The Justice Department confirmed yesterday that the Drug Enforcement Administration (DEA) plans to move marijuana from Schedule I of the Controlled Substances Act (CSA), a list of completely prohibited drugs, to Schedule III, which includes prescription drugs such as ketamine, t Novocodeine and anabolic steroids. The Associated Press noted that the change was based on an August 2023 recommendation from the U.S. Department of Health and Human Services (HHS) following a review ordered by President Joe Biden in October 2022 that “no Fully legalize marijuana for recreational use.
That’s by no means the only thing that rescheduling cannabis can’t do. Biden wants to take credit for “marijuana reform,” which he hopes will help motivate young voters whose turnout could be crucial to his reelection. The DEA’s announcement appears to be an effort to maximize its electoral impact. But voters shouldn’t be fooled: While adding marijuana to Schedule III would boost medical research and provide economic growth for the marijuana industry, federal marijuana prohibition would be largely unaffected.
Rearranging marijuana use does not resolve the conflict between the CSA and the laws of the 38 states that recognize marijuana as a drug, 24 of which also allow recreational use. Under federal law, state-licensed marijuana businesses will remain criminal enterprises, putting them at risk of prosecution and seizure. While annually updated disbursement riders protect medical marijuana providers from these risks, prosecutorial discretion is the only factor that protects businesses serving the recreational market.
Even with a state license, a marijuana vendor would be in the same legal position as anyone selling a Schedule III drug without a federal license. Unauthorized distribution is punishable by up to 10 years in prison for a first offense and up to 20 years in prison for a subsequent offense. That’s less severe than current federal penalties for cultivating or distributing marijuana, which include mandatory minimum sentences of five, 10 and 20 years, depending on the quantity or quantity of marijuana plants. But distributing marijuana remains a felony with or without a state license.
This reality suggests that banks will remain wary of providing financial services to state-licensed cannabis vendors, which could carry the risk of potentially devastating criminal, civil and regulatory penalties. The lack of financial services forces many cannabis vendors to rely heavily on cash, which is cumbersome and puts them at higher risk of robbery. This also makes it difficult to invest in business expansion.
While federal arrests for marijuana possession are rare, marijuana consumers still commit crimes, even if they live in a state that has legalized marijuana. Pursuant to 21 USC 844, possession of a controlled substance without a prescription is a misdemeanor punishable by a fine of at least $1,000 and up to one year in prison. Adding marijuana to Schedule III does not change the law, only Congress can do that. President Joe Biden is offering mass pardons to people convicted of marijuana possession under the statute, which only applies retroactively and does not “decriminalize the use of marijuana,” as he promised during the 2020 campaign.
Biden has repeatedly decried the barriers marijuana criminalization poses to education, jobs and housing. But contrary to what he claimed, his pardon did not mean expungement of criminal records and therefore did not remove those obstacles. The pardons also do not address the various legal barriers associated with marijuana convictions, marijuana consumption or participation in the marijuana industry, including loss of Second Amendment rights (a policy Biden defends) and ineligibility for immigration entry, legal residence and citizenship law. Re-scheduling marijuana use will also not remove these barriers and obstacles.
Adding cannabis to Schedule III doesn’t even make it legal for use as a drug, which requires regulatory approval of the specific product. Doctors can legally prescribe Marinol (also known as dronabinol) (a synthetic version of THC listed on Schedule III) and Epidiolex (a hemp-derived CBD solution listed on Schedule V). They also cannot prescribe marijuana III unless the Food and Drug Administration approves other marijuana-based drugs.
Medical “advice” under state law authorizing patients to use marijuana to relieve symptoms is not a prescription, and their use does not comply with the CSA’s regulations. So not only would rescheduling the use of marijuana not legalize recreational use; It would also not legalize medical use.
What will Reschedule? It should provide important benefits to state-licensed cannabis suppliers by making it easier to conduct medical research by eliminating regulatory requirements unique to Schedule I and allowing them to deduct standard business expenses when paying federal income taxes.
Under Section 280E of the Internal Revenue Code, a taxpayer cannot claim a “deduction or credit” for “any amount paid or incurred in the conduct of any trade or business during the taxable year,” a provision designed to impose it on drug traffickers. “Trafficking” in Schedule I or Schedule II drugs. Since the rule has been interpreted by the Tax Court, cannabis businesses can still deduct “cost of goods sold,” which counterintuitively means they can deduct expenses associated with acquiring and maintaining an inventory of cannabis products. But they can’t deduct any other business expenses, including rent, utilities, wages and benefits, office supplies, security, cleaning services, insurance and legal fees.
The regulation creates a heavy financial burden, forcing cannabis retailers to pay effective tax rates of up to 70% or higher. But since Section 280E only applies to businesses selling drugs in Schedule I or Schedule II, moving cannabis to Schedule III would eliminate this disadvantage.
“I cannot stress enough that removing § 280E will change the entire industry. foreverMarijuana attorney Vince Sliwoski writes. Problems such as bankruptcy are even more serious. This will be huge. .
Beyond these practical changes, the rescheduling represents a historic shift in federal thinking about the benefits and harms of marijuana. Presumably, Schedule I is reserved for drugs with a high potential for abuse and unacceptable medical uses that cannot be used safely even under the supervision of a physician. In explaining its rationale for recommending reclassification of marijuana, the U.S. Department of Health and Human Services acknowledged that the drug does not meet those standards — a point critics have been making for half a century.
The U.S. Department of Health and Human Services cited “solid scientific support” for marijuana’s use in treating pain, nausea and vomiting, and “anorexia associated with medical conditions.” Regarding abuse potential and safety, it noted that cannabis compares favorably with “other drugs of abuse” such as heroin (Schedule 1), cocaine (Schedule 2), diazepam and benzodiazepines such as alprazolam (Schedule 1). Table 4) and alcohol (out of the schedule) are more favorable. The U.S. Department of Health and Human Services states that “the vast majority of people who use marijuana do not cause dangerous consequences to themselves or others.”
In agreeing to follow HHS’s recommendations, the DEA similarly implicitly acknowledged that the federal government has been lying about marijuana for decades. But this long-overdue reversal falls far short of resolving the core issue with marijuana today: the conflict between federal prohibition and state tolerance that extends to recreational use in jurisdictions that make up the majority of the U.S. population. Repealing federal prohibition—a step Americans overwhelmingly support—would resolve this conflict. While Biden cannot do this alone, he has stubbornly resisted the idea even as he emphasized the irrationality and injustice of the war on marijuana.
