In a paradigm shift, the U.S. Drug Enforcement Administration (DEA) is poised to reclassify cannabis from a Schedule I narcotic to Schedule III. That is according to an Associated Press report released earlier today.
In response to the report, Justice Department director of public affairs Xochitl Hinojosa said in a statement, “Today, the Attorney General circulated a proposal to reclassify marijuana from Schedule I to Schedule III.”
Hinojosa added, “Once published by the Federal Register, it will initiate a formal rulemaking process as prescribed by Congress in the Controlled Substances Act.”
Drug Scheduling in the U.S.
Schedule I, where cannabis has been classified since the Nixon administration alongside heroin, lysergic acid diethylamide (LSD), 3,4-methylenedioxymethamphetamine (known colloquially as ecstasy or Molly), methaqualone, and peyote, is defined by the Federal Government as “a drug with no medicinal value and a high potential for abuse.”
Some examples of Schedule III drugs, defined as “drugs with a moderate to low potential for physical and psychological dependence,” are products that contain less than 90 milligrams of codeine per dosage unit (e.g., Tylenol with codeine), ketamine, anabolic steroids, and testosterone.
According to AP, the White House Office of Management and Budget (OMB) must review the DEA’s proposal to recognize the medical uses of cannabis and acknowledge it has less potential for abuse than other arguably more dangerous drugs. However, it would not federally legalize cannabis for either medical or adult use.
According to the outlet, once the OMB gives the go-ahead, the DEA will accept public comments on the plan to reschedule cannabis, as noted above. Once the public comment phase concludes and an administrative judge reviews the proposal, the agency will eventually publish the final rule.
Validation
“I believe that the removal of cannabis from Schedule I will support safety in the industry by allowing for more clinical trials, the pathway to SAFE banking (proposed Bill H.R. 2891), and the tax burdens that prevent cannabis businesses from being able to operate,” said Luna Stower, chief impact officer at vape technology company, Ispire.
“We wanted descheduling because this opens up a Pandora’s Box of other issues, and we still don’t know exactly how it will be implemented, so we don’t want to celebrate this as perfect policy when it is not,” said the CIO.
“But we also want to celebrate small wins when we get them because, at the end of the day, when you zoom out, this is still a step in the right direction and changes the narrative around the fact that cannabis has been admitted by the federal government to have medical efficacy,” Stower elaborated.
Not a Game Changer?
Despite Stower’s cautiously optimistic take, there is an opposing prediction that rescheduling cannabis won’t mean anything tangibly beneficial to the cannabis industry.
“Even if the DEA is most likely going [to] move cannabis to a Schedule III, this is inconsequential to any DEA-licensed cultivator and multi-state (MSO) or overseas operator. While it will lighten some of the domestic security protocols, for example, a Schedule I-compliant vault will no longer be required, and it will reduce the caging requirement around the plants, nothing else would significantly change,” said a cannabis company CEO with knowledge of the practicalities of the situation. The CEO is currently suing the DEA.
The CEO added, “Furthermore, the international companies, the Tilray types hoping for a stock bump, might get lucky short term, but otherwise, it’s all hype. This story is a politically motivated ruse by the Biden administration, which needs help to garner the far-left, pot-smoking vote. It won’t enact SAFE banking. When you peel the layers of the onion back, the DEA still has a huge, prevailing, anti-cannabis sentiment deeply embedded within its ranks.”
Free from 280 E
The most significant benefit to state-legal cannabis companies would be the elimination of the bane of the sector’s existence: IRS tax law 280E.
Forever the pain point of the cannabis industry and even cannabis-related 501c3 non-profits, 280E is a federal tax regulation that prevents state-legal cannabis companies from claiming overhead cost tax deductions the way non-cannabis businesses are entitled to do.
Since 280E applies to Schedule I and II drugs, but not Schedule III, re-classification could be a major financial boon to cannabis companies nationwide that have narrow margins from absorbing myriad operating expenses.
“Eliminating the 280E tax burden would level the playing field, empowering small cannabis businesses to thrive without the crippling financial weight. This change would unlock new opportunities, allowing these entrepreneurs to reinvest in their communities and foster a more equitable industry,” said Dr. Chanda Macias, CEO of MSO National Holistic Health.
Cannabis & Tech Today could not reach a DEA representative for comment. Come back tomorrow for a recap of reactions from across the industry.
