Last week, The Drug Enforcement Administration (DEA) made the historic decision to move marijuana from Schedule I to Schedule III under the Controlled Substances Act (CSA). Even though marijuana is still federally illegal, this is an instrumental decision that can still help the industry in a variety of ways.
“This is a historic moment and will have a large and meaningful impact on both large and small cannabis operators,” said Brian Vicente, Founding Partner, Vicente LLP. “It really can’t be understated — it’s an incredibly important business change and policy shift that can accelerate descheduling all together.”
A few days after the rescheduling notice, Vicente LLP hosted a webinar explaining what this means for the industry and how both consumers and businesses will be impacted. We’re sharing a brief breakdown of the webinar here.
What Rescheduling Marijuana Will and Won’t Do
If you’re wondering who and what marijuana rescheduling impacts, Shawn Hauser, Partner at Vicente LLP, gave a thorough explanation. Marijuana rescheduling will:
- Recognize the medical use and safety of cannabis, which will ultimately earn greater public and government support.
- Maximize the achievable outcome from an administrative process.
- Move the country away from prohibition, which has devastated countless lives.
- Remove cannabis from the purview of IRS tax provision 280E.
- Provide momentum and grounds for Congress to pursue descheduling and regulation.
“This is the biggest step forward in federal policy within the last decade,” Hauser said. “Descheduling was not likely to happen in this administrative process, but without President Biden, we wouldn’t have even gotten this far. By establishing the legitimacy of cannabis, it can better influence legislative leaders across the nation.”
While rescheduling marijuana from Schedule I to Schedule III can bring a lot of good, Hauser also broke down some aspects of the industry that will not change as a result of this move:
- Rescheduling will not decriminalize cannabis or fully achieve criminal justice reform goals.
- It doesn’t remove problematic research barriers.
- It does nothing to change current FDA or DEA enforcement policies.
- It doesn’t make state operations legal.
Interstate Commerce and FDA Oversight
Since marijuana is still federally illegal, rescheduling will not legalize interstate commerce for existing businesses, explained Andrew Livingston, Director of Economics & Research at Vicente LLP. In order for interstate commerce to commence, products need to be FDA compliant.
“Cannabis will still be classified as a controlled substance under federal law and states could continue to prohibit interstate transfers along with the sale of federally illegal cannabis products,” said Livingston. “Rescheduling may create pressure to issue a new enforcement memo which could be expanded to include interstate commerce, border enforcement and international investors.”
For the past few years, the FDA has been cracking down on cannabis manufacturers for deceptive packaging that mimics the look of candy and snack brands popular with children. Livingston suggested that the organization will continue to do so, as well as focus on unlawful medical claims.
What Happens Next?
Many have been left wondering what the next process is for rescheduling marijuana. Jason Adelstone, Senior Associate at Vicente LLP, explained that we are now in the proposed rulemaking stage. Until 30 days after a final rule is published, and pending a court’s intervention, marijuana will remain a Schedule I drug.
“The DEA has sent the Office of Management and Budget (OMB) the proposed rule,” said Adelstone. “The OMB has up to 90 days to review the proposed rule and send it back to the DEA with its determination.”
Once the DEA has the proposed rule, they will then publish it in the federal register and provide a 30-to-90 day comment period. During this time, the DEA may also grant an administrative law hearing. Once the comment period concludes, the DEA will then review all of the information submitted and make its final determination.
“There is no statutory requirement on how long this review will take, so it could be a year or two until we see something,” noted Adelstone. “The final rule becomes effective 30 days after its publication.”
