Unanswered questions abound for cannabis stakeholders over rescheduling

Now that the U.S. Department of Justice has formally begun moving forward with a proposed rescheduling of marijuana, the cannabis industry has been abuzz with rumors and optimism about how the reform could spur even more business-friendly developments.

But it’s worth remembering that the rescheduling process will take months, at the minimum, and the outcome itself could still be in jeopardy. There are also still a wealth of unanswered questions that surround the rescheduling proposal.

Timeline

The first question is the timeline of the rescheduling process itself, which may fluctuate greatly. At best, rescheduling might be finished within a matter of several months, but litigation could draw it out for several years, some experts have warned.

At least one cannabis industry representative believes that the Biden administration expects to have the process completed before the November election, however.

“Why would this all of a sudden take a long period of time when everything to this point has shown that this has moved as expeditious as ever?” asserted Adam Goers, an executive with The Cannabist Company and co-chair of the Coalition for Cannabis Scheduling Reform. “The administration has not gone to the great work of doing this quickly just to allow it to be slowly tortured to death. They’re going to finish the job.”

Presidential election

The second major question is what happens to rescheduling if former President Donald Trump beats current President Joe Biden in the coming November election and the rescheduling isn’t finished by the time he takes office.

While Trump in his first term maintained the hands-off policy of his predecessor, President Barack Obama, with respect to operational state marijuana markets, there were also several anticannabis moves by some officials in his first administration. Perhaps the most notable of those was the revocation of the Cole Memos and other cannabis-related policy memos in 2018 by then-Attorney General Jeff Sessions, an outspoken marijuana opponent.

Trump himself doesn’t have a clear policy on cannabis, and while he’s not as vociferously antimarijuana as some other conservatives, it’s feasible that he could appoint a new attorney general who would decide to keep cannabis as a Schedule I narcotic.

“Part of the story is, if the Biden administration can’t turn the youth vote … do we have a chance with Trump?” said attorney Shane Pennington, who’s made a close study of the rescheduling process. “What is the plan if there’s a Trump administration? I’m talking to my clients about this… How do we get them on our side?”

Another Cole Memo?

Yet another major question mark is when – or if – the DOJ will issue an updated version of the Cole Memo, and how that policy guidance could change – or leave undisturbed – the day-to-day operations of the cannabis trade.

The Cole Memo author himself, former U.S. Deputy Attorney General James Cole, now a private attorney practicing at Sidley Austin, predicted last week during a media availability that the DOJ will reinstate some sort of parallel industry guidance, but that likely won’t be issued until the rescheduling is finalized.

“I think almost anything is possible” with a new version of the Cole Memo, he said. “It’s probably likely (DOJ) will consider the issue and determine whether or not any guidance is necessary once the rule has taken effect. Hard to predict what it’ll be.”

Cole suggested that a new federal DOJ policy will also have to take into account the thriving illicit marijuana market, which has taken root in several states that have legalized marijuana across the country.

Congressional inaction

Even if rescheduling is completed, the entire U.S. marijuana industry will still be federally illegal, because none of the state-legal companies meet the legal standards to manufacture or sell Schedule III substances.

That means, at least theoretically, that federal agents from the U.S. Food and Drug Administration or the DEA could still prosecute state-legal operators under federal law, said former FDA Commissioner Howard Sklamberg during the same media briefing.

“This is an important first step, but not a final step, because rescheduling … does not change cannabis’ status in (the federal) regulatory framework,” Sklamberg said. “Which is to say, the Food, Drug, and Cosmetic Act applies the same way to a substance that is Schedule III as it does to Schedule I.”

That legal tension begs for action from Congress, Cole said.

“What is really needed to resolve this … is for Congress to act, to create a unified regulatory environment that involves both the states and federal government,” Cole noted.

Senate Majority Leader Charles Schumer and two of his Democratic allies last week reintroduced the Cannabis Administration and Opportunity Act to fully remove cannabis from the list of controlled substances.

But the ongoing hyper-partisanship of Congress makes it unclear whether any marijuana-related reforms – such as the SAFER Banking Act or other incremental reforms – can gain the needed votes to get to Biden’s desk this year.

Tangential questions

Aside from the major structural questions about rescheduling, there are also tangential questions swirling, including:

• Will the DEA’s move to reschedule encourage more banks to work with cannabis companies?
• Will stock exchange officials to loosen up and accept marijuana businesses to the Nasdaq or New York Stock Exchange?
• What other action could stem from this federal pivot?

The future is unclear, but at least it’s looking positive at the moment.