Author: Leticia Maskell, Emerge Law Clerk
News broke last week that U.S. Health and Human Services (HHS) sent a letter to the Drug Enforcement Administration (DEA) recommending the reclassification of marijuana from Schedule I to Schedule III on the DEA’s list of controlled substances. Examples of drugs currently in Schedule III include ketamine, Tylenol with codeine, and anabolic steroids. Whereas Schedule I covers drugs with no accepted medical use and a high potential for abuse, such as heroine.
The announcement sparked considerable excitement in the industry for good reason. For example, cannabis business costs have been disproportionately high, in part due to Internal Revenue Code 280E, which prohibits state-licensed marijuana businesses from taking standard business deductions because of marijuana’s Schedule I status. If marijuana becomes a Schedule III drug, however, 280E should no longer apply, and standard deductions should become available.
Further, rescheduling marijuana would increase access to cannabis research, which is heavily restricted for Schedule I substances. More cannabis research could translate to medical breakthroughs and further legitimization of cannabis, generally.
Rescheduling does not equal de-scheduling. While, according to the DEA, Schedule III drugs “have a potential for abuse less than substances in Schedules I or II,” such drugs still fall under DEA authority, and, under federal law, a DEA license would be required to dispense marijuana. Schedule III drugs also fall under the federal food and drug administration’s (FDA) purview, which would add another level of federal regulations and hurtles to navigate to produce and sell a federally legal marijuana product. So, in some ways, rather than reduce federal oversight, rescheduling would plug “federally legal” marijuana into the federal regulatory pipeline and make little difference to state-legal cannabis operators from a federal perspective.
Much remains to be seen in the wake of HHS’s recommendation. First, nothing requires the DEA to follow the recommendation and history has shown the agency’s general hostility toward marijuana, though many are confident that, under the Biden administration, the DEA may be more likely to change its tune. Second, if the DEA does accept the recommendation, no timeline exists for when the rescheduling would occur, and there may be a new president with a different agenda before the DEA completes the process. Third, rescheduling may invite more large pharmaceutical companies to enter the cannabis space and produce federally legal cannabis products, increasing competition with state-legal cannabis operators.
So, while HHS’s recommendation reflects some welcome movement from the federal government on cannabis policy, uncertainty continues to plague the state-legal cannabis industry, and we all continue to await more concrete steps from Congress and the Biden administration to alleviate the myriad obstacles for cannabis operators that accompany continuing federal prohibition.