Trump's Potential Marijuana Rescheduling: What The Industry Can Expect

President Trump is expected to issue an executive order this week that would reclassify marijuana from a Schedule I controlled substance to a less-regulated Schedule III substance under Federal law. What does rescheduling mean to marijuana customers, patients, and businesses?

Marijuana (not 'industrial hemp') is a Schedule I controlled substance under the federal Controlled Substances Act of 1970, enacted under the Nixon Administration. Like other Schedule I controlled substances (heroin, LSD, and ecstasy), marijuana is illegal to use or merely possess, and the interstate distribution of marijuana is a Federal (and State) trafficking felony. Currently, the Federal government considers marijuana to have no accepted medical use and a high potential for abuse.

Despite its Schedule I prohibitions, marijuana's growth and resilience in the U.S. is a study in persistence. In the 1970s through 2010s, Federal and local jurisdictions aggressively prosecuted illegal marijuana growers, users, and street distributors. Today, however, due to the enactment of 40 State and District of Columbia-authorized marijuana programs, U.S. marijuana sales are expected to reach nearly $50 billion in 2025 – all while the Federal government is essentially out of the marijuana enforcement business at the State level.

Recent Interest in Rescheduling

Over the past six months, President Donald Trump has indicated an interest in rescheduling marijuana to the less-regulated status of Schedule III. For example, Tylenol with codeine is a Schedule III drug. Schedule III drugs are less heavily regulated and taxed, but still subject to rigorous testing and approval by the DEA. Rescheduling would not make marijuana legal across the U.S., and the full impact of rescheduling will likely not be understood for years, due to governmental agency oversight, court actions and appeals, and political considerations.

At this time, we do not know the parameters under which the President may reschedule marijuana, but there are numerous potential consequences to moving marijuana from Schedule I to Schedule III.

Expected Benefits to Marijuana Businesses of Rescheduling. Rescheduling marijuana to Schedule III could permit marijuana businesses to:

• Claim substantial tax deductions if IRS Section 280E no longer applies to marijuana revenues as 'illegal' business.
• Publicize and advertise marijuana, as other Schedule III drug companies do.
• Form non-profit corporations and foundations for community benefit purposes.
• Sell to users who own and use guns.
• Conduct interstate commerce.

Costs to Marijuana Businesses of Rescheduling. Rescheduling marijuana to Schedule III could require marijuana businesses to:

• Obtain DEA or Food & Drug Administration (FDA) product vetting and approvals before sale to the public.
• Follow DEA or FDA testing protocols typically costing greater than $1 million/product.
• Obtain licenses to conduct research on marijuana.
• Require customers to obtain a prescription by a DEA-licensed medical doctor prior to sale to the public.
• Require fulfillment of the prescription by a DEA-licensed pharmacy.

Implications to the Marijuana Industry of Rescheduling. Rescheduling could impose more regulatory controls (and costs) upon the industry, such as:

• The development of a Federal medical (only) marijuana program that pre-empts a State's medical program, such as the model adopted for State hemp programs that are approved by the U.S. Department of Agriculture. Under this possible scenario, the State adult-use programs would continue.
• Mandatory training of 500,000 marijuana employees on new laws.
• Insurers and insurance and benefit plans will likely have to cover prescriptions for medical marijuana use, thus increasing premiums and plan costs.
• Doctors' offices, drug stores and hospitals could be overwhelmed with new patients seeking prescriptions, while some physicians may refuse to write scripts for marijuana.
• Schools and universities would need to amend their teaching materials and procedures to align with the Federal program.
• Competitive expansion of marijuana research and strategic business partnerships or consolidations among dispensaries with beer, wine and alcohol, pharma and tobacco companies.
• U.S. trademark applications for marijuana products could inundate the U.S. Patent and Trademark Office.
• Employers would need to know how to handle increased marijuana use on the job when taken as medicine.
• More restaurants could open with marijuana on their menus.
• Interstate commerce shipments of marijuana would cross state lines in cars, trucks, vans, aircraft, and by droids.
• In states with unlimited licensing, e.g., California, Colorado, and Oklahoma, the number of dispensaries would likely multiply. Conversely, dispensaries in limited licensing states may be inundated with customers who now don't need to worry about federal law enforcement activities.
• Federal and State governments would stand to lose millions of dollars in annual tax revenues as a result of marijuana businesses being permitted to deduct standard business expenses.
• Public trading exchanges may more readily permit marijuana-selling enterprises to list their stocks.

This is a developing situation, and we'll continue monitoring it closely and share relevant updates.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.