Cannabis rescheduling faces uphill battle, but DEA decision expected soon

Rescheduling could languish in court if money doesn't brick behind its support.

The U.S. Department of Health and Human Services’ proposal to reclassify cannabis from a Schedule I to a Schedule III substance under the Controlled Substances Act faces an uncertain effective date due and potential legal battles.

The recommendation, if approved by the Drug Enforcement Administration, would shift cannabis into a category that recognizes its medical benefits and lower potential for abuse versus Schedule I substances. The reclassification could impact several legal and economic aspects of the industry in major ways, but it likely faces delays from opposition and court proceedings.

“I think that the whole industry thinks that ‘Oh, HHS has given its recommendation and now the DEA is going to approve it, they’ll issue a rule and we’ll all be good,’” said Sally Peebles, lead southern counsel for Vicente. “And that’s just not the case.”

The timeline for the proposed change remains unclear. According to the process, once the DEA reviews and endorses the HHS recommendation, a proposed ruling will be filed in the Federal Register, which is expected to initiate a 60-day public comment period.

Peebles noted that during the comment period, opposition groups may request a hearing before an administrative law judge. The DEA would then need to issue its final ruling, with the reclassification effective 30 days later.

However, if the decision is appealed, the timeline could be extended for further judicial review.

Money talks

In the best-case scenario, the effective date could be as early as 90 days after the DEA’s initial ruling. But, according to a memo by consulting firm GreenWave Advisors, that too is subject to change.

“Unless the industry mobilizes and funds attorneys and policy advisors to get this done, then this isn’t going to get done,” Peebles added. “Because the opposition to marijuana being rescheduled is huge, and they are well financed.”

The HHS recommendation went a long way toward reevaluating cannabis policy in the U.S. following President Joe Biden’s 2022 directive to review the drug’s federal classification.

With a majority of states having legalized medical marijuana and a growing number permitting recreational use, the reclassification is seen as a step towards aligning federal policy with state laws and public opinion.

Still, the legwork behind trading legal barbs with those who oppose the industry can cost lots of money.

The potential reclassification is expected to have significant financial implications for the cannabis industry, particularly by removing the 280E tax burden, which would improve cash flows and attract more investors.

The sweeping effect on entire company valuations could be swift, too. Full federal legalization, which would address issues like interstate commerce, remains a separate and more complex issue.

Adam Jackson

Adam Jackson writes about the cannabis industry for the Green Market Report. He previously covered the Missouri Statehouse for the Columbia Missourian and has written for the Missouri Independent. He most recently covered retail, restaurants and other consumer companies for Bloomberg Business News. You can find him on Twitter at @adam_sjackson and email him at adam.jackson@crain.com.


6 comments

  • Jason W White

    February 1, 2024 at 9:08 pm

    This is an a-men moment to me. Alcohol is worse then cannabis.

    Reply

  • Alvin

    February 1, 2024 at 11:38 pm

    It is totally against the US Constitution for an enforcement branch to be able to write the law that it is to enforce. That’s a direct violation of the separation of powers of the three branches of government! The sole power of laws that are enforced must be written by the legislators otherwise they are deemed not valid. The legislation can be written to remove all criminal penalties thus making it legal such is their power. The DEA has the power to enforce the law as written not to make the law that they enforce!

    Reply

    • JR

      February 2, 2024 at 1:49 pm

      I thought that only Congress has the power to write legislation…

      Reply

  • Joseph mcknight

    February 2, 2024 at 4:39 pm

    Schedule 1 definition: Class of addictive drugs with a LETHAL dosage and NO history of medical use.

    Cannabis aka marijuana has been around for years there are 100s of published reports proving it’s medical benefits. With NO deaths asprin kills more people a year than cannabis had in the history of mankind..

    Keeping it illegal is just proving that the government will lie.. FENTYNAL IS A LOWER CLASS THAN MARINIANA?!

    TAX AND LEGALIZE IT Already I dont even use cannabis and I believe it should be legal and taxed use the money for schools and community

    Reply

  • Brent Churches

    February 2, 2024 at 7:43 pm

    The Feds can’t stand to see states that made it legal getting tax massive tax dollars and them not. They just can not wait to get their greedy hands on more money to waste, this is going to be fast tracked to happen.

    Reply

  • Bruce

    February 3, 2024 at 8:41 am

    The president should say hey if you don’t declassified marijuana I will do away with the DEA all the gather there are being ridiculous and bull headed about rescheduling pot

    Reply

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