Earlier today, on August 30, 2023, the U.S. Department of Health and Human Services (HHS) officially recommended that cannabis be moved from Schedule I to Schedule III under the Controlled Substances Act (CSA) – a landmark recommendation from HHS which indicates that HHS no longer considers cannabis to be a drug with high abuse potential and no medical value.
After completing a scientific review into cannabis per a
requested review from the Biden Administration, HHS advised the
Drug Enforcement Administration (DEA) that it believes marijuana
should be placed in Schedule III of the Controlled Substances
Act.
Note, HHS's recommendation is NOT binding on the DEA but given
the report's findings and growing public sentiment is likely
that the DEA agrees with the recommendation and shifts its
policy.
Historically, cannabis has been federally prohibited as a Schedule
I controlled substance. As noted by many pundits, the rescheduling
to Schedule III would have major implications for researchers who
have long criticized the Schedule I classification that creates
significant barriers to access for studies.
For researchers, this change would likely mean that they would no
longer need to go through the onerous registration process with the
DEA in order to access cannabis for studies as a Schedule III drug.
The shift to Schedule III would also enable various federal tax
deductions to become applicable to the cannabis industry and unlock
value for them that is currently stuck in an onerous tax structure
under the Internal Revenue Code. Schedule III drugs are not subject
to the same onerous structure under federal rules.
The cannabis ball is now firmly in the DEA's court as the
DEA has the final authority to schedule a drug as Schedule III
rather than Schedule I under the CSA (or transfer a controlled
substance between schedules or remove such a drug from scheduling
altogether).
Parting Hits – With Congress due to
reconvene after Labor Day, and the Biden Administration looking for
a win on moving this issue along, look for pressure to continue to
mount for some type of Congressional action in the Banking arena
under a SAFE legislation bill and for the DEA to move through their
rule making process in a swift and firm manner.
Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.