Marijuana Rescheduling: What does this mean for me and my cannabis business?

Earlier this week, the Associated Press reported that the DEA would reclassify marijuana as a less dangerous drug and ease some federal restrictions. While this has been accurately reported as one of the biggest shifts in modem American drug policy, the question remains, “What does this mean for me and my cannabis business?”  In this blog, we address that question and many other questions surrounding this landmark announcement.

What does the rule do?

As reported by the Associated Press, “Attorney General circulated a proposal to reclassify marijuana from Schedule I to Schedule III.”  According to the Drug Enforcement Agency, “DEA,” “Schedule III drugs, substances, or chemicals are defined as drugs with a moderate to low potential for physical and psychological dependence. Schedule III drug abuse potential is less than Schedule I and Schedule II drugs but more than Schedule IV. Some examples of Schedule III drugs are products containing less than 90 milligrams of codeine per dosage unit (Tylenol with codeine), ketamine, anabolic steroids, and testosterone.”

Unlike Schedule I drugs, Schedule III drugs do have accepted medical value and can be researched more efficiently. Additionally, moving Marijuana from Schedule I to Schedule III would eliminate the applicability of Section 280E of the United States Tax Code to State-legal cannabis businesses.

“Reclassifying Marijuana from Schedule I to Schedule III would probably eliminate 280E which is the top issue that our clients in the cannabis space face today.  We are excited for the probability of this development happening and will continue to track the updates as well as collaborate with attorneys who are well-versed on this subject.  We regularly speak with our clients about what this means to them and the potential ramifications on current and future filings.” – Cory Parnell, CEO of BGM

However, it is important to note that while it may help with removing the applicability of 280E, changing Marijuana’s schedule status does not make state-authorized marijuana sales federally legal. In order for state-authorized marijuana sales to be federally legal, businesses would need to comply with all applicable requirements of the Federal Food Drug and Cosmetic Act for Schedule III drugs. At a minimum, this would require Marijuana to be federally approved as a drug and for businesses to become registered with the DEA. Within the industry, it is not expected that either of these could be accomplished quickly. For starters, Marijuana is a botanical substance that varies in quality and consistency. This botanical nature of Marijuana makes it very unlike typical drugs that are approved by the Food and Drug Administration and may require new rules before the process can even begin. Additionally, many businesses would currently not meet the policy and procedure requirements necessary to become a federally legal dispenser of Schedule III drugs even if Marijuana was approved. This would particularly be true in the twenty-four states that allow for Adult-Use marijuana purchases, as Schedule III drugs require a prescription to be dispensed legally under federal law.

Despite the potential roadblocks that lay ahead for Marijuana on the road to full federal legalization, the potential financial impact of the removal of 280E and the growing public support have generated unprecedented optimism in the cannabis industry.

When Will this Rule Take Effect?

Currently, the rule is in the hands of The White House Office of Management and Budget, which has up to 90 days to approve the proposed rule. Once the Office of Management and Budget approves, the rule will go back to the DEA for notice and public comment. The DEA will be required to hold a 30-to-90-day public comment period where members of the public are allowed to ask questions or make comments about the proposed rule. Once the public comment period ends, the DEA will be obligated to respond to every comment. There is no statutorily defined timeline for how long the DEA may take to respond to comments. After responding to comments, the DEA may publish the final rule. The final rule will then become law effective 30 days after the publication unless legal challenges are filed.

Rely on our Cannabis Industry Expertise and Experience

Are you interested in the cannabis market? BGM and Bridge West Consulting are at the forefront of providing expert cannabis industry advice and guidance in this complex and ever-changing field. Whether you’re a budding entrepreneur, a seasoned investor, or simply curious about the industry, our cannabis industry team has significant experience. It is well-equipped to help you navigate the landscape with confidence and strategic insight. Reach out to us today, and let’s cultivate your success in the cannabis market together.