DEA Moves to Reclassify Cannabis to Schedule III

LOS ANGELES- The U.S. Drug Enforcement Administration (DEA) is reportedly planning to reclassify cannabis from a Schedule I to a Schedule III substance under the Controlled Substances Act, a change confirmed by anonymous sources and first reported by the Associated Press. This change would significantly alter the regulatory framework affecting the cannabis industry.

Before the DEA can finalize this reclassification, the proposal must undergo a review by the White House Office of Management and Budget (OMB). Following OMB approval, a period for public comment will be observed before the DEA issues a final rule. The rescheduling effort requires establishing new regulatory frameworks, a process expected to navigate through extensive bureaucratic procedures.

The announcement has already had a noticeable impact on the financial markets, with many cannabis-related stocks experiencing significant gains. For example, some major cannabis companies saw their stock prices increase by up to 37 percent on Tuesday.

The move from Schedule I to Schedule III is poised to alleviate many of the financial and regulatory challenges currently faced by the cannabis industry. Specifically, the reclassification would modify the tax burdens imposed by Section 280E of the Internal Revenue Code, which prohibits cannabis businesses from deducting common business expenses because they are considered to be engaged in the “trafficking” of Schedule I or II substances. Additionally, reclassification is expected to facilitate cannabis companies’ access to U.S. stock exchanges and improve their banking, credit, and financial services options.

This pending reclassification of cannabis would mark a historic shift in U.S. drug policy, recognizing the medical benefits of cannabis and its lower potential for abuse compared to other substances currently listed in the same category under the Controlled Substances Act. The move represents a significant milestone for the cannabis industry, promising to reshape its market landscape.