February 6, 2024

The Federal Government Considers Rescheduling Cannabis

February 6, 2024

In a significant development in U.S. cannabis policy, the federal government is poised to make a monumental change to marijuana regulations that could reshape the landscape of cannabis use, business operations, and legal frameworks. After nearly a century of prohibition and strict control, a move to reschedule marijuana under the Controlled Substances Act is on the horizon, marking the most considerable stride towards legalization at the federal level since cannabis was first banned.

President Biden’s Initiative and HHS Recommendation

This potential policy shift follows President Joe Biden’s directive in October 2022 to the Department of Health and Human Services (HHS) to review marijuana’s scheduling. In August, the HHS recommended that marijuana be rescheduled from Schedule I to Schedule III, indicating a drug with a moderate to low potential for dependence. Schedule I drugs are currently deemed to have no accepted medical use and a high potential for abuse, a category that includes heroin and LSD. Rescheduling to Schedule III, which includes substances like ketamine and anabolic steroids, would acknowledge marijuana’s medical value and lower its abuse potential according to the federal viewpoint.

Implications for Cannabis Businesses

The implications of this federal cannabis rescheduling are vast. For cannabis businesses, it could lift the heavy tax burdens imposed by Section 280E of the IRS tax code, which currently prohibits businesses dealing in Schedule I or II substances from deducting ordinary business expenses. This change could significantly reduce the financial strain on these businesses, making cannabis products more competitively priced against the illicit market. In 2022 alone, cannabis businesses paid an additional $1.8 billion in federal taxes compared to “ordinary businesses,” with expectations for this figure to rise to $2.1 billion in the current year.

Debate Over Rescheduling vs. Descheduling

However, critics argue that rescheduling is not enough. It’s seen as a modest step that would still leave cannabis illegal at the federal level, thus continuing the conflict between federal and state laws where cannabis is legal in some form. Advocates for cannabis reform argue that the ultimate goal should be descheduling (see cannabis entirely, removing it from the Controlled Substances Act to resolve these conflicts and pave the way for full legalization.

Anticipation and Speculation on DEA’s Announcement

There’s also speculation around the timing of the Drug Enforcement Administration (DEA)’s announcement on this matter, with industry insiders suggesting it could happen as early as March. This anticipation is built on the backdrop of the DEA’s silence since the HHS’s recommendation last August, despite calls from Congress members for complete legalization over reclassification. The rescheduling process includes a 60-day public comment period following the DEA’s proposal, leading to potential litigation from opponents of cannabis reform. This process’s timing is crucial, as it could influence the political landscape ahead of the November election and play a significant role in Biden’s potential reelection campaign.

The Broader Impact of Rescheduling Marijuana

While federal cannabis rescheduling would not solve all the issues surrounding cannabis in the U.S., it is viewed as a significant step toward recognizing the drug’s medical benefits and reducing the federal government’s harsh stance against it. This move is also symbolic of broader shifts in societal attitudes towards cannabis, reflecting a growing acceptance and calls for reform in drug policy at the national level.


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