DEA Rescheduling Call to Action

HHS Rescheduling Recommendation

In early Septemer 2023, the U.S. Department of Health and Human Services (“HHS”) recommended a rescheduling of cannabis from Schedule I to Schedule III. This could be a boon to legal, licesned cannabis operators, as it would remove the onerous tax burden of IRS tax code 280E.

While critics for HHS’s recommendation point out that rescheduling cannabis would not close the growing gap between state and federal marijuana policy, and that the vast majority of state-legal “adult use” or “recreational” cannabis transactions would remain federally illegal, moving cannabis to Schedule III would nevertheless provide significant benefits to the industry.

In particular, classifying cannabis as a Schedule III drug would mean that Section 280e of the IRC, which by its terms applies only to controlled substances on Schedules I and II of the CSA, will no longer apply to cannabis businesses. 26 U.S. Code §280E. Rescheduling would also open new avenues for research and medical uses, result in lighter criminal penalties for cannabis-related violations of the CSA, and would likely attract more investors, researchers, and entrepreneurs into the cannabis space.

It remains to be seen whether it would also attract more financial institutions, and other service providers, to the industry. If nothing else, rescheduling could also go a long way toward changing public perceptions about cannabis’s safety and medical potential, which, in turn, may help reduce stigma and increase acceptance among those who remain skeptical about its medical use.

“What rescheduling to Schedule III would mean for the cannabis industry”, Reuters, 9/12/2023

DEA Scheduling Process

Rescheduling is not a decision for HHS to make; rather, it is a responsibility of the U.S. Drug Enforcement Agency (DEA). So, how will that decision be rendered? Let’s hear what the person in charge of that agency had to say on the topic back in July, upon questioning from everybody’s friend, Rep. Matt Gaetz, about what happens next after the HHS recsheduling recommendation “work product” gets delivered to the DEA:

The way the scheduling process works under the law and the regulations is, HHS does a review, they then send it to DEA. We then do what is known as an eight factor review, there’s an opportunity for public comment as well, and so we go through that part of the process. And so, obviously, we start with what HHS has provided us, we then go through our own review and a public comment process, and then we come to a scheduling decision.

DEA Administrator Anne Milgram, July 27, 2023

So, how does the eight factor review work? According to Americans for Safe Access, the eight factors are:

1. Cannabis’ Actual or Relative Potential for Abuse
2. Scientific Evidence of the Pharmacological Effects and General Pharmacology of Cannabis
3. The State of Current Scientific Knowledge Regarding the Drug or Other Substance
4. Its History and Current Pattern of Abuse
5. The Scope, Duration, and Significance of Abuse
6. What, if any, Risk there is to the Public Health
7. Its Psychic or Physiological Dependence Liability
8. Whether the Substance is an Immediate Precursor of a Substance Already Controlled

The full report from Americans for Safe Access, “SCHEDULING CANNABIS: A PREPARATORY DOCUMENT FOR FDA’S 8‑FACTOR ANALYSIS ON CANNABIS”, is a valuable resource regarding this topic.

Public Comment Time!

The fact that there is a public comment process means that you and I could make the difference in whether this rescheduling is implemented by the DEA! Cannabis rescheduling from Schedule I to Schedule III, and the end of tax code 280E for legal cannabis businesses, could be as simple as 1,2,3!

1. Read the full Americans for Safe Access report, or at least the sections pertaining to the factor(s) most relevant to you.
2. Solidify your own position statement(s) regarding those factors in preparation for the DEA public comment period.
3. Let’s all submit comments during the upcoming DEA public comment window, and get cannabis rescheduled together!