Four sources with knowledge of the decision said that the Biden administration will soon announce an interim rule reclassifying cannabis for the first time since the Controlled Substances Act was passed more than 50 years ago, marking a historic step toward easing federal restrictions on the drug.
The Department of Health and Human Services has recommended that marijuana be moved from the most restrictive Schedule I to the least restrictive Schedule III, and the Drug Enforcement Administration is expected to adopt this recommendation. For the first time, the American government would be recognizing its possible medical benefits and starting to investigate them seriously.
A person with knowledge of the matter said that Attorney General Merrick Garland sent the rescheduling suggestion to the White House Office of Management and Budget on Tuesday afternoon.
It will still be months before any reclassification takes effect. The public comment period for the proposal will last for sixty days following its publication in the Federal Register. After reviewing the proposal, an administrative law judge may opt to convene a hearing before the rule’s approval.
What rescheduling means
Marijuana has been classified alongside heroin, methamphetamines, and LSD since 1971. All drugs included in Schedule I are classified as having a significant potential for misuse and no recognized medicinal value. Steroids, testosterone, and Tylenol with codeine are examples of Schedule III substances.
Cannabis would be rescheduled so that it could be thoroughly examined and investigated to determine its specific medicinal benefits. This would allow pharmaceutical companies to begin selling and distributing medical marijuana in states where it is legal.
In addition to removing major tax burdens for businesses operating in states where cannabis is legal, the move would also benefit the $34 billion cannabis industry. Section 280E of the IRS code would no longer apply, preventing legal cannabis companies from deducting expenses that would otherwise be considered ordinary business expenses.
The Justice Department’s decision to reschedule may also contribute to a reduction in the black market, which has flourished despite legalization in states like California and New York and has outperformed the heavily taxed and strictly regulated legal markets.
Years in the making
In October 2022, President Joe Biden issued a directive to the Department of Health and Human Services to reconsider the classification of marijuana. Federal experts came to the conclusion that, compared to other banned substances, cannabis poses less health dangers and has credible medical benefits.
This year, during his State of the Union speech, Biden even made history by mentioning marijuana from the House chamber dais and mentioning the federal review procedure for the first time. He declared, “No one should be imprisoned for using or having marijuana.”
The White House opposed marijuana legalization when Biden served as vice president in the Obama administration, claiming that it would “pose significant health and safety risks to all Americans.”
The renowned Cole Memo, which was penned in 2013 by Jim Cole, the Obama administration’s deputy attorney general, helped to establish the framework for the contemporary marijuana industry. As long as states had “strong and effective regulatory and enforcement systems to control the cultivation, distribution, sale, and possession of marijuana,” the memo reduced federal intervention in places where marijuana use was legal.
Reclassifying marijuana to Schedule III would “open up the ability to actually test it and put it in a laboratory without all of the restrictive measures” of a Schedule I drug, according to Cole, who is now a member of the National Cannabis Roundtable, who stated as much in an interview this week.
Reclassifying marijuana is “the result of a politicized process,” according to Kevin Sabet, president and CEO of Smart Approaches to Marijuana and a former adviser to the Obama administration. He claimed that it “will be devastating for America’s kids, who will be bombarded with attractive advertising and promotion of kid-friendly pot products.”
“The only winner here is the marijuana industry, which will receive a new tax break and thus widen their profit margins,” Sabet said. “Reclassifying marijuana as a Schedule III drug sends the message that marijuana is less addictive and dangerous now than ever before. In reality, today’s highly potent, super-strength marijuana is more addictive and linked with psychosis and other mental illnesses, IQ loss and other problems.”
Concerns have been voiced by researchers regarding the potential for high-potency marijuana and cannabis to cause psychological illnesses, especially in young men.
Some challenges ahead
The marijuana sector would benefit immediately from the DEA’s formal pronouncement. However, a public review period that coincides with the DEA’s proposed rule change may result in a challenge to, or maybe a modification of, the rescheduling proposal.
Under the Congressional Review Act, which grants Congress the authority to comment on rules issued by federal agencies, Congress would also be able to reverse the rule after the public comment period has ended and the Office of Management and Budget has reviewed the decision. With a 51-seat Democratic majority in the Senate, an overturn under the CRA would require the backing of two-thirds of both chambers, which suggests that the marijuana rescheduling would probably hold.
While marijuana reforms continue to enjoy bipartisan support, the electorate has played a major role in driving this trend, even though cannabis remains a contentious issue on Capitol Hill. According to a Pew Research survey conducted last month, about 60% of Americans believe that marijuana should be allowed for both medical and recreational use. Twenty-four states have legalized cannabis for recreational use.
Congress is considering its bills
Congress is debating its proposals that would facilitate the growth of legal marijuana companies and open the door for an influx of small and minority-owned enterprises into the industry.
By the end of the year, both chambers may approve the SAFER Banking Act, for instance, which would allow legal marijuana companies to access standard banking and financial services.
Another bipartisan initiative called the HOPE Act is also being debated by lawmakers. It would provide state and municipal governments the authority to automatically remove criminal records for minor, nonviolent cannabis infractions.
Additionally, a Democratic-only initiative aims to fully remove cannabis from the Controlled Substances Act, giving states the authority to enact their cannabis laws and give priority to economic justice and restorative care for individuals impacted by the “war on drugs.”
The administration’s action was applauded by Senate Majority Leader Charles Schumer, D-N.Y., who said that it amounted to “finally recognizing that restrictive and draconian cannabis laws need to change to catch up to what science and the majority of Americans have said loud and clear.”
Meanwhile, he declared that he is “strongly committed” to advancing the Democratic bill that would completely remove cannabis off the Controlled Substances Act as well as the SAFER Banking Act. In a statement, he added, “Congress must do everything we can to address the long-standing harms caused by the War on Drugs and end the federal prohibition on cannabis.”
While applauding the administration’s action, Sen. Cory Booker, a Democrat from New Jersey, emphasized that “we still have a long way to go.”
Booker called on Congress in a statement to “follow the lead of states around the country and legalize cannabis for adult-use and create a comprehensive taxation and regulatory scheme.”
“Thousands of people remain in prisons around the country for marijuana-related crimes. Thousands of people continue to bear the devastating collateral consequences that come with a criminal record,” he said. “Legal marijuana businesses, especially those in communities hardest hit by the War on Drugs, still have to navigate a convoluted patchwork of state laws and regulatory schemes. I hope that my colleagues on both sides of the aisle, especially those who represent constituents benefitting from medical or adult-use programs, join me to pass federal legislation to fix these problems.”
However, members who recall the last time Congress passed a drug-related measure are getting a little tired.
In the 2018 agricultural bill, the Republican-led Senate approved hemp growing. This decision opened the door for the over-the-counter, frequently unregulated sale of synthetic and exotic cannabinoids, especially in states where marijuana is illegal.
It’s a murky area that has faced opposition from both parties, most notably with the emergence of Delta-8, a synthetic tetrahydrocannabinol product that turns CBD generated from hemp into Delta-8 THC by using chemicals, some of which are hazardous.
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