Business
DEA's big marijuana shift could be a lifeline for California's troubled pot industry
If the U.S. Drug Enforcement Administration reclassified marijuana as a less dangerous drug, it wouldn’t eliminate the conflicts between the feds and states such as California that have legalized many uses of the substance.
But it would bring one significant shift that could give California’s licensed pot companies a badly needed boost: a lighter tax burden.
The Associated Press reported Tuesday that the Drug Enforcement Administration will propose moving marijuana from the list of Schedule I drugs, which includes heroin and cocaine, to Schedule III drugs, which include ketamine and anabolic steroids. The proposal would still have to be reviewed and endorsed by the White House as well as be made available for public comment.
Industry insiders say the move, if approved, could become a lifeline to California’s struggling cannabis industry. “We’ve been anticipating this,” said Meital Manzuri, an attorney whose firm specializes in the cannabis industry. “This is big for the industry.”
Lawful in California but illegal under federal law, the state’s cannabis industry has operated in a difficult legal limbo. Stores and farms operate in the open, but they’re cut off from benefits that other businesses enjoy, such as access to out-of-state markets.
Their murky legal standing has also meant that banking, credit card processing, insurance and other vital business services are out of reach for many marijuana businesses.
The tax burden, though, has been particularly onerous. Section 280E of the federal tax code bars businesses involved in “trafficking” of Schedule I or II substances from deducting the expenses they incur. As a result, they are taxed on every dollar they collect, not just their profits.
But if marijuana is reclassified as a Schedule III drug, “players in that industry for the first time will be able to take standard tax deductions that other businesses take,” said Paul Armentano, deputy director of the National Organization for the Reform of Marijuana Laws, also known as NORML, which advocates for cannabis consumers. “The biggest change is going to be how the industry does business.”
“The industry in California especially has been faltering in the last couple of years and this offers them a future,” Manzuri said. “It might be a lifeline that they need to continue operating.”
According to the California Department of Tax and Fee Administration, legal marijuana shops reported about $5.1 billion in revenue in 2023, less than the previous year and 11% less than in 2021.
For years, licensed businesses have struggled to compete with a burgeoning black market that, while avoiding licensing, fees and taxes, can sell its wares at a fraction of the price charged by legal outfits.
But Armentano hopes those in the industry don’t “jump the gun” and that, if marijuana is reclassified, it may still take some time for changes to become tangible.
If cannabis is reclassified, he said, it would nevertheless remain illegal under federal law for recreational uses. States that have legalized marijuana, he said, don’t operate under the federal standards.
Thirty-seven states have legalized cannabis for medicinal use, seven others have legalized CBD oil for medicinal use and 24 states have legalized cannabis for recreational use, according to DISA Global Solutions, a company that administers drug tests.
Some organizations that oppose marijuana legalization, including Smart Approaches to Marijuana, have announced their intent to challenge the final rescheduling decision.
“Crude marijuana has never passed safety and efficacy protocols,” said Dr. Kevin Sabet, president of Smart Approaches to Marijuana, calling it a political decision in an election year. “Politics and industry influence have loomed over this decision from the very beginning.”
If the reclassification is ultimately approved, it would recognize medicinal uses for marijuana and require the drug be sold and regulated on the federal level similar to how ketamine, some anabolic steroids and Tylenol with codeine are regulated. Products would need federal approval — which no cannabis product currently has.
“The majority of the states regulate cannabis in a way that’s inconsistent with federal law,” Armentano said.
That means other financial benefits, such as banking and insurance, would still be out of reach for many businesses, Manzuri said, especially for dispensaries that operate for recreational use.
That has remained an ongoing issue for dispensaries, which typically operate as cash-only businesses. Many of them are unable to obtain banking services for what has grown to be a billion-dollar industry, although the California Department of Cannabis Control has sought to help marijuana businesses set up bank accounts.
The major credit card companies, though, won’t process marijuana-related payments, and reclassifying the drug to Schedule III wouldn’t change this, experts said.
“The payments industry only processes legal products, and reclassification does not make cannabis legal,” said Scott Talbot, executive vice president of the Electronic Transactions Assn. “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.”
Yet reclassifying could help address some of the stigma that has been associated with marijuana and the cannabis business, Armentano said. It will be part of a long process, especially for a service as important to the industry as banking.
“My presumption is that marijuana could be made legal tomorrow, and your Chases, JP Morgans, and Wells Fargos would still say, at least at first, that it doesn’t change our bottom line,” Armentano said.
But those who have been navigating the legal waters of the weed industry still welcome 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 — essentially a huge investment in the overall sector by the way of tax relief,” said Adam Terry, chief executive of Cantrip, a THC-infused drink company based in Massachusetts. “[Reclassification] improves the overall economic health of the industry and continues to inch towards legitimization in the eyes of the public.”
“The California cannabis industry needs that right now,” said Amy Jenkins, legislative advocate for the California Cannabis Industry Assn. “The industry has a significant number of challenges with our existing taxation framework.”
Whitney Economics, a cannabis-focused research company, estimated last year that legal cannabis operators in the U.S. overpaid more than $1.8 billion in taxes in 2022 when compared with other businesses.
Reclassification, Jenkins said, “would provide greater stability to the legal cannabis industry.”
It could also allow more entities to conduct research, possibly opening the doors to industry innovation and greater medicinal benefits. “No one has been able to research it on a wide scale for a long time,” Manzuri said.
For Armentano, whose organization wants states to be allowed to regulate marijuana the way they can regulate alcohol, the possibility of reclassification doesn’t go far enough.
“It’s going to be a very long time after the fact before regulators at the FDA and DEA and other agencies acknowledge that this change isn’t sufficient,” he said.
Business
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Business
Civil case against Alec Baldwin, ‘Rust’ movie producers advances toward a trial
Nearly two years after actor Alec Baldwin was cleared of criminal charges in the “Rust” movie shooting death, a long simmering civil negligence case is inching toward a trial this fall.
On Friday, a Los Angeles Superior Court judge denied a summary judgment motion requested by the film producers Rust Movie Productions LLC, as well as actor-producer Baldwin and his firm El Dorado Pictures to dismiss the case.
During a hearing, Superior Court Judge Maurice Leiter set an Oct. 12 trial date.
The negligence suit was brought more than four years ago by Serge Svetnoy, who served as the chief lighting technician on the problem-plagued western film. Svetnoy was close friends with cinematographer Halyna Hutchins and held her in his arms as she lay dying on the floor of the New Mexico movie set. Baldwin’s firearm had discharged, launching a .45 caliber bullet, which struck and killed her.
The Bonanza Creek Ranch in Santa Fe, N.M. in 2021.
(Jae C. Hong / Associated Press)
Svetnoy was the first crew member of the ill-fated western to bring a lawsuit against the producers, alleging they were negligent in Hutchins’ October 2021 death. He maintains he has suffered trauma in the years since. In addition to negligence, his lawsuit also accuses the producers of intentional infliction of emotional distress.
Prosecutors dropped criminal charges against Baldwin, who has long maintained he was not responsible for Hutchins’ death.
“We are pleased with the Court’s decision denying the motions for summary judgment filed by Rust Movie Productions and Mr. Baldwin,” lawyers Gary Dordick and John Upton, who represent Svetnoy, said in a statement following the hearing. “He looks forward to finally having his day in court on this long-pending matter.”
The judge denied the defendants’ request to dismiss the negligence, emotional distress and punitive damages claims. One count directed at Baldwin, alleging assault, was dropped.
Svetnoy has said the bullet whizzed past his head and “narrowly missed him,” according to the gaffer’s suit.
Attorneys representing Baldwin and the producers were not immediately available for comment.
Svetnoy and Hutchins had been friends for more than five years and worked together on nine film productions. Both were immigrants from Ukraine, and they spent holidays together with their families.
On Oct. 21, 2021, he was helping prepare for an afternoon of filming in a wooden church on Bonanza Creek Ranch. Hutchins was conversing with Baldwin to set up a camera angle that Hutchins wanted to depict: a close-up image of the barrel of Baldwin’s revolver.
The day had been chaotic because Hutchins’ union camera crew had walked off the set to protest the lack of nearby housing and previous alleged safety violations with the firearms on the set.
Instead of postponing filming to resolve the labor dispute, producers pushed forward, crew members alleged.
New Mexico prosecutors prevailed in a criminal case against the armorer, Hannah Gutierrez, in March 2024. She served more than a year in a state women’s prison for her involuntary manslaughter conviction before being released last year.
Baldwin faced a similar charge, but the case against him unraveled spectacularly.
On the second day of his July 2024 trial, his criminal defense attorneys — Luke Nikas and Alex Spiro — presented evidence that prosecutors and sheriff’s deputies withheld evidence that may have helped his defense . The judge was furious, setting Baldwin free.
Variety first reported on Friday’s court action.
Business
California’s gas prices push Uber and Lyft drivers off the road
The highest gas prices in the country are making it tougher for some gig drivers to make a living.
Gas prices have shot up amid the war in the Middle East. On average, California gas prices are the most expensive in the United States, according to data from the American Automobile Assn. The average price of regular gas in California is almost $6. The national average is a little above $4.
While Uber and Lyft drivers have concocted clever ways to cut gas consumption, they say that without some relief they will be forced to leave the ride-hailing business.
John Mejia was already struggling to make money as a part-time Lyft driver when soaring gas prices made his side hustle even harder.
“Unfortunately, it’s the economics of paying less to drivers and gas prices,” he said. “It actually is pulling people out of the business.”
Guests at The Westin St. Francis hotel get into an Uber.
(Jess Lynn Goss / For The Times)
Gig work offers drivers the freedom to work for themselves and more flexibility, but being independent contractors also means they must shoulder unexpected costs.
Ride-sharing companies say they’re trying to help, but drivers say the gas relief comes with caveats. For now, drivers say they’re being pickier about what rides they accept, cutting hours and are looking at other ways to make money.
Mejia, who started driving for Lyft more than a decade ago, said in his early days, he would sometimes make $400 in three hours. Now it takes 12 hours to rake in $200.
The San Francisco Bay Area consultant is an active member of the California Gig Workers Union, so he knows he isn’t alone. California has more than 800,000 gig rideshare drivers, according to the group, which is affiliated with the Service Employees International Union.
On social media sites such as Reddit and Facebook, gig workers have posted about how the higher gas prices are eating into their earnings. Among the tricks they are suggesting: reducing the number of times the ignition is turned on or off, avoiding traffic, working in specific neighborhoods and at times with high demand and switching to electric vehicles.
Gig drivers usually have only seconds to decide whether to accept a ride on the app, but they have become more strategic about which rides and deliveries they accept.
That means they are more likely to sit back in their cars and wait for higher fares for quick pick-up and drop-off.
“I highly recommend the ‘decline and recline’ strategy, rejecting unprofitable rides until a better one appears,” wrote Sergio Avedian, a driver, in the popular blog the Rideshare Guy.
Pedestrians cross the street in front of a Lyft and Uber driver on Wednesday. High gas prices have made it hard for gig drivers to make a living, cutting into their profits.
(Jess Lynn Goss / For The Times)
Uber, Lyft and other companies have unveiled several ways to help drivers save on gas.
Uber said drivers can get up to 15% cash back through May 26 with the Uber Pro card, a business debit Mastercard for drivers and couriers. Based on a worker’s tier, they can get up to $1 off per gallon of gas through Upside — an app that offers cash rewards — and up to 21 cents off per gallon of gas with Shell Fuel Rewards. The company also offers incentives for drivers who want to switch to electric vehicles.
“We know the price of gas is top of mind for many rideshare and delivery drivers across the country right now,” Uber said in a blog post about its gas savings efforts.
Lyft also said it’s expanding gas relief through May 26 because the company knows that the extra cost “hits hardest for drivers who depend on driving for their income.”
The company is offering more cash back, depending on the driver’s tier, for drivers who use a Lyft Direct business debit card to pay for gas at eligible gas stations. They can get an additional 14 cents per gallon off through Upside.
Drivers say the fine print on the offers dictates which card they use and where they fill up gas, making it difficult for them to save money.
“If I do the math, it’s ridiculous,” Mejia said. “They’re offering us nothing.”
Uber declined to comment, but pointed to its blog post about the gas relief efforts. Lyft also referenced the blog post and said “the gas savings were structured through rewards to maximize stackable opportunities.”
Guests at The Westin St. Francis hotel get into an Uber.
(Jess Lynn Goss / For The Times)
Gig workers have struggled with rising gas prices in the past.
In 2022, Lyft and Uber temporarily added a surcharge to their fares amid record-high gas prices following Russia’s invasion of Ukraine. This year, Uber is adding a fuel charge to its fares in Australia for roughly two months to offset the high cost of gas for drivers. Lyft said it hasn’t added a fuel charge in the U.S. or elsewhere.
Margarita Penalosa, who drives full time for Uber and Lyft in Los Angeles, started as a rideshare driver in 2017. Back then, gas was cheaper. She would easily hit her goal of making $300 in eight hours. Now she’s making just $250 after working as much as 14 hours.
Gas prices, she said, used to be less than $3 per gallon. Now some gas stations are charging more than $8 per gallon.
“Take out the gas. Take out the mileage from my car and maintenance. How much [do] I really make? Probably I get $11 for an hour,” she said.
Jonathan Tipton Meyers wants to spend fewer hours as a rideshare driver.
He already juggles multiple gigs even while driving for Uber and Lyft in Los Angeles. He’s a mobile notary and loan signing agent, a writer and performer.
Driving is “a very challenging, full-time job,” he said. “It’s very taxing and, of course, wages were just continually decreasing.”
John Mejia, a longtime Lyft and Uber driver, poses for a portrait before attending a meeting about unionizing gig drivers.
(Jess Lynn Goss / For The Times)
Even if oil continues to flow through the Strait of Hormuz, which Iran reopened Friday, it could take a while for gas prices to come down to earth, said Mark Zandi, the chief economist at Moody’s Analytics.
“There’s an old adage that prices rise like a rocket and fall like a feather,” he said. “I think that’ll apply.”
In the meantime, it will be survival of the fittest drivers. If enough of them decide to leave the apps, the ride-hailing companies could be forced to raise fares further to attract some back.
“Those who approach rideshare driving strategically, tracking expenses, choosing trips carefully, and optimizing efficiency are far more likely to weather periods of high gas prices,” wrote Avedian in the Rideshare Guy blog. “For everyone else, a spike at the pump can quickly turn rideshare driving from a side hustle into a money-losing venture.”
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