The Justice Department made an announcement on Thursday, stating that they have submitted a rule aimed at relaxing restrictions on cannabis. However, it is important to note that this move does not fully meet the demands of those advocating for complete legalization.
U.S. Attorney General Merrick Garland has taken a significant step towards reclassifying marijuana by submitting a notice of proposed rulemaking to the Federal Register. This marks the official initiation of a formal rulemaking process to consider moving marijuana from a Schedule I drug to a Schedule III drug under the Controlled Substances Act. This development follows the news that surfaced in late April regarding the potential reclassification.
In a video message shared on social media, President Joe Biden expressed his concern over the negative impact of our current marijuana policies, stating, “Our failed approach to marijuana has resulted in too many lives being disrupted.”
Marijuana has remained classified as an illegal Schedule I drug since 1970. However, if it were to be re-scheduled as a Schedule III drug, the impact on cannabis consumers would be limited. Despite this, certain cannabis businesses have expressed that this change would enable them to deduct more business expenses, potentially leading to lower prices. It is important to note, however, that this outcome is not guaranteed.
In 2022, President Joe Biden requested Attorney General Garland and the Secretary of Health and Human Services to conduct a scientific evaluation of the federal scheduling of marijuana. Following the review, the Department of Health and Human Services advised the DEA to reschedule marijuana to Schedule III in 2023.
Cannabis has long been categorized as a Schedule I drug, which is a class reserved for substances deemed to have no accepted medical value and a high likelihood of abuse. Among the other drugs in this category are heroin, LSD, ecstasy, and methaqualone, the sedative known as Quaalude before it was discontinued in the 1980s.
Cannabis is set to be reclassified as a Schedule III drug, which categorizes drugs with a moderate to low potential for physical and psychological dependence. This classification aligns it with other substances such as products containing less than 90 milligrams of codeine per dosage unit, ketamine, anabolic steroids, and testosterone.
According to the Justice Department, the rescheduling of a controlled substance goes through a formal rulemaking procedure. This process includes notifying the public, providing an opportunity for comment, and conducting an administrative hearing. The proposal marks the beginning of this process, in which the Drug Enforcement Administration will collect and evaluate information and opinions from the public. The ultimate goal is to determine the appropriate schedule for the substance. It’s important to note that until a final rule is published, marijuana will continue to be classified as a schedule I controlled substance.
According to Matthew Schweich, the executive director of the Marijuana Policy Project, he previously described it as a “modest step.”
In a statement, he emphasized the significance of recognizing that this rescheduling would not alter the criminalization of medical cannabis patients and cannabis consumers under state laws. Therefore, it is crucial to persist in our efforts to establish rational and equitable cannabis legalization and medical cannabis laws through state legislatures and ballot initiatives.
The rescheduling of marijuana through rulemaking has the potential to bring about significant changes for those involved in the industry. However, for the majority of Americans, the way marijuana is handled in other places will remain unchanged.
If Biden succeeds, and cannabis is reclassified from a Schedule I drug to a Schedule III drug, it will remain illegal at the federal level.
It is possible that businesses and investors may experience some changes in the future, but these changes may not significantly affect the overall perception and treatment of the drug across the country.
Cannabis businesses face an exorbitant effective tax rate of over 70% due to the treatment of cannabis under the 280E tax code. This code prohibits companies selling Schedule I drugs from deducting expenses like travel and rent from their tax bills. However, if cannabis were to be reclassified as a Schedule III drug, this would introduce a significant change in the tax deductions available to these businesses.
Using cannabis, whether legally or illegally, may offer potential advantages to individuals if reduced taxes result in decreased prices for consumers. However, it is important to note that such benefits are not guaranteed.
According to Tiffany Chappell Ingram, the executive director of the Cannabis Business Association of Illinois, the proposed rulemaking acknowledges the medicinal advantages of the drug.
“In the years following the misguided classification of marijuana, communities of color have suffered numerous consequences as a result of the war on drugs. While this decision cannot undo the harm caused, it does acknowledge the medicinal advantages of cannabis and improves the prospects of marijuana businesses. This includes granting them the same tax deductions that other businesses enjoy,” she stated on Thursday. “It is a significant stride in the right direction for the cannabis industry and our society as a whole, and we remain hopeful that it will further pave the way for federal legalization.”
