President Biden shook up the cannabis world two weeks ago with an executive order on cannabis. As a result of his order, no matter the outcome, the cannabis industry landscape will be changed forever. Functionally, this is the beginning of the end of prohibition; the only question remaining is how prohibition ends—for a better cannabis industry or a far worse one.
Biden’s Pardons
Khan
Biden’s order has two parts: pardons and scheduling review.
As to the first part, the president has pardoned roughly 6,500 individuals for simple cannabis possession under federal law. By doing this, he is signaling that he has evolved from a fervent drug warrior to granting discretionary mercy to a large class of justice-affected individuals, and for that he deserves praise.
It is important to note, however, that he did the absolute minimum to be able to show he is fulfilling campaign promises right before the midterms. There are inherent limitations of the pardon and clemency powers. They are not expungements that wash away a record, but instead are used to restore some rights and end further punishment over an individual. But pardons function as an admission of guilt and a record thereof. That is typically why they are applied to prisoners and not released individuals. Because Biden’s pardon only applies to federal charges and convictions, including violations of D.C. criminal code, no one who is, or was, incarcerated for breaking state or other local laws qualifies. It’s also unclear if anyone will ever be released from federal prison due to Biden’s pardon. A senior administration official told reporters in an Oct. 6 press call that “there are no individuals currently in federal prison solely for simple possession of marijuana.” Nevertheless, taking a public position on restoring the rights of justice impacted individuals is a laudable doing on its face and will in effect catalyze much needed movement on the federal cannabis front.
Scheduling Review
The second part of the order, and the far more impactful component, is the review of cannabis under the Controlled Substances Act. From this order, the possible outcomes range from complete removal from the Schedules to rescheduling into Schedules II through V, as well as the very unlikely outcome of maintaining Schedule I status.
Although Biden has publicly maintained that he supports rescheduling, not descheduling, the Secretary of Health and Human Services (HHS) and the Attorney General will ultimately determine that outcome. Unless Schedule I status is maintained, total federal prohibition is over. However, the system likely will not remotely resemble what is does today unless cannabis is fully removed from the Schedules.
What does all that mean? It’s simple: rescheduling is recriminalizing; descheduling is decriminalizing.
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If cannabis is rescheduled into any of Schedules II through IV, it remains an FDA-controlled drug, and trafficking in it, or adulterated versions of it, is a criminal penalty. Currently, there are FDA-approved drugs containing CBD and synthetic THC, so any product containing those molecules is an adulterated drug and could constitute criminal manufacture, distribution, etc., of a controlled substance. State adult-use markets would also be subject to FDA oversight and traditional pharmaceutical channels of distribution.
Aside from an unlikely “over-the-counter” Schedule V designation, to legally obtain and use cannabis, consumers would have to get a prescription from a clinician who must have a DEA license, and to fill the prescription they would have to go to a pharmacist, who must also have a controlled substance license. Schedule II drugs traditionally require a paper prescription; however, they are now prescriptible via electronic prescribing of controlled substances (EPCS).
Schedule III and IV substances may be prescribed by paper script, EPCS or verbal order over the phone. Existing cannabis companies would have to dissolve their retail assets or go through the process of converting their locations into pharmacies, which would require a pharmacy license, a prescription drug number and a DEA number. Cannabis brands would have to pull their products and put them through a lengthy and very costly FDA trial and approval process or sell the IP to someone who can afford to do so. From my discussions with White House Health and Human Services and the FDA, we [the Global Alliance for Cannabis Commerce] believe this is a likely outcome. If cannabis is rescheduled, the entire industry will be handed over to Big Pharma while simultaneously creating more problems than it fixes.
If cannabis is descheduled, it is decriminalized under Controlled Substances Act penalty schemes. This does not mean there are no criminal laws that enforce on issues like honest labeling and fraudulent business practices, but the massive weight of the Controlled Substances Act is removed. The enforcement regime is entirely different.
However, because of technical inadequacies in each of these outcomes for stakeholders from patients to businesses, Congress must act now.
Congress Must Act
No matter what the Attorney General and HHS Secretary do, the best possible outcome for cannabis is forward-looking decriminalization.
But this does nothing about existing IRS Code 280E tax liability or liability for prior criminal activity and the proceeds of those crimes, nor does it provide clear, low-barrier-to-entry reform to ensure craft producers and small and minority-owned businesses can be successful. The ugly truth is that businesses, including multistate operators, need criminal justice reform just as much as the next federally criminal enterprise.
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Indeed, this is why in both the States Reform Act and the Cannabis Administration and Opportunity Act, pains are taken by the bill authors to retroactively correct the criminal liability for non-violent offenders who pose no further threat to society, restoring both people and existing state-licensed businesses on the same footing. This is the only path forward that accounts for all the functional intricacies and practical (as well as legal) considerations that must be addressed for us to truly move past cannabis prohibition and onto comprehensive legalization so that Americans can access the health and economic benefits of a regulated industry.
Congress made this mess in 1937 when it began marihuana prohibition, and Congress must clean it up.
Rezwan (“Rez”) Khan, J.D., is president of award-winning cannabis genetics company DNA Genetics; executive chair and president of trade association Global Alliance for Cannabis Commerce; co-founder of seedless Clothing Co. (seedleSs); and a partner in URBN Leaf, a vertically integrated California cannabis company. He is a leading expert on national and international comparative cannabis law and regulatory compliance. He received his bachelor’s degree in psychology from SDSU, and his law degree from Thomas Jefferson School of Law, where he focused his studies on Controlled Substance, Intellectual Property, and Corporate Law.
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