Hey, I’m Morgan Davis, a business attorney from Raleigh, North Carolina, specializing in cannabis and wellness.
DEA to Reschedule Cannabis: A Major Shift
In April, the U.S. Drug Enforcement Agency (DEA) announced its intention to follow the Department of Health and Human Services’ recommendation to reschedule cannabis from a Schedule I to a Schedule III controlled substance. This move is monumental as it shifts cannabis from the same category as heroin and methamphetamines, which are deemed to have no accepted medical use, to a category allowing medical uses.
What Does This Mean for Cannabis Businesses?
Cannabis operators in the industry are celebrating because rescheduling could remove the Section 280E tax burden, allowing businesses to potentially recover some taxes. But before you start celebrating, here’s what you need to know:
The Rulemaking Process: What Happens Next?
While the DEA has announced its intention, a formal rule has not yet been proposed. The rulemaking process involves several steps:
- Drafting and Proposing the Rule: The DEA will need to draft and formally propose the rule, though the timeline is currently unclear.
- White House and OMB Approval: The White House will review and approve the rule, assuming that the current administration remains supportive.
- Potential Congressional Approval: If Congress deems this a major rule change, they may require approval, adding further delays.
- FDA Oversight: Once rescheduled, the FDA will likely regulate cannabis, impacting the requirements for manufacturers and distributors.
Challenges for Medical Cannabis Operators
Current state-approved medical cannabis operators might face difficulties meeting the DEA’s federal Schedule III standards. While no official standards have been set yet, there’s speculation that existing medical operators may not be guaranteed DEA approval once the new regulations are in place.
Federal Rescheduling and State-Level Impact
It’s important to note that rescheduling cannabis from Schedule I to Schedule III does not legalize adult or recreational use. Each state will still manage its own laws, and some may choose to stay silent or adjust their policies to align with federal standards.
The Hemp Industry: Will Rescheduling Affect It?
The rescheduling of cannabis could also indirectly impact the hemp industry, which was largely removed from the Controlled Substances Act in the 2018 Farm Bill. However, ongoing debates about derivatives like Delta-8, Delta-10, and others may lead to future challenges, particularly if these products are viewed as synthetic or intoxicating.
Preparing for Rescheduling: What Businesses Should Do Now
If you are considering entering the medical cannabis space, now is the time to prepare. Start researching and asking the right questions to ensure you are ready to meet potential federal standards. The DEA’s rescheduling is a significant development, but its full implementation could take time.
Stay Updated
As the process progresses, be sure to keep up with changes that may affect your business. If you have any questions or need guidance on how to prepare for these changes, reach out to us for help.
Need Help Navigating Cannabis Laws? The rescheduling of cannabis is a long-awaited development, but it’s not without complexities. If you’re a cannabis operator or thinking of entering the industry, contact us to ensure you’re compliant with current and upcoming regulations. We’re here to help you every step of the way.
