reschedule cannabis, DEA

Breaking News! DEA to Reschedule Cannabis: 50 Years of Misinformation Ends, An Industry Reacts

by | May 1, 2024

reschedule cannabis, DEA

Written by Kristina Etter

Kristina is a digital content creator and designer. She has a talent for creating engaging and informative content that resonates with our professional audience. Kristina’s passion for the cannabis industry stems from her belief that it has the potential to revolutionize the world in many ways, and has a personal testimony of cannabis success.

An in-depth look at the pros, cons, and implications of the DEA’s leaked announcement to reschedule cannabis that acknowledges the medical potential of the herb and caused an uproar in the industry.

In a groundbreaking shift that could reverberate across generations of American drug policy, the U.S. Drug Enforcement Administration (DEA) has signaled a historic move to reschedule cannabis, challenging decades of stringent prohibition.

The DEA’s proposal promises to recognize the medical potential of cannabis and acknowledges its comparatively low risk of abuse – a seismic departure from the status quo, where marijuana sits amongst heroin and LSD as a Schedule I substance under the Controlled Substances Act.

“But let’s be clear, this does not end the War on Drugs, it ends the War on Patients.”

American Cannabis Coalition Co-Founder Don Murphy

“Today marks a monumental milestone in the journey towards cannabis reform. The decision to move cannabis from Schedule 1 to Schedule 3 on the Controlled Substances List is a pivotal moment, signaling a necessary first step in our collective efforts to dismantle the stigma surrounding cannabis. But let’s be clear, this does not end the War on Drugs, it ends the War on Patients,” said American Cannabis Coalition Co-Founder Don Murphy.

“For far too long, patients have borne the brunt of this misguided war, facing unjust criminalization for seeking relief through cannabis. Today, we get to stand proud and declare that it’s a good day to be a patient. This victory is not just for today’s patients but for all those who have bravely advocated for cannabis as medicine in the face of adversity,” he continued.

Although the leaked change fails to legalize adult-use cannabis, falls short of necessary reparations for social justice, and creates more questions than answers, needless to say, the announcement created quite a buzz within the industry.

“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.” John Mueller, Founder & CEO of Greenlight, stated in an email.

However, to truly grasp the significance of this momentous shift, we have to look back on the prohibition of marijuana in the past to understand the depth of this change.

1971 to Today: 50+ Years of Political Bias

reschedule cannabis
Nixon being sworn into office in 1969.

From the political games of the Nixon era to the present-day efforts of the Biden administration, marijuana’s journey through federal politics is fraught with intrigue, controversy, and shifting attitudes.

Crafted like a script from Hollywood, the story of cannabis is a tangled web of policies, prejudices, and public perceptions that have shaped the trajectory of marijuana policy in the United States.

Acknowledging the truth of marijuana prohibition, we confront the sobering reality of how political agendas and prejudice have shaped drug policy in the United States.

To understand the significance of the DEA’s proposed reclassification of marijuana, we must first revisit the bygone era of the Nixon administration, where the seeds of marijuana prohibition were nurtured. Sadly, Nixon and his staff deliberately ignored his own fact-finding committee.

The Scientific American wrote in a 2016 article, “The Shafer Commission found in 1972 that cannabis was as safe as alcohol, and recommended ending prohibition in favor of a public health approach.”

Disgraced Attorney General John Mitchell, a key figure in Nixon’s inner circle, wielded his influence to place marijuana in the most restrictive category of controlled substances—Schedule I—alongside heroin and LSD.

https://en.wikipedia.org/wiki/File:John_Mitchell_speaking_with_President_Nixon.jpg

This classification, enacted under the guise of the Controlled Substances Act of 1970, was a strategic ploy aimed at advancing Nixon’s political agenda. As revealed in covert recordings from Watergate, Nixon saw marijuana prohibition as a means to target two perceived enemies: the antiwar left and minority communities. By associating marijuana with these groups and criminalizing its use, Nixon sought to undermine their influence and sow discord within their ranks.

The DEA’s proposed initiative to reschedule cannabis represents a watershed moment in this ongoing saga—a chance to rectify past injustices, correct the misinformation, and embrace a more enlightened approach to drug regulation and the industry as a whole.

With this recent announcement, John Hartmann, CEO of Ascend Wellness, stated, “Today marks a historic step forward from the Federal government on cannabis reform. The DEA’s agreement with the HHS to reschedule cannabis from Schedule I to Schedule III is a pivotal move that opens various opportunities to cannabis operators like Ascend. We look forward to seeing how this plays out in the coming weeks.”

Correcting the Record: A Monumental Shift in Policy

President Joe Biden’s administration has ushered in a new era of cannabis policy, marked by a commitment to review federal marijuana laws and address longstanding injustices. Recognizing the disproportionate impact of marijuana convictions on marginalized communities, President Biden has made criminal justice reform a cornerstone of his agenda.

Since taking office, the Biden administration has taken decisive action to mitigate the harms caused by decades of punitive drug policies. Although many argue, it’s not nearly enough.

In October 2022, President Biden called for a comprehensive review of federal marijuana law, signaling a willingness to reevaluate the classification of cannabis and its implications for public health and safety. This call for reform was accompanied by efforts to pardon thousands of Americans convicted federally of simple possession of marijuana, aiming to alleviate the burdens of past convictions and pave the way for a more equitable future.

President Biden has also urged governors and local leaders to follow suit and take steps to expunge marijuana convictions, recognizing the need to dismantle barriers to employment, housing, and education faced by individuals with prior drug offenses.

By acknowledging the failures of the “war on drugs” and advocating for meaningful reform, President Biden has positioned himself as a champion of social justice and progressive drug policy.

Commenting on the impact for small and start-up businesses, Dylan Hood, CEO and founder of FREE-Green LLC, stated in an email, “As we are in the fundraising phase for our cultivation site, any actions by the Fed that help to move the needle and reinvigorate investors will be very helpful to us. Much more is needed, especially for a social justice, social enterprise operation like FREE-Green, but we will take the win.”

Likewise, Cannabis Tech partner Kyle Rosner of 420 Interactive agreed and hopes for continued progress. “We still have a long road ahead of us in setting up an equitable and sustainable industry, but this is the first step in the right direction. As someone who has been personally impacted by the war on drugs, I hope others will see the light of day, and we can continue to exonerate those who have suffered and are still incarcerated for nonviolent cannabis crimes,” he implored.

reschedule cannabis
The policy to reschedule cannabis does not decriminalize recreational cannabis use.

DEA’s Proposal to Reschedule Cannabis

Aligning with President Biden’s vision for drug policy reform, the U.S. Drug Enforcement Administration (DEA) has announced a groundbreaking proposal to reschedule cannabis from Schedule I to Schedule III under the Controlled Substances Act. This shift acknowledges marijuana’s medical potential and recognizes its lower potential for abuse compared to other controlled substances.

The DEA’s plan to reschedule cannabis represents a departure from decades of stringent regulation, paving the way for increased access to medical cannabis and opening the door to further research into its therapeutic benefits. By moving marijuana to Schedule III alongside substances like ketamine and some anabolic steroids, the DEA aims to strike a balance between acknowledging its medical utility and maintaining regulatory oversight.

“The DEA decision will improve the climate for additional scientific research on the effects cannabis products create,” says Israel Gasperin, founder and CEO of neurotechnology pioneer Zentrela, Inc. “We all benefit when US consumers have access to independent, scientific product effect information to inform their purchase and consumption decisions.”

Implications of the proposed plan to reschedule cannabis extend beyond medical marijuana access, impacting broader efforts toward marijuana legalization and criminal justice reform. While the proposed reclassification stops short of legalizing marijuana outright for recreational use, it signals a significant shift in federal drug policy and sets the stage for further legislative and regulatory changes.

Next Steps: Decriminalize, De-Schedule, and Ramp Up Social Justice

Nothing happens quickly in government. As the DEA’s proposal moves through the regulatory review process, stakeholders across the country are closely watching its progress and assessing its potential implications for drug policy, public health, and social equity.

The proposed plan to reschedule cannabis represents a critical juncture in the ongoing debate over cannabis legalization, offering hope for a more enlightened approach to drug regulation and criminal justice reform in the United States.

In a statement provided by the Drug Policy Alliance, Representative Jerry Nadler (NY) stated that the work has only begun for cannabis reform. “While rescheduling marijuana is an important step, we must go further. It is time to end the prohibition and criminalization of marijuana at the federal level.”

Echoing Nadler, Rep. Barbara Lee (CA) believes this is only a stepping stone, and more must be done to correct the wrongs of the past.

“While the rescheduling of marijuana is a historic step in the right direction, anything short of descheduling falls woefully short of remedying the harms of the current system and the failed racist War on Drugs.”

Rep. barbara lee (ca)

Continuing, she stated, “Rescheduling would allow for the criminal penalties for recreational and medical marijuana use to continue – disproportionately impacting Black and Brown communities. The criminalization of marijuana is also increasingly out of step with state law and public opinion. We need full descheduling and to pass the MORE Act – which I proudly co-lead – as a solution for equitable comprehensive marijuana reform rooted in racial and restorative justice.”

reschedule cannabis, social justice
The DEA plan to reschedule cannabis lacks necessary social justice reform.

“Supporting federal marijuana decriminalization means supporting the removal of marijuana from the Controlled Substances Act, not changing its scheduling” said Cat Packer, Director of Drug Markets and Legal Regulation at the Drug Policy Alliance (DPA).

“We all deserve a federal framework for marijuana that upholds the health, wellbeing, and safety of our communities – particularly Black communities who have borne the brunt of our country’s racist enforcement of marijuana laws. Rescheduling marijuana is not a policy solution for federal marijuana criminalization or its harms, and it won’t address the disproportionate impact that it has had on Black and Brown communities,” she firmly stated.

Regulatory and Implementation Challenges

While the DEA’s leaked proposal to reschedule cannabis represents a significant step toward reform, it also presents a host of regulatory and implementation challenges. If marijuana is moved to Schedule III, it will remain a controlled substance subject to strict regulations and oversight by the DEA. This means that marijuana dispensaries and research institutions will likely be required to comply with federal reporting requirements and register with the DEA, potentially complicating their operations and increasing administrative burdens.

Anticipating deeper regulations and requirements, Ron Romano from SafetyNet America stated, “As the cannabis industry prepares to move from a Schedule I drug to Schedule III, where it will be more widely accepted, it is even more important that cultivators place a greater emphasis on less use of pesticides and other hazardous chemicals and more emphasis on proven biosecurity products and methods so consumers are more confident of quality and inclined to buy from legitimate sources.”

Additionally, a plan to reschedule cannabis rather than deschedule may have unintended consequences for the burgeoning industry and the broader research landscape. Easing federal regulations could reduce the tax burden on cannabis businesses and facilitate research into the therapeutic benefits of cannabis. However, it could also create uncertainty and disruption as stakeholders navigate the shifting regulatory landscape and adjust to new compliance requirements.

As policymakers and stakeholders grapple with these challenges, it is imperative that they prioritize the principles of equity, justice, and public health in their decision-making. By addressing these issues thoughtfully and collaboratively, leaders can chart a path toward a more rational, evidence-based approach to drug policy that promotes the well-being of all individuals and communities.

Comparing the Pros and Cons to Reschedule Cannabis

While the official announcement or any of the policies have yet to be named, we can only speculate as to the final result of this historical change in drug policy. However, there are a number of potential pros and cons that could come to light in the coming months or years. Here’s a look at the potential pros and cons in the movement to reschedule cannabis.

Benefits for Businesses

To reschedule cannabis would offer several potential benefits for the industry, improving operations for cannabis businesses in a variety of ways:

  • Increased Access to Banking Services: Many financial institutions are hesitant to provide banking services to cannabis businesses due to federal regulations. A move to Schedule III could alleviate some of these concerns, making it easier for cannabis businesses to access essential banking services such as loans, lines of credit, and merchant processing.
  • Expanded Research Opportunities: Naturally, the plan to reschedule cannabis should pave the way for expanded research opportunities with fewer roadblocks to studying the plant’s medical properties and potential therapeutic uses.
  • Improved Insurance Options: Currently, many insurance providers are reluctant to offer coverage to cannabis businesses due to the plant’s Schedule I classification. Rescheduling cannabis to Schedule III may make it easier for cannabis businesses to obtain insurance coverage, mitigating risks associated with operations such as crop loss, property damage, and liability claims.
  • Enhanced Market Legitimacy: Cannabis’s Schedule I classification has long been a barrier to the industry’s legitimacy in the eyes of consumers, investors, and regulators. Rescheduling cannabis to Schedule III could help destigmatize the plant and bolster its credibility as a legitimate industry, potentially attracting increased investment and consumer trust.
  • Facilitate Interstate Commerce: Due to federal restrictions, cannabis businesses face significant legal barriers when engaging in interstate commerce. Rescheduling cannabis could facilitate market expansion and growth opportunities for businesses operating in multiple states by allowing for more permissive regulations regarding the transportation and distribution of cannabis products across state lines.
  • Standardization of Quality and Safety Standards: With clearer federal regulations and oversight, cannabis businesses may benefit from standardized quality and safety standards for products. This could improve consumer confidence in the safety and efficacy of cannabis products, leading to increased demand and market growth.

“This rescheduling carries significant implications for the entire cannabis landscape. Firstly, it will alleviate the burdens imposed by 280E tax regulations, bolstering the credit quality of cannabis operators, including those within NewLake’s portfolio. We project that our tenants stand to collectively save over $400 million annually in taxes, leading to increased cash flows for their businesses.”

– NewLake Capital Partners CEO Anthony Coniglio
reschedule cannabis business benefits

A Few Potential Challenges

On the other hand, rescheduling could present a few challenges. Many industry stakeholders have expressed concerns that Schedule III could do more harm than good.

  • Increased Competition: The move to reschedule cannabis could attract new (bigger) players to the industry. With fewer regulatory barriers and a potentially more favorable regulatory environment, an influx of deep-pocketed competition (such as alcohol, nutraceutical, tobacco, and pharmaceutical companies) may intensify market saturation and pricing pressures, particularly for smaller businesses without the resources to compete effectively.
  • Uncertainty and Instability: The next steps to reschedule cannabis involve implementing new regulations, which could create uncertainty and instability within the industry. Business owners may face challenges navigating evolving regulatory requirements, compliance standards, and market dynamics, leading to operational disruptions and financial strain.
  • Continued Banking Challenges: While the plan to reschedule cannabis should improve access to banking services for some businesses, others may still encounter difficulties due to lingering concerns about the legal and regulatory risks associated with the industry. This could limit access to essential financial services such as loans, lines of credit, and merchant processing, hindering business growth and expansion.
  • Legal and Compliance Risks: Despite rescheduling, cannabis remains a controlled substance subject to federal regulations. Business owners must continue to navigate complex legal and compliance requirements, including licensing, packaging, labeling, and advertising restrictions. Non-compliance could result in penalties, fines, and legal liabilities, posing significant risks to business viability and reputation.

Dotan Y. Melech, Founder & CEO, CTrust, is a little more reserved with the news, stating in an email, “While we will ultimately need to wait and see how FINCEN changes their required Suspicious Activity Report (SAR) for cannabis businesses, Schedule III will create curiosity and motivation for banks and lenders looking at cannabis.”

He continued, “Our industry will need normalization and standardization in how the capital is deployed and who gets that capital. The reality is that current lending practices are unlikely to change without a better understanding of cannabis risk. Banks do not currently have insights into which companies are performing well and are creditworthy and which ones will continue to burn capital and not pay their debts.”

While the unknowns run wild, one aspect holds fast: The political landscape surrounding cannabis policy remains dynamic and subject to change. Shifts in government priorities, leadership, and public opinion are sure to result in further regulatory changes, creating uncertainty and volatility for cannabis businesses.

Change is Coming

As the announcement signals forthcoming change, we no longer have a question of “if.” Now, the questions become, “When and how?”

In a historical moment for American drug policy, the U.S. Drug Enforcement Administration (DEA) has announced its intention to reschedule cannabis, signaling a seismic shift in the nation’s approach to cannabis regulation. This groundbreaking proposal, which acknowledges marijuana’s medical potential and lower risk of abuse, represents a stark departure from decades of stringent regulation that relegated cannabis to the same category as heroin and LSD.

Although the announcement may raise more questions than answers, we must celebrate this historic milestone. It is essential to recognize the incredible journey that marijuana has undertaken, from its vilification during the Nixon era to the present-day efforts of the Biden administration to rectify past injustices.

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