Learn what marijuana rescheduling means, why it matters, and what the changes and challenges of this major policy have in store for the cannabis industry and consumers
The U.S. Drug Enforcement Administration (DEA) may soon approve a major policy change that could have significant implications for the cannabis industry and consumers. The DEA is expected to follow the recommendation of the U.S. Department of Health and Human Services (HHS) to reschedule marijuana from Schedule I to Schedule III, a move that would acknowledge its medical value and ease some of the tax and regulatory burdens on the cannabis sector.
What is Rescheduling and Why Does It Matter?
Under the Controlled Substances Act (CSA), the federal law that regulates drugs in the U.S., substances are classified into five schedules based on their potential for abuse, medical use, and safety. Schedule I drugs are considered the most dangerous and have no accepted medical use, while Schedule V drugs are the least restrictive and have a low potential for abuse. Marijuana is currently classified as a Schedule I drug, along with heroin, LSD, and ecstasy. This means that the federal government considers marijuana to be illegal, highly addictive, and without any therapeutic benefits.
Marijuana rescheduling from Schedule I to Schedule III would recognize that it has a moderate to low potential for abuse, a currently accepted medical use, and a low risk of dependence. Schedule III drugs include codeine, ketamine, and anabolic steroids. Rescheduling would also have several practical effects for the cannabis industry and consumers, such as:
- Tax relief: Cannabis businesses currently face a heavy tax burden due to Section 280E of the Internal Revenue Code, which prevents them from deducting ordinary business expenses such as rent, payroll, and advertising. This is because Section 280E only applies to businesses that traffic in Schedule I or II substances. Marijuana rescheduling from Schedule I to Schedule III would allow cannabis businesses to deduct these expenses and lower their effective tax rate.
- Banking access: Cannabis businesses also face challenges in accessing banking and financial services, as most banks are reluctant to work with them due to the risk of federal prosecution and regulatory scrutiny. Rescheduling marijuana to Schedule III would reduce this risk and encourage more banks to offer accounts, loans, and other services to cannabis businesses, improving their cash flow and security.
- Research opportunities: Rescheduling marijuana to Schedule III would also facilitate more scientific research on its medical benefits and risks, as researchers would face fewer barriers and restrictions in obtaining and studying cannabis. This would increase the quality and quantity of evidence-based information on marijuana and potentially lead to the development of new cannabis-based medicines and treatments.
What are the Chances and Challenges of Rescheduling?
The possibility of rescheduling marijuana has been raised several times in the past, but has never materialized. However, the current situation is different, as the HHS has issued a formal recommendation to the DEA to reschedule marijuana to Schedule III, based on a scientific and medical evaluation conducted by the Food and Drug Administration (FDA). The HHS recommendation was issued in August 2023, following a petition filed by a coalition of cannabis advocacy groups in 2019. The DEA has 90 days to respond to the HHS recommendation, but can request an extension if needed.
According to various legal experts and industry stakeholders, the DEA is likely to follow the HHS recommendation and issue a proposed rule change to reschedule marijuana by 2024, before the next presidential election cycle. This is because the DEA has historically deferred to the HHS and the FDA on matters of drug scheduling, and because the current administration has expressed support for marijuana rescheduling and decriminalization specifically. However, rescheduling marijuana is not a simple or straightforward process, and it may face several legal and political hurdles, such as:
- International treaties: The U.S. is a signatory to three international treaties that prohibit or restrict the production, distribution, and possession of marijuana and other drugs. These treaties are the Single Convention on Narcotic Drugs of 1961, the Convention on Psychotropic Substances of 1971, and the Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances of 1988. Rescheduling marijuana to Schedule III may violate or conflict with these treaties, and may require the U.S. to renegotiate or withdraw from them, which could have diplomatic and geopolitical consequences.
- State laws: Rescheduling marijuana to Schedule III would not automatically change the legal status of marijuana at the state level, where it is currently legal for medical or recreational use in 36 states and the District of Columbia, and illegal in 14 states. Rescheduling would create a patchwork of laws and regulations across the country, and may cause confusion and inconsistency for cannabis businesses and consumers. Rescheduling would also not prevent the federal government from enforcing the CSA against state-legal cannabis activities, as the supremacy clause of the U.S. Constitution gives federal law precedence over state law.
- Product quality and safety standards: Rescheduling marijuana to Schedule III would subject it to the oversight and regulation of the FDA, which is responsible for ensuring the safety, efficacy, and quality of drugs and medical products. This would mean that cannabis products would have to meet the same standards as other pharmaceuticals, such as undergoing clinical trials, obtaining approval, and labeling and packaging requirements. This could pose significant challenges and costs for the cannabis industry, especially for small and medium-sized businesses, and could limit the diversity and availability of cannabis products for consumers.
What is the Future of Marijuana Reform?
Rescheduling marijuana to Schedule III would be a historic and significant step for the cannabis industry and consumers, but it would not be the end of the road for marijuana reform. Marijuana rescheduling would not legalize marijuana at the federal level, nor would it address the social and racial injustices caused by the war on drugs, such as the disproportionate arrest and incarceration of people of color for marijuana offenses. Marijuana rescheduling would also not guarantee the protection and recognition of the rights and interests of cannabis patients, consumers, and businesses, as they would still face legal uncertainty and discrimination in areas such as employment, housing, education, and health care.
To achieve full legalization and social justice in the cannabis sector, further legislative action and public support are needed. Several bills have been introduced in Congress to legalize marijuana at the federal level, such as the Marijuana Opportunity Reinvestment and Expungement (MORE) Act, the Cannabis Administration and Opportunity Act, and the Common Sense Cannabis Reform for Veterans, Small Businesses, and Medical Professionals Act. These bills would not only remove marijuana from the CSA, but also provide for expungement of past convictions, reinvestment in communities harmed by prohibition, and regulation and taxation of the cannabis market. However, these bills face strong opposition from some lawmakers and interest groups, and their chances of passing are uncertain.
Meanwhile, public opinion on marijuana has shifted dramatically in recent years, with a majority of Americans supporting legalization and recognizing its medical and economic benefits. More states are also expected to legalize marijuana for medical or recreational use in the near future, following the example of states like New York, New Jersey, and Arizona, which legalized marijuana in 2020. As the cannabis industry and culture continue to grow and evolve, so will the demand and pressure for marijuana rescheduling at the federal level. While marijuana rescheduling from Schedule I to Schedule III may represent a milestone, it is not the destination.
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