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2021/05/03

Caution: Cannabis Roadblocks Ahead

 
Profit Trends

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Editor's Note: Have you heard of Bruce Linton?

He's the name in the cannabis industry...

Linton founded Canopy Growth Corp. (Nasdaq: CGC) and helped get cannabis legalized in Canada. And that's why Chief Trends Strategist Matthew Carr wanted to team up with him.

They both agree that the U.S. cannabis market is about to EXPLODE as cannabis nears full legalization.

Linton even said, "There isn't a next time for something this big."

So now is the time to get in!

Today, Matthew will give YOU a "perfect play" for cannabis legalization. That includes the name and ticker symbol of the stock - 100% free.

You've got nothing to lose.

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- Rebecca Barshop, Senior Managing Editor

3 Major Roadblocks for Cannabis Companies

Matthew Carr | Chief Trends Strategist | The Oxford Club

Matthew Carr

Cannabis legalization is coming.

It's as simple as that.

And I believe it's only a matter of weeks or months, not years.

It might not happen in one grand sweeping gesture. But, like any other revolution, change will happen in stages.

Right now, I want you to take a look at this map of the United States.

It depicts the current legal status of cannabis across the U.S.

US Cannabis by State
 

As you can see, cannabis has been legalized in some capacity in all but three states.

So you may be wondering why I believe the cannabis industry still has a lot of room to grow.

Here's the thing...

Even though 18 states have legalized adult-use and 36 states have legalized medical use...

Cannabis is still illegal at the federal level.

And that's created three major roadblocks for cannabis companies, all of which will be completely eliminated if legalization goes into effect.

Roadblock No. 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 for 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, then you know 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!"

 

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Roadblock No. 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 New York Stock Exchange or the Nasdaq.

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

Roadblock No. 3: No Access to Banking Services

Check out this chart.

Equity for US 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 the 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.

Thankfully, there are multiple cannabis bills circulating in Congress right now that are trying to remove these roadblocks.

There's the Secure and Fair Enforcement (SAFE) Banking Act, the Marijuana Freedom and Opportunity Act, the Marijuana Justice Act, and the Marijuana Revenue and Regulation Act - to name a few.

And once these hurdles are cleared...

Cannabis companies will be off to the races.

The opportunity here - to get in before federal legalization occurs - is so much bigger than just joints and lighters.

It will affect medicine, research, manufacturing, entertainment, food and beverage, and more.

I recently teamed up with Bruce Linton, the founder and former CEO of Canopy Growth Corp., to discuss this exact topic.

He said, "I think it's the single biggest economic shift that could occur."

To hear what else Linton had to say about U.S. legalization, click here right now.

Here's to high returns,

Matthew

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