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In light of Section 280E of the US Internal Revenue Code, which significantly inflates effective tax rates by prohibiting standard business deductions for companies trafficking in Schedule I substances, employee stock ownership plans (ESOPs) have gained traction as a strategic countermeasure in the cannabis space.

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While the transition of medical marijuana to Schedule III has provided some tax relief, adult-use cannabis continues to be classified as a Schedule I substance, keeping the burden of 280E in place for many.

But as federal rescheduling efforts progress, will the complexity of an ESOPs remain necessary?

The Investing News Network recently interviewed Scott H. Moskol, partner and cannabis practice co-chair at Blank Rome, to explore how these structures benefit the sector and what could be next.

Moskol described ESOPs as “especially salient for the cannabis industry” because they effectively restore cashflow that 280E would otherwise strip out. He mentioned Massachusetts operators Canna Provisions and Theory Wellness as companies that have completed ESOP transactions and “continue to grow,” as well as at least one ESOP-owned business in Maine, where higher state income tax rates can make the ESOP tax advantage more meaningful.

Illicit, a company that was backed in an ESOP transaction by a lender client of Moskol's firm, was also cited by Moskol as an example of how these structures can support growth. After completing its ESOP, Illicit is now looking to use the cashflow that’s been freed up “to make certain strategic acquisitions."

Ultimately, tax savings from ESOPs can be used to shore up operations, acquire new assets, pay down debt or even purchase real estate that’s currently being leased. All of those moves can strengthen EBITDA, improve balance sheets and make a business more attractive as a future sale or initial public offering candidate, or if institutional investors begin to apply more traditional valuation frameworks to the sector.

To read the full article, please click <a href="https://investingnews.com/scott-moskol-esops-280e-cannabis/">here</a>.

"ESOPs for Cannabis Companies: A Strategic Solution to 280E Tax Hurdles," by Meagen Seatter was published in <a href="https://investingnews.com/scott-moskol-esops-280e-cannabis/">Investing News Network</a> on June 1, 2026.

ESOPs for Cannabis Companies: A Strategic Solution to 280E Tax Hurdles

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ESOPs for Cannabis Companies: A Strategic Solution to 280E Tax Hurdles

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