In what will become a historic overhaul of American drug policy, the Drug Enforcement Administration (DEA) has announced that it will reclassify marijuana as a Schedule III controlled substance, marking a significant shift from its current status as a Schedule I drug.

“Today, the Attorney General circulated a proposal to reclassify marijuana from Schedule I to Schedule III,” Justice Department Director of Public Affairs Xochitl Hinojosa said in a statement. “Once published by the Federal Register, it will initiate a formal rulemaking process as prescribed by Congress in the Controlled Substances Act.”

Attorney General Merrick Garland has circulated a proposal indicating that once published in the Federal Register, it will start a formal rulemaking process, as mandated by the Controlled Substances Act. This process, which includes a public comment period, could take several months to complete.

The Attorney General, Merrick Garland’s, signature demonstrates the support of the Justice Department and the Executive Branch.

John Mueller, Founder & CEO of Greenlight, welcomed the move as a significant stride towards rectifying decades of stringent prohibition policies. He emphasized the impact on the cannabis industry, which has long sought legitimacy and growth opportunities. “This is a major nail in the coffin on a failed 50-year prohibition policy. Good riddance, let it rest in peace. We’re finally headed in the right direction after all these years, but we still have a long way to go. This is a major milestone for a marginalized industry that’s been fighting for recognition. We’re more than ready to be recognized as a legitimate industry on its way to becoming a $50 billion market. It’s about time we embraced progress and leave outdated practices behind.”

Echoing Mueller’s sentiments, Andrew Mullins, Executive Director of MoCann Trade, highlighted the operational and regulatory benefits that reclassification could bring. He pointed out that this adjustment would align marijuana businesses with other small businesses in terms of federal taxation and reduce barriers to conducting essential medical research. “This is a monumental policy shift for our industry and also for cannabis normalization in general. Besides putting marijuana businesses in parity with all other small businesses by eliminating 280E, moving to Schedule III removes research barriers and also finally and officially recognizes the efficacy and safety of cannabis for medical use. This is a great and long overdue step in the right direction by our federal government.”

Andrew Mullins

This pivotal change, prompted by recommendations from the Department of Health and Human Services, acknowledges the medicinal benefits of marijuana and aims to recalibrate its legal and societal perception, potentially easing numerous federal restrictions related to research, banking, and taxation of cannabis-related businesses.

It would allow greater freedom for scientific research and ease some criminal penalties associated with cannabis. Moreover, cannabis businesses could potentially access banking services more freely and benefit from tax deductions currently denied to them under the strictest federal regulations.

Nick Rinella of Hippos discussed the broader implications for social justice and regulatory fairness that could arise from this change. He stressed the importance of continuing efforts to decriminalize and destigmatize cannabis to ensure equitable access and fair treatment across communities. “Rescheduling cannabis from Schedule 1 to Schedule III is a step in the right direction, acknowledging its medicinal value and untangling the web of unjust regulations. Removing the burden of 280E tax provisions is a positive stride, yet true progress necessitates a broader effort to decriminalize and destigmatize this plant, ensuring equitable access and fair treatment for all.”

Peter Sack, Partner and Co-CEO at Chicago Atlantic, focused on the economic and social benefits, indicating that the rescheduling could unlock significant capital and growth opportunities for the cannabis industry. “We are thrilled by recent news that the DEA is expected to announce the rescheduling of cannabis. The policy change is likely to bring significant benefits to the U.S. cannabis industry, including the elimination of punitive federal tax burdens, increased access to capital and increased employment and investment.” Sack continued, “Over the past six years, Chicago Atlantic has led the industry in providing debt capital to many of the market’s strongest operators, and we are eager to grow alongside our clients.” He also touched on the historical context of cannabis prohibition and its impact on law enforcement policies. “Beyond the economic impact, the rescheduling of cannabis is a long overdue recognition of cannabis’ medical benefits and decades of misguided law enforcement policies.  While there is still uncertainty as to exactly how and when the rescheduling will conclusively take place, these reports signal encouraging progress that we are following closely.”

Overall, the decision to reclassify marijuana could herald a new era in how cannabis is perceived and managed in the United States, reflecting a the substantial progress that cannabis has seen in public perception in recent years, with an overwhelming number of American adults (88%) supporting marijuana legalization for medical or recreational use according to Pew Research.

Nicholas Higbee, VP of Operations at Verts Dispensary, expressed enthusiasm for the cultural shift this reclassification represents. He underscored the importance of this moment for industry stakeholders to recognize the significance of these changes in public and governmental perceptions of cannabis. “We’re thrilled that the government has made it clear that they understand there are therapeutic benefits from cannabis use, and that it doesn’t belong in the Schedule I column. We’re excited for the comment period and the opportunity to lend our voice to the millions of others across the USA. The plant finally being seen as more than ‘reefer’ is the perfect time for the industry, itself, to understand the importance of the moment. We are excited for the cultural change as a whole and getting closer and closer to becoming the norm in countless lives.”

As industry leaders reflect on the implications of the DEA’s proposed reclassification, the cannabis sector anticipates not only an increase in economic activity and research but also a significant transformation in how marijuana is viewed in legal and societal contexts. This shift towards a more enlightened approach to cannabis policy could lead to further legislative and social reforms in the near future.

Amy Moore, Director of the Missouri Division of Cannabis Regulation, anticipated further developments, “We are excited about the implications for cannabis research that could result from rescheduling and also understand the significant impact this action should have on the financial stability of Missouri’s regulated cannabis businesses. We look forward to following the federal rulemaking process to understand the full effect of this action on Missouri’s regulation of cannabis.”

John Pennington

Like Moore, other industry leaders and professionals celebrate progress while looking ahead.

John Pennington, Co-Founder and CEO of Proper conveyed the communal reaction, “It’s certainly a historic step—one that has taken years of effort and hard work from people all over the country. Our efforts here in Missouri have played a crucial role in getting us here. But the work is not complete; once the White House finalizes the draft rules there will be at least 60 days of public comment, and we will continue to help and assist where we can.”

“While we want to see cannabis completely removed from the scheduling system, we are thrilled to see its movement from schedule I to schedule III for a number of reasons. What immediately comes to mind is the substantially expanded research implications that will come from this change,” explained Chris LeGrand, Compliance Director at CAMP Cannabis. “Cannabis operators will also become one step closer to being treated like non-cannabis operators with relief from the tax burden associated with 280e. Most importantly, the public perception of cannabis and its therapeutic potential will improve.”

Sarah Bantz, CPA of Smith Patrick CPA, voiced excitement for both the immediate financial impact on businesses as well as the long-term potential for social and justice reform, “I believe this is an historic milestone for legalizing cannabis. It is clearly a step in the right direction on the part of the DEA, and will certainly be a dramatic benefit for state regulated cannabis businesses including my clients. Rescheduling should also reduce the legal burden on those who’ve been incarcerated or otherwise penalized for participation in the legacy market.” Bantz offered pragmatic advice to current licensees and operators, “This will impact my clients, and all plant-touching operators, as they calculate their second quarter estimated tax payment, and the complex thinking that goes into cash management and penalty calculations,” she explained that as the process moves forward timelines and implications will manifest with guidance pertaining to tax reform lying further ahead. “I would just encourage my clients to play it conservative and make their payments as if 280E is going to be in effect for the entire quarter, which it probably will be. My baseline advice is that cannabis is risky,  just by existing in the cannabis space, your business is risky. When you make these incremental decisions, erring on the side of lowering your risk is the wise thing to do. “

Sarah Bantz

This sweeping administrative move could signal a turning point in the normalization and integration of cannabis into American society, reflecting a more enlightened approach to drug policy that aligns with modern understandings of marijuana’s benefits and applications. for industry operators, it is a welcome shift, allowing a product that has shown proven therapeutic benefits and a low risk for abuse and addiction to be regulated and administrated more appropriately.

The rescheduling of cannabis will not affect the federal rider in appropriations legislation that currently prevents the Justice Department from interfering with state medical marijuana programs. This ensures that states with medical marijuana laws will still enjoy some level of federal protection.


Featured Photo Gas Basket | Proper Cannabis

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