IgniteIt · Cannabis Capital ConferenceMIAMI 2027March 24–26 · The Diplomat Beach Resort, Hollywood FL
The story behind the story.
The IRS Is Financing Cannabis. What Happens When It Collects?
Cannabis companies have spent years fighting Section 280E. Meanwhile, many have been using unpaid federal taxes to finance their operations.
That has helped sustain cash flow in an industry where conventional financing remains expensive and access to capital is limited.
But what happens when the bill comes due?
This week, Rolando García Bernado, PhD, IgniteIt’s Chief Economics Columnist, examines how much of the industry’s reported operating cash flow comes from taxes companies have recorded but not paid.
We’re also covering the DEA’s latest rescheduling ruling, exclusive interviews with Cronos CEO Mike Gorenstein and Grown Rogue’s founders, new developments in Curaleaf’s pursuit of Aurora, and a Dickinson Wright analysis of how federal hemp restrictions could affect trademark rights.
And with Washington, D.C., just three weeks away, these debates will be central to our November 18 Cannabis Capital & Policy Summit.
— Nico Rodriguez, Managing Editor
Nov. 18 in Washington, D.C.Cannabis Capital & Policy Summit, Grand Hyatt Washington — join us
One Number
$685M
That’s how much of the $905 million in 2025 operating cash flow reported by 12 publicly traded cannabis operators came from federal income taxes recorded as expenses but not paid, according to Rolando García’s analysis of company filings.
Without that $685 million, their combined operating cash flow would have been approximately $220 million.
The IRS will not necessarily collect this cash immediately. But investors cannot simply ignore it.
One Date
Nov. 5
DEA rescheduling briefing ends
On October 22, DEA Chief Administrative Law Judge Derek Julius rejected further discovery, admitted a GAO report into the record, and allowed limited briefing.
Initial briefs are due October 29, with replies due November 5. When briefing closes, the stay lifts automatically.
The ruling follows the DEA’s October 20 opposition to additional discovery, which it called a “fishing expedition.” The stay lifting does not mean rescheduling happens that day; no deadline has been set for the judge’s recommendation or the DEA’s final decision.
The Big Story
The IRS Is Financing America’s Cannabis Industry. What Happens When It Collects?
Cannabis companies have spent years arguing that Section 280E imposes an unfair tax burden on businesses operating legally under state law.
The industry’s frustration is understandable. Section 280E prevents businesses trafficking in Schedule I or II substances from deducting ordinary operating expenses for federal income tax purposes.
But while the legal and political fight continues, some operators have adopted a strategy with significant financial consequences: recording federal income tax expenses without paying the full amounts due.
In a new IgniteIt analysis, Rolando García examines the resulting liabilities across major publicly traded operators.
The cash-flow discussion
In 2025, the 12 companies in Rolando’s sample generated $905 million in reported operating cash flow.
Approximately $685 million came from income taxes that had been recorded as expenses but remained unpaid.
That means roughly three-quarters of their combined operating cash flow depended on retaining cash otherwise owed in federal taxes.
Green Thumb Industries accounted for much of the remaining cash generation. The other 11 companies collectively produced approximately $52 million in operating cash flow after adjusting for those unpaid taxes.
The financial consequences extend well beyond tax accounting.
What happens if the IRS collects?
Unpaid taxes have become an important source of liquidity for cannabis operators. But how does that financing compare with traditional borrowing, and what happens when those liabilities come due?
Want to know what unpaid taxes really cost cannabis companies and what happens when the IRS comes collecting?
Read Rolando’s full analysisA question for the C-suite
How are you incorporating 280E liabilities into your capital allocation and liquidity planning?
Are you a cannabis CEO, CFO, or senior executive with insights to share? Reach our editorial team at nico@igniteit.com to contribute to our reporting or arrange an interview.
The CEO Desk
Cronos CEO Mike Gorenstein: How Sustainable Is a 54% Gross Margin?
Cronos has delivered substantial revenue growth, expanded its international presence, and reported a 54% gross margin.
But the more important question for investors is how much of that margin can be maintained.
In an exclusive IgniteIt interview, Cronos CEO Mike Gorenstein acknowledged that the reported margin may represent a high point.
At the same time, he distinguished temporary factors from production efficiencies that management expects to retain.
The company’s GrowCo capacity expansion, which raised cultivation capacity by about 70%, is another important part of the investment story.
Greater capacity can support future revenue growth, but its economic value depends on utilization, operating costs, and the ability to sell additional production profitably.
Read the exclusive interview: Cronos CEO on Margins and Production Efficiencies →
Grown Rogue: Production Growth Begins With Sales
In another IgniteIt exclusive, Grown Rogue’s founders tell A.J. Herrington why expanding cultivation requires more than increasing production.
Without sufficient demand, additional capacity can drive up costs and weaken margins.
Their message: secure the sales before investing in more production.
The Capital Test
Reverse Splits, Nasdaq Pressure, and the Cost of Staying Listed
Canopy Growth and Safe Harbor Financial are confronting Nasdaq listing requirements as cannabis companies continue to navigate weak share prices and limited access to equity capital.
Reverse stock splits can increase the quoted price per share without changing the underlying enterprise value.
They may help address minimum bid-price requirements, but they do not improve revenue, operating margins, or cash generation by themselves.
A higher nominal share price can help preserve market access, but investors still need to evaluate balance-sheet strength, potential dilution, and the cost of raising new capital.
Read: Canopy Growth and Safe Harbor Face Nasdaq Pressure →
Decibel Draws Institutional Interest
Canadian investment firm Ewing Morris has proposed investing up to C$5 million in Decibel Cannabis shares at a 16.4% premium to the 20-day volume-weighted average price.
The proposal provides another perspective on cannabis equity valuations. The premium alone does not establish fair value. The transaction’s terms, potential dilution, and implications for existing shareholders remain essential.
Read: Canadian Investment Firm Offers C$5 Million for Decibel Shares →
The SpreadWeek 7 of 11
Curaleaf and Aurora: The Fight Moves Beyond Price
Curaleaf has accused Aurora of refusing to engage in due diligence while entertaining discussions with other potential bidders.
Aurora has maintained that the proposal undervalues its business and exposes shareholders to risks associated with Curaleaf’s share-based consideration.
The dispute now involves the board’s strategic alternatives, access to due diligence, negotiations with potential competing bidders, the valuation of Aurora’s assets, and the interests of shareholders on both sides.
On October 26, the Alberta Securities Commission dismissed Curaleaf’s application to halt Aurora’s at-the-market share program, which lets Aurora keep raising capital by selling stock. Curaleaf reaffirmed its offer the next day without changing its terms.
And because most of the consideration is paid in Curaleaf shares, the offer’s market value continues to fluctuate.
Curaleaf / AuroraAs of Oct. 27 close
6.1%Aurora’s discount
to offer value
to offer value
Aurora closed at $4.15 against consideration now worth $4.42. A week earlier the gap was 3.7%.
64%Annualized return
if it closes
if it closes
$4.42Offer’s value today,
up from $4.14
up from $4.14
37Days until
Dec. 4 expiry
Dec. 4 expiry
Why it matters: Both stocks rose about 6% on Tuesday, and Curaleaf’s gain lifted the offer to $4.42. But Aurora, at $4.15, is trading further below that than it was a week ago. With regulators letting Aurora keep issuing shares, Curaleaf alleging talks with rival bidders and no diligence access, the market is demanding a wider discount to bet on this deal closing as offered.
DW Analysis
Hemp Brands Face a New Federal Trademark Problem
What happens to a brand’s federal trademark protection when the products it sells no longer qualify as hemp?
That’s the issue examined by Jonathan Wachs and Jessica Kaiser of Dickinson Wright in their client alert, What Does the Revised Definition of Hemp Mean for Trademarks?
Federal trademark registration generally requires lawful commercial use.
That has historically prevented many marijuana businesses from registering their brands nationally, even when their products are legal under state law. The 2018 Farm Bill created a federal pathway for certain hemp-related trademarks.
Now that framework is changing. Most of the revised federal hemp definition now takes effect December 11, 2026, after Congress pushed it back from November 12. It replaces the delta-9 THC threshold with a broader total-THC standard that includes THCA, and certain synthetic cannabinoids and finished products will no longer qualify as hemp.
Brands built on products that no longer qualify could face new obstacles to federal trademark protection.
What operators should do now
The attorneys recommend reviewing product compliance and trademark portfolios ahead of the new rules: confirming products stay at or below 0.3% total THC, tightening the goods described in trademark filings, and considering state registrations where marks are in use.
Based on Dickinson Wright’s client alert, “What Does the Revised Definition of Hemp Mean for Trademarks?” by Jonathan R. Wachs and Jessica Kaiser.
Signal
Massachusetts: What Happens to a $330 Million Tax Base?
Massachusetts voters will decide on November 3 whether to reverse adult-use cannabis legalization. Question 8 would end adult-use sales on January 1, 2028, while preserving the medical program.
In an IgniteIt interview, Green Thumb Industries warned that repealing the regulated market would not eliminate consumer demand.
Instead, the company argues, it would threaten approximately $330 million in annual cannabis-related tax revenue.
The implications extend beyond retailers.
The Bottom Line
The Cost of Uncertainty Is Showing Up Everywhere
Unpaid taxes are supporting reported cash flow. Public companies are struggling with listing requirements. Acquisitions continue to raise questions about shareholder value. Federal policy remains unresolved.
And the approaching hemp restrictions could affect not only product inventories but also the commercial value of established brands.
These are different problems, but they have a common financial consequence. They make it harder to determine how much capital a business needs and how much cash it can reliably generate.
For investors, the challenge is separating temporary financial relief from sustainable operating performance. For management teams, it means preparing for obligations that may not come due on a predictable schedule.
A business that depends on delayed payments, favorable financing, or an anticipated regulatory change is carrying risks that may not be obvious from its reported revenue.
Which cannabis companies are best prepared to manage those risks?
Washington, D.C. — November 18
November 18 · Washington, D.C.
The Cannabis Capital & Policy Summit
The questions shaping this week’s newsletter will be central to our next IgniteIt event.
On November 18, we’ll bring together cannabis executives, operators, advocates, investors, policymakers, and financial professionals in Washington, D.C., to discuss federal reform, capital allocation, taxation, and the industry’s financial future.
IgniteIt Cannabis Capital & Policy Summit
November 18, 2026 · Grand Hyatt Washington
Join us in Washington, D.C.Upcoming IgniteIt Events
Cannabis Capital & Policy SummitNov 18 · Washington, D.C.