top of page

Is the DEA Close to Making a Decision on Cannabis Rescheduling?

Following President Biden's historic and unexpected mention of marijuana rescheduling during his State of the Union Address last week, industry watchers and stakeholders are hopeful a decision will happen soon.



The question of whether the U.S. Drug Enforcement Agency (DEA) will finally act on last year's recommendation by the Department of Health and Human Services (HHS) to reschedule cannabis from a highly restricted Schedule I narcotic to a Schedule III drug on the federal Controlled Substances List may have an answer as early as next month.


According to multiple media outlets, following President Joe Biden's surprising and welcome comments concerning his administration's ongoing efforts to achieve meaningful cannabis reform during last week's State of the Union Address, many advocates and stakeholders supporting the $34 billion industry expressed optimism and hope that those words will translate into meaningful action regarding the legal status of the polarizing and popular plant medicine.


However, there is also a growing chorus of dissent among members of that same cannabis coalition who continue to voice their frustration over the constant promises and delays regarding the DEA's inaction concerning the rescheduling recommendation by HHS.


It has been over a year since the President requested an extensive scientific review of cannabis as part of his decision to grant pardons to all individuals currently serving federal prison sentences for simple marijuana possession convictions. In that request, Biden directed the Secretary of Health and Human Services and the Attorney General to "expeditiously" review marijuana scheduling under federal law. 


As a result of the President's directive, officials at HHS released its recommendation to reschedule the plant from a Schedule I to a Schedule III drug in August of last year. While the decision is not binding, with the DEA having the final word, the overwhelming scientific data combined with growing political momentum for marijuana reform could significantly impact the DEA's final decision. 


Under Schedule III, cannabis would remain federally prohibited. However, the move would have far-reaching repercussions for scientific researchers facing prohibitive barriers because of marijuana's past Schedule I status. Suppose the DEA takes the recommendation and moves marijuana to Schedule III. In that case, researchers will no longer have to navigate the tedious and time-consuming registration process with the agency to gain access to cannabis for studies.


In addition to the expanded research possibilities afforded by the rescheduling, the move would enable cannabis companies to take advantage of tax opportunities and other financial instruments currently unavailable to businesses that sell Schedule I and II drugs.


For example, the rescheduling would allow these companies to make federal business tax deductions currently prohibited by cannabis' Schedule I status. Federal prohibition has saddled the industry for years with a punitively higher effective tax rate.


Furthermore, it has forced many states to give state-level tax relief for companies operating in their regulated and legal markets. This classification change could have massive financial implications for states with legalized adult-use marijuana and, more importantly, those considering cannabis reform legislation.


Despite all the potential positives arising from the seismic policy change, there is still no definitive timetable for when DEA officials will make a decision. Rumors have been flying around Washington for months concerning if and when the top drug law enforcement agency will act on the recommendation. Some insiders feel confident a decision is imminent, while others are not as confident.


"Anyone who says they know is full of it. Only the DEA/DOJ knows about timing. And it's a black box." Andrew Kline, a Denver-based senior counsel for Perkins Coie who co-chairs the law firm's cannabis industry group, said via email Monday.


"Anyone who says they know is full of it. Only the DEA/DOJ knows about timing. And it's a black box."

- Andrew Kline, a Denver-based Senior Counsel for Perkins Coie


And it's not just industry supporters and stakeholders who are applying pressure to the DEA. Several states' attorneys general and outspoken members of Congress have also been demanding action by agency officials. For their part, the concern over rescheduling is more a matter of public safety than the need for tax and economic relief within the industry.


Because cannabis businesses are prohibited by federal law from opening simple checking accounts, many of them operate on a cash basis, which has led to an epidemic of armed robberies and other violent crimes, including the ever-present specter of the illicit black market.


Much of the mystery and frustration stems from the fact that the decision-making process is closed to lawmakers and the public. 


"This is a closed process. I can't give you anything concrete. Anybody that can tell you they can give something concrete isn't telling the truth. But I still feel confident saying that we are going to see something out of DOJ sooner rather than later," said David Culver, the Washington, DC-based senior vice president of public affairs at the U.S. Cannabis Council.


"This is a closed process. I can't give you anything concrete. Anybody that can tell you they can give something concrete isn't telling the truth. But I still feel confident saying that we are going to see something out of DOJ sooner rather than later."

- David Culver, Sr. VP of Public Affairs at the U.S. Cannabis Council


Regardless of when the DEA makes its decision, the results could have far-reaching implications for the cannabis and hemp industries. While many view the potential change as overwhelmingly positive, there is the distinct possibility that a rescheduling move could have devastating economic effects on the small to medium-sized businesses comprising most of both plant market sectors. 


Sometimes, the time-tested axiom of "be careful what you wish for" is a wise and gentle reminder to practice patience when considering all the possible outcomes of a decision as important and impactful as this one. 


42 views0 comments

Comments


bottom of page