It was reported on Tuesday that the United States Drug Enforcement Agency is in the early stages of reclassifying cannabis as a Schedule III narcotic, following a recommendation from the Department of Justice and months of campaign rhetoric signaling the Biden administration’s intention to relax restrictions on the drug.
For over 50 years, cannabis has been classified, alongside harder drugs such as heroin and LSD, as a Schedule I controlled substance, dedicated for narcotics with a “high abuse potential” and “no accepted medical use.” Rescheduling it as a Schedule III drug, alongside less stigmatized drugs such as codeine-based Tylenol and anabolic steroids, would indicate a recognition of cannabis’ medicinal properties and the relatively lower risk of abuse it poses, bringing the DEA’s classification in line with the Department of Health and Human Services’ recent survey of the contemporary scientific research.
This proposed rescheduling would have the effect of facilitating such research, removing many of the barriers that have stifled attempts to administer cannabis to participants in clinical studies. Additionally, it would remove a major tax burden cannabis companies have had to shoulder under s. 280E of the Internal Revenue Code, which prevents companies engaged in the trafficking of Schedule I narcotics from writing off business expenses.
This will allow such companies to more easily compete with black market sellers, who have been able to undercut licenced companies even in states where recreational cannabis use has been legalized, in large part due to this tax burden. As proponents of legalization have long pointed out, this will go a long way towards ensuring the safety and quality of cannabis products available to consumers.
It will moreover improve the ease with which cannabis companies can secure loans from banks, which have often demonstrated discomfort in financing an industry shrouded in legal uncertainty. However, the current incongruence between state-level and federal-level laws will largely remain intact, as under this proposed rescheduling, cannabis will still be classified as a controlled substance, and cannabis companies will thus still have to register with the DEA and fulfill accompanying obligations. With regard to medical cannabis in particular, absent a state-level program, Schedule III drugs are only eligible to be dispensed via prescription in the form of a product independently approved by the Food and Drug Administration, which at this point only applies to a number of specific cannabis-based medications.
While rescheduling cannabis would not alter its criminalization under federal law, including the applicability of quantity-based mandatory minimum sentences, the increasing reluctance among federal law enforcement to prosecute cannabis possession offenses renders this effectively moot.
The Justice Department’s proposal will have to be reviewed and approved by the White House Office of Management and Budget, after which point a lengthy public comment period will commence, allowing stakeholders to provide feedback before the recommendation is implemented. The decision will then be subject to judicial review.
In the meantime, this historic move at the very least signals a monumental shift in how the federal government will approach the regulation of cannabis moving forward, potentially indicating that federal legalization is on the horizon.
By Justin Hovey
(Justin is a 2nd year law student at Osgoode Hall Law school and summer student for CansultED. CansultEd is an alternative dispute resolution company that operates exclusively in the US Cannabis space.)