claim ordinary business expenses again; banks and institutional investors would face fewer legal obstacles to providing services and capital; financing costs could fall and capital sources broaden beyond high‑rate loans and private credit. Tilray’s view - Irwin Simon, Tilray Brands chief executive, said reclassification would directly affect Tilray’s capital structure and US growth plans by making the stock accessible to a wider range of institutional shareholders and easing banking complications. - Simon noted that funds earned in Canada and Europe can’t currently be used freely within US operations because of cannabis’s federal status; reclassification would allow Tilray to channel overseas proceeds into US medical-business expansion. - Tilray reported a record second-quarter net revenue of about US$193 million, giving the company scale but leaving federal rules as a constraint on cross‑jurisdictional cash deployment. Tax code and banking implications - Section 280E prevents businesses dealing in Schedule I and II substances from claiming ordinary deductions, causing many cannabis firms to face much higher effective tax rates than other industries. - Moving to Schedule III would remove that barrier, allowing companies to claim deductions and credits like other regulated pharmaceutical and chemical businesses, which could materially improve after‑tax profitability and change valuation models. - Banking: federal illegality has pushed lenders and insurers away from the sector. A Schedule III listing would reduce legal and compliance obstacles for banks, increasing access to deposits, lending, and standard financial services.

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The recommendation now moves to the Drug Enforcement Administration for a final decision.

This article was created with AI assistance.