John SchroyerThis is a developing story and may be updated.
The U.S. Department of Justice is about to make the biggest marijuana reform move in over half a century, with a proposed reclassification from Schedule I to Schedule III on the list of controlled substances, the agency confirmed in an email. If ultimately accomplished, the rescheduling would be a formal recognition by the U.S. government that marijuana has medical value and should be legally available to patients.
“Today, the Attorney General circulated a proposal to reclassify marijuana from Schedule I to Schedule III,” DOJ Director of Public Affairs Xochitl Hinojosa said in an emailed statement. “Once published by the Federal Register, it will initiate a formal rulemaking process as prescribed by Congress in the Controlled Substances Act.”
The next step, the Associated Press reported, is for the White House Office of Management and Budget to formally sign off on the proposed rule, after which a public comment period would ensue before the Drug Enforcement Administration publishes a final rule.
The step is a near-culmination of a process kickstarted by President Joe Biden in October 2022, when he ordered his administration to begin a review of marijuana’s classification as a federally prohibited drug. Last summer, the U.S. Department of Health and Human Services issued a formal recommendation to the DEA that cannabis be moved to Schedule III, citing medical benefits of cannabis, but the DEA has remained mum about its plans until now.
While rescheduling would mark a historic shift for cannabis legalization advocates, it’s also not the entire ballgame. Many activists are far from content with the reclassification, because it leaves in place many state laws that still criminalize marijuana, and also leaves in place plenty of business hurdles.
The biggest and most immediate benefit would be the effective elimination of 280E, the irksome portion of the federal tax code that prohibits state-legal cannabis companies from claiming business tax deductions. The provision routinely costs businesses millions each year, and not having to comply with that would be a financial boon to the entire industry.
But rescheduling would also leave in place laws that prohibit interstate commerce, since none of the state-legal marijuana companies are actually legally qualified to traffic in Schedule III substances. That’s a domain reserved for major pharmaceutical companies which deal in medical-grade Tylenol with codeine, ketamine, anabolic steroids, and other Schedule III drugs.
It also would leave unsettled the legal tension between federal law and state marijuana markets, particularly recreational marijuana markets. That’s because Schedule III drugs are accepted as having medical use, but the drugs themselves remain very heavily regulated and are not available for over-the-counter purchase, as adult-use cannabis is in much of the country.
Some legal experts have suggested that a new Cole Memo-style guidance from the Department of Justice could rectify that, at least temporarily. The Cole Memo was a policy document issued by the DOJ in 2013 after Colorado and Washington state legalized recreational marijuana, outlining certain standards by which the DOJ would remain hands-off and not raid state-licensed cannabis companies. But the Cole Memo and other cannabis policy documents were rescinded during the Trump administration in 2018 by then-Attorney General Jeff Sessions.
U.S. Rep. Earl Blumenauer, a Democrat from Oregon who co-chairs the Congressional Cannabis Caucus, said during a press availability Tuesday evening that he believes a new version of the Cole Memo is inevitable, and that it may be expanded from the original 2013 version to better flesh out federal policy toward state-level cannabis markets.
Blumenauer also predicted that the rescheduling move will have “a domino effect” that will lead to the passage in Congress of more substantial marijuana legislation. That includes the SAFER Banking Act, which is aimed at normalizing relations between cannabis companies and financial institutions despite the legal tension undergirding the industry, Blumenauer said.
“I think SAFE Banking is going to follow very quickly, and that will have a huge impact” on the U.S. marijuana industry, Blumenauer said.
But Blumenauer and the other co-chair of the caucus, California Democratic U.S. Rep. Barbara Lee, emphasized that they and their allies are not done with cannabis reform by a long shot.
Rather, they won’t be satisfied until marijuana is removed from the list of controlled substances altogether, a shift activists call “de-scheduling,” which would federally legalize marijuana and put cannabis companies on the same playing field as alcohol and tobacco.
“This is a welcome step. It’s a major step. But it’s not the last step,” Lee said. “Definitely, we’ve got to keep fighting for de-scheduling.”
Attorney Shane Pennington recently cautioned, however, that even the new proposed rule from the DEA only launches a lengthy process, which he predicted will also involve litigation by cannabis opponents who will be intent on derailing the rescheduling process.
“If you look back at recent times there have been hearings, just the pre-conference litigation … filled 15 volumes of records and took two years to complete,” Pennington told Green Market Report earlier this month. “Then you had more years of (administrative law judge) hearings. Then you had litigation in federal court. And if you think this isn’t going to get litigated, I don’t know what you’re smoking.”
“My point is simply, no matter how you slice it, we have a very long way to go,” Pennington said.
Regardless, the rescheduling move has been hotly anticipated for months by the U.S. cannabis industry, much of which sees the shift as a gateway to additional capital and investment dollars.
