Biden Administration Calls on DEA to Move Marijuana to Schedule 3

Marijuana rescheduling just got real.

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

The move is potentially the first step toward cannabis legalization in the United States, since Schedule 1 is reserved for drugs that have “no currently accepted medical use,” such as heroin, while Schedule 3 is defined as having “a potential for abuse” and “may lead to moderate or low physical dependence.” Schedule 3 drugs are easily available for medical patients, and the category includes ketamine, Tylenol with codeine, and some anabolic steroids.

The recommendation was in a letter sent on Aug. 29 from HHS Assistant Secretary for Health Rachel Levine to Drug Enforcement Administration chief Anne Milgram, Bloomberg reported. The letter also noted that the Food and Drug Administration examined eight different factors while analyzing marijuana’s place on Schedule 1, and determined that Schedule 3 was the more appropriate fit.

The National Institute on Drug Abuse concurred with that recommendation, Levine wrote.

An HHS spokesperson confirmed in an email to Green Market Report that “Following the data and science, HHS has expeditiously responded to President Biden’s directive to HHS Secretary Becerra and provided its scheduling recommendation for marijuana to the DEA on August 29, 2023.”

“This administrative process was completed in less than 11 months, reflecting this department’s collaboration and leadership to ensure that a comprehensive scientific evaluation be completed and shared expeditiously,” the spokesperson wrote, but declined to share the actual letter to the DEA.

The ball is now in the DEA’s court, since the top narcotics enforcement agency in the nation must now conduct its own internal review and then make a recommendation to Attorney General Merrick Garland, who will be the final decisionmaker on whether marijuana gets rescheduled, de-scheduled or left on Schedule 1.

While there’s no set timeline for any of the review process or deadline for when it may be finished, industry experts have been speculating for months now that the Biden administration will likely push to have a resolution before the 2024 election. Several D.C. beltway insiders have even predicted that rescheduling could take place this year or early next year.

Biden set the wheels in motion last October, when he both pardoned several thousand federal cannabis convicts and also ordered the review of marijuana’s scheduling status. Since then, there’s been a flurry of cannabis industry interests who have attempted to persuade Biden administration officials that de-scheduling is the way to go, but those arguments appear to have fallen short thus far.

Plenty of public cannabis company stocks popped when the news of the rescheduling recommendation broke, Bloomberg reported, including:

BI Global Cannabis Competitive Peers index up 11%
Columbia Care Inc. (OTC: CCHWF) (Cboe: CCHW) up 29%
Ayr Wellness Inc. (CSE: AYR.A) (OTCQX: AYRWF) up 28%
Verano Holdings Corp. (CSE: VRNO) (OTCQX: VRNOF) up 20%
Green Thumb Industries Inc. (CSE: GTII) (OTCQX: GTBIF) up 18%
Cresco Labs Inc. (CSE: CL) (OTC: CRLBF) up 13%

The rescheduling move, if completed by DEA, would nullify the impact of the 280E tax provision on marijuana companies, meaning the entire industry could begin claiming standard business tax deductions on their federal returns, saving cannabis companies untold millions in coming years.

Rescheduling could also open the doors for public companies to uplist to major exchanges such as the Nasdaq and the New York Stock Exchange, something that C-suite marijuana executives have been anxiously awaiting for years.

“I think the floodgates of money start to open up” if rescheduling to Schedule 3 becomes a reality, Glass House Brands CEO Kyle Kazan predicted in a recent interview with Green Market Report.

Rescheduling is also certain to leave many legal tensions unresolved between the federal government and states that have recreational marijuana markets, and would also fall short of what many marijuana activists desire – which is total de-scheduling and complete federal legalization.

But still, praise for the Biden administration began pouring in on Tuesday afternoon when news of the HHS recommendation broke.

“It’s about damn time,” Verano CEO George Archos said in a statement.

“As one of the nation’s fastest-growing industries employing half a million people and contributing hundreds of millions of dollars to local communities, states and economies every year, Verano is energized by the opportunity to reach its full potential and provide additional economic and social impact across the U.S.,” Archos said.

Sunburn Cannabis CEO Brady Cobb called the move “the most monumental moment the cannabis reform movement has felt during the 70-plus-year battle to end the failed war on the cannabis plant.”

Cobb added in an emailed statement, “HHS making the recommendation to reschedule cannabis from Schedule 1 to Schedule 3 is a massive step forward and validated the medicinal benefits of marijuana.”

The U.S. Cannabis Council hailed the news as a formal end to the war on drugs, and celebrated the news as a victory for marijuana stakeholders of all stripes.

“Rescheduling to Schedule 3 will mark the most significant federal cannabis reform in modern history,” the USCC said in a statement. “President Biden is effectively declaring an end to (President Richard) Nixon’s failed war on cannabis and placing the nation on a trajectory to end prohibition.”

“Rescheduling will have a broad range of benefits, including signaling to the criminal justice system that cannabis is a lower priority and providing a crucial economic lifeline to the cannabis industry by lifting the 280E tax burden,” the USCC said. “State licensed cannabis businesses of all shapes and sizes will benefit from this historic reform. We urge the DEA to proceed with rescheduling cannabis with all reasonable speed.”

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