August closed with a bang after the US Department of Health And Human Services (HHS) announced its recommendation to reschedule cannabis from its current Schedule I to Schedule III status. The announcement fulfills a recent HHS promise to complete the task by the end of the year. The recommendation now moves to the US Drug Enforcement Agency (DEA), which will decide its fate.
If the DEA approves, rescheduling would drastically change cannabis in many ways.
Currently, the plant is considered a substance with a high potential for abuse. It also has no accepted medical use, according to US regulators.
Under Schedule III, cannabis would be classified as a substance with an accepted medical use that may produce low to moderate physical or psychological dependence.
What Rescheduling Could Do for Cannabis in America
Rescheduling cannabis could open a world of assurances and possibilities for the plant. They include:
Change in Government Approach
The most significant impact could be that the US government admits that cannabis has medical potential, nor does it have a high potential for abuse. If approved, cannabis would no longer be classified as a highly addictive drug with little to no benefit.
If moved to Schedule III, cannabis would join substances such as anabolic steroids, testosterone, and ketamine. The reclassification may be a significant win on the surface. But, many advocates and legal experts have pushed back, with several sources feeling that rescheduling will continue the plant’s prohibition.
Increased Medical Research
One of the most significant changes from rescheduling could be increased clinical access and improved cannabis research. Schedule I drugs are up against substantial research barriers, including strict regulations and limited access to research material. Under the current law, cannabis can only be sourced through government-approved channels.
Schedule III would mean less strict research regulations. Additionally, researchers would gain greater access to cannabis for research and increase funding opportunities. With lowered barriers, the public will likely better understand the plant from a clinical perspective, allowing US researchers to explore years of anecdotal feedback and lingering uncertainties at a greater volume and depth.
Business Relief
Cannabis operators could see significant changes to their businesses’ operations if cannabis is rescheduled. Finding profitability has been the albatross hanging above the industry for years now. After years of being unable to operate in the black, many in the business sector feel that rescheduling could be the remedy.
Much of the struggle stems from IRS federal tax code 280E. The provision, founded in 1982, is intended to prevent companies involved in trafficking illegal drugs or substances from using federal tax deductions on standard business expenses, including rent, staff salary, branding-related purposes and many other crucial business functions.
The ripple effect of 280E leads to higher tax liabilities for businesses. It also places properties and employees at an elevated risk of theft or bodily harm. Credit payments are prohibited under 280E, meaning companies must operate as cash-only operations. Often, cash is stored on-site or at secure holding facilities, making these sites and the employees inside significant targets for robberies.
Some may believe rescheduling cannabis would eliminate all the concerns with 280E out of the picture. While businesses would undoubtedly face a lower tax liability, it’s uncertain if credit payments would be permitted–with it believed that a bill like the SAFE Banking Act would need to pass to ensure greater payment and banking access.
Potentially More FDA-Approved Drugs
The US Food And Drug Administration (FDA) has approved three cannabis or synthetic cannabis-based drugs for medical treatment: Epidiolex, Marinol and Syndros. These medications are specific to either rare forms of epilepsy or chemotherapy-related nausea and vomiting symptoms.
If rescheduling were to occur, the US could soon see a flurry of additional approved medications for various conditions. Increased access to research could fuel further understanding regarding how the plant and its products react to human bodies, potentially leading to more FDA-approved cannabis-based medications.
The outcome is not guaranteed, but many are holding out hope, as it is believed that cannabis can address various conditions and symptoms.
What Rescheduling Won’t Do
Legalize State Programs
Rescheduling would not affect state-level laws. While a significant policy change on the federal level could sway some states to take action, states would not be compelled to alter their rules or programs under any rescheduling decision.
Additionally, legalized state markets wouldn’t be affected by the decision. If rescheduled, legalized state cannabis programs would still be able to exist and operate as their laws state.
Up for Debate?
Legalize Interstate Commerce
Currently, cannabis brands cannot ship products across state lines. This limitation presents a problem for growing brands. If a company wanted to move products from its Texas headquarters to Louisiana, Arkansas, Oklahoma, New Mexico or beyond, it would need to obtain licensing in that state and set up an entirely new company, facility and team. Otherwise, they violate US interstate cannabis commerce laws and face steep fines and possible jail time. The same rules apply whether a company wants to ship products to retail partners or its own facilities in other states.
The limitations and startup costs are staggering, often running into the six- or seven-figure range. Adding to the troubles is product quality. While many states claim to produce fine cannabis, it’s no shock that scores of brands and consumers hope for a day when their state can import products from the premier American cannabis cultivators often found in Oregon and Northern California’s Emerald Triangle.
Some businesses in states including Minnesota, Arkansas and beyond have claimed to be concerned over potential out-of-state competition. However, numerous legal experts say rescheduling will not change the current rules.
Next Steps
Many expect a DEA decision to be made sometime in 2024 before the Presidential election. Still, the agency has not provided a timeline as of Sep 12, 2023, leaving speculation to swirl.
While waiting, the public and government will continue to debate the issue, with some advocates saying that the ultimate goal is to deschedule, also known as legalize, cannabis on the federal level. On September 12, 2023, 14 Republican Congress members sent a letter to DEA Administrator Anne Milgram, requesting cannabis be kept a Schedule I drug. The letter was led by Sen. James Lankford of Oklahoma and Rep. Pete Sessions of Texas.
