Cannabis Rescheduling: DEA’s Decision Marks a New Era for the Industry

The US Drug Enforcement Administration (DEA) is set to approve the rescheduling of cannabis in a move set to have a significant impact on the cannabis industry across the globe.

Eight months after the Department of Health and Human Services (HHS) recommended rescheduling cannabis to the DEA on August 29, 2023, the organisation has reportedly made its decision, following sustained pressure from the Biden administration.

According to the Associated Press, five sources close to the matter confirmed that the DEA will recommend that cannabis be moved from a Schedule I substance to a Schedule III to the White House Office of Management and Budget (OMB).

Xochitl Hinojosa the director of public affairs for the Justice Department, of which the DEA is a component, confirmed that the Attorney General had circulated ‘a proposal to reclassify marijuana’.

“Once published by the Federal Register, it will initiate a formal rulemaking process as prescribed by Congress in the Controlled Substances Act.”

While the proposal now has the full weight of the Justice Department behind it, it could still take months to actually implement.

Once published in the Federal Register, there will be a 60-day public comment period, before the proposal is reviewed by a judge, who may decide to hold a hearing before it is approved.

The industry has celebrated this ‘historic’ move, which represents the first time cannabis has been officially acknowledged for having medical benefits, and the first shift in federal law regarding cannabis in the US in 50 years.

Though cannabis will remain federally illegal, it will now sit alongside less harmful drugs like high-strength ibuprofen and anti-depressants instead of LSD and heroin.

What will this mean?

For businesses, this means that they could soon be free of the Internal Revenue Code Section 280E tax, which prevents them from making deductions on their tax returns.

Bryan Barash, Dutchie’s Vice President, External Affairs and Deputy General Counsel, said: “Moving cannabis to a Schedule III classification represents a critical milestone for the industry at large and a crucial development for cannabis operators, especially small and social equity businesses. This change levels the playing field and eliminates crushing tax penalties that skyrocket operational costs and drive up costs for consumers.”

Another major change that could significantly impact the global medical cannabis industry is that it will make conducting clinical research on cannabis much less difficult.

Mike Sassano, CEO of Somai Pharmaceuticals, said: “The global medical cannabis community and every health regulatory agency entered the New Year with a present from the biggest and most well-funded health authority in the world, the HHS, who said that cannabis is both safe and has medical benefits for pain and at least 15 other indications. This is the single most significant finding conducted in the largest medical market (USA).”

According to Co-Chair of Clark Hill’s Cannabis practice, Sander Zagzebski, rescheduling could also make inter-state trade much more likely.

He explained: “Rescheduling marijuana under the Controlled Substances Act won’t have any direct or immediate impact on state cannabis laws, but any relaxation in federal policy will get people talking about interstate commerce and possible challenges to state programs under the Dormant Commerce Clause.”

Others have called for the industry not to get complacent, arguing that despite this historic step ‘there’s more work to be done to rectify the harms of the failed war on drugs’.

Senator Ron Wyden said that while this was a ‘huge shift in policy’, he is not going to let today’s news ‘slow this movement down’.

“Cannabis should ultimately be descheduled with strong federal regulations put in place to protect public health and safety. Leader Schumer, Senator Booker and I have just the bill to do it.”

This sentiment was echoed by Sarah Gersten, Executive Director of the Last Prisoner Project, who said: “Last Prisoner Project believes that complete descheduling and full legalisation of cannabis is a necessary step towards correcting past injustices and creating a fair and equitable criminal legal system.

“Despite not achieving full legalization, we must use this historic moment to push the fight for cannabis justice forward and we intend to do so by leveraging this reclassification for broader criminal legal reforms as outlined here.”