Major Shift in U.S. Cannabis Policy on the Horizon

LOS ANGELES– On Monday, the U.S. Department of Health and Human Services under the Joe Biden administration formally recommended to its counterparts at the Department of Justice that cannabis be moved lower on the list of federally controlled substances, from Schedule 1 to Schedule 3, Bloomberg reported Wednesday.

Such a move indicates a significant step toward cannabis legalization in the United States. Schedule 1 is earmarked for drugs deemed to have “no currently accepted medical use,” like heroin. In contrast, Schedule 3 drugs, which encompass substances like ketamine, Tylenol with codeine, and certain anabolic steroids, are recognized as having “a potential for abuse” and “may lead to moderate or low physical dependence.” This classification permits these drugs to be more accessible to medical patients.

HHS Assistant Secretary for Health, Rachel Levine, conveyed this recommendation in a letter sent on August 29 to Drug Enforcement Administration chief Anne Milgram, as reported by Bloomberg. Levine highlighted the Food and Drug Administration’s analysis of eight distinct factors determining cannabis’s position on Schedule 1, leading to the conclusion that Schedule 3 was a more appropriate classification.

The National Institute on Drug Abuse supported this view, as Levine documented.

In communication with Green Market Report, an HHS spokesperson confirmed, “Following the data and science, HHS swiftly responded to President Biden’s directive to HHS Secretary Becerra, providing its scheduling recommendation for cannabis to the DEA on August 29, 2023.”

Though the HHS has finalized its part, the next phase rests with the DEA. This agency will conduct an internal review before submitting its recommendation to Attorney General Merrick Garland, who holds the final decision-making authority on whether cannabis is rescheduled, de-scheduled, or remains on Schedule 1.

Insiders in the political landscape of D.C. speculate that the Biden administration might seek resolution before the 2024 elections. Some anticipate rescheduling could transpire this year or early next.

Biden initiated this wave of reform last October. Not only did he pardon several federal cannabis convicts, but he also commissioned a review of cannabis’s scheduling status. Since then, numerous stakeholders in the cannabis industry have tried influencing Biden administration officials, advocating for de-scheduling. Their efforts, however, seem to have garnered limited traction.

Public cannabis companies experienced a surge in their stock values upon the news of the rescheduling recommendation. Some significant upticks included:

• BI Global Cannabis Competitive Peers index: +11%
• Columbia Care Inc.: +29%
• Ayr Wellness Inc.: +28%
• Verano Holdings Corp.: +20%
• Green Thumb Industries Inc.: +18%
• Cresco Labs Inc.: +13%

If the DEA proceeds with the rescheduling to Schedule 3, the 280E tax provision, a significant burden for cannabis companies, would be rendered null. This shift would permit companies in the industry to claim standard business tax deductions on their federal returns, leading to substantial savings.

Moreover, rescheduling could facilitate public cannabis companies to be listed on premier exchanges like the Nasdaq and the New York Stock Exchange. This prospect is something industry leaders have eagerly anticipated for years.

Glass House Brands CEO, Kyle Kazan, in a conversation with Green Market Report, opined, “The floodgates of money will open up” if the rescheduling becomes a reality.

However, the journey toward comprehensive cannabis reform isn’t devoid of hurdles. Rescheduling to Schedule 3 might leave numerous legal quandaries unresolved between federal governance and states with recreational cannabis markets. Many activists still aspire for complete federal legalization and total de-scheduling of cannabis.

Yet, the sentiment among many in the industry remains positive. “It’s about damn time,” expressed Verano CEO George Archos, adding to the rising chorus of commendation for the Biden administration’s steps.

Brady Cobb, Sunburn Cannabis CEO, labeled the move as “the most monumental moment the cannabis reform movement has witnessed during the 70-plus-year battle against the prohibition of the cannabis plant.”

The U.S. Cannabis Council viewed this development as an emblematic termination of the long-standing war on drugs, terming it a triumphant moment for stakeholders across the spectrum.

“Rescheduling to Schedule 3 marks the most revolutionary federal cannabis reform in contemporary history,” declared the USCC. The council fervently urged the DEA to expedite the rescheduling process, bringing this historic reform to fruition.