WASHINGTON — The Biden administration will take a historic step toward easing federal restrictions on cannabis, with plans to announce an interim rule soon reclassifying the drug for the first time since the Controlled Substances Act was enacted more than 50 years ago, four sources with knowledge of the decision said.
The Drug Enforcement Administration is expected to approve an opinion by the Department of Health and Human Services that marijuana should be reclassified from the strictest Schedule I to the less stringent Schedule III. It would be the first time that the U.S. government has acknowledged its potential medical benefits and begun studying them in earnest.
Attorney General Merrick Garland submitted the rescheduling proposal to the White House Office of Management and Budget on Tuesday afternoon, a source familiar with the situation confirmed.
Any reclassification is still months from going into effect. After the proposal is published in the Federal Register, there will be a 60-day public comment period. The proposal will then be reviewed by an administrative law judge, who could decide to hold a hearing before the rule is approved.
What rescheduling means
Since 1971, marijuana has been in the same category as heroin, methamphetamines and LSD. Each substance under the Schedule I classification is defined as a drug with no accepted medical use and a high potential for abuse. Schedule III substances include Tylenol with codeine, steroids and testosterone.
By rescheduling cannabis, the drug would be studied and researched to identify concrete medical benefits, opening the door for pharmaceutical companies to get involved with the sale and distribution of medical marijuana in states where it is legal.
For the $34 billion cannabis industry, the move would also eliminate significant tax burdens for businesses in states where the drug is legal, notably getting rid of the IRS' code Section 280E, which prohibits legal cannabis companies from deducting what would otherwise be ordinary business expenses.
The Justice Department’s rescheduling decision could also help shrink the black market, which has thrived despite legalization in states like New York and California and has undercut legal markets, which are fiercely regulated and highly taxed.
Years in the making
President Joe Biden directed the Department of Health and Human Services in October 2022 to review marijuana’s classification. Federal scientists concluded that there is credible evidence that cannabis provides medical benefits and that it poses lower health risks than other controlled substances.
Biden even made history in his State of the Union address this year, for the first time referring to marijuana from the dais in the House chamber and making note of the federal review process. “No one should be jailed for using or possessing marijuana,” he said.
When Biden was vice president in the Obama administration, the White House opposed any legalization of marijuana, saying it would “pose significant health and safety risks to all Americans.”
Jim Cole, who was deputy attorney general in the Obama administration, wrote the famous Cole Memo in 2013, paving the way for the modern marijuana market. The memo scaled back federal intervention in states that had legalized marijuana as long as they implemented “strong and effective regulatory and enforcement systems to control the cultivation, distribution, sale and possession of marijuana.”
Cole, who is now a member of the National Cannabis Roundtable, said in an interview this week that reclassifying marijuana to Schedule III would “open up the ability to actually test it and put it in a laboratory without all of the restrictive measures” of a Schedule I drug.
Kevin Sabet, president and CEO of Smart Approaches to Marijuana and a former Obama administration adviser, said the decision to reclassify marijuana is "the result of a politicized process," arguing that it "will be devastating for America’s kids, who will be bombarded with attractive advertising and promotion of kid-friendly pot products."
"The only winner here is the marijuana industry, who will receive a new tax break and thus widen their profit margins," Sabet said. “Reclassifying marijuana as a Schedule III drug sends the message that marijuana is less addictive and dangerous now than ever before. In reality, today’s highly potent, super strength marijuana is more addictive and linked with psychosis and other mental illnesses, IQ loss and other problems.”
Researchers have raised concerns about high-potency marijuana and cannabis-induced psychiatric disorders, particularly among young men.
Some challenges ahead
Once the DEA formally makes its announcement, the marijuana industry would see an immediate benefit. But with the DEA’s proposed rule change comes a public review period that could lead to a challenge, and perhaps even a change, to the rescheduling proposal.
Once the public comment period has concluded and the Office of Management and Budget reviews the decision, Congress would also be able to overturn the rule under the Congressional Review Act, which gives it the power to weigh in on rules issued by federal agencies. Democrats control the Senate with a 51-seat majority, and for an overturn under the CRA to succeed, two-thirds of the House and the Senate would be needed to support it, meaning the marijuana rescheduling would most likely survive.
Though cannabis remains a divisive topic on Capitol Hill, there has been growing support on a bipartisan basis for marijuana reforms, largely driven by the electorate. Nearly 6 in 10 Americans say marijuana should be legal for medical and recreational purposes, according to a Pew Research poll last month. Cannabis is legal in 24 states for recreational use.
Congress is considering its own bills
Congress is considering its own measures that would make it easier for legal marijuana businesses to thrive and allow for more small and minority-owned shops to flood the marketplace.
The SAFER Banking Act, for example, which would grant legal marijuana businesses access to traditional banking and financial services, could pass both chambers by the end of the year.
Lawmakers are also considering the HOPE Act, another bipartisan bill that would provide states and local governments with resources to automatically expunge criminal records for petty, nonviolent cannabis offenses.
There is also a Democratic-only effort to remove cannabis entirely from the Controlled Substances Act, empowering states to create their own cannabis laws and prioritize restorative and economic justice for those affected by the “war on drugs.”
Senate Majority Leader Chuck Schumer, D-N.Y., praised the administration for its move, saying it amounts to "finally recognizing that restrictive and draconian cannabis laws need to change to catch up to what science and the majority of Americans have said loud and clear."
At the same time, he said he is "strongly committed" to moving forward with both the SAFER Banking Act and the Democratic bill to remove cannabis from the Controlled Substances Act entirely. “Congress must do everything we can to end the federal prohibition on cannabis and address longstanding harms caused by the War on Drugs," he said in a statement.
Sen. Cory Booker, D-N.J., also praised the administration’s move but cautioned that “we still have a long way to go.”
Booker called on Congress in a statement to "follow the lead of states around the country and legalize cannabis for adult-use and create a comprehensive taxation and regulatory scheme."
“Thousands of people remain in prisons around the country for marijuana-related crimes. Thousands of people continue to bear the devastating collateral consequences that come with a criminal record,” he said. “Legal marijuana businesses, especially those in communities hardest hit by the War on Drugs, still have to navigate a convoluted patchwork of state laws and regulatory schemes. I hope that my colleagues on both sides of the aisle, especially those who represent constituents benefitting from medical or adult-use programs, join me to pass federal legislation to fix these problems.”
But there is weariness among lawmakers who remember the last time Congress made law surrounding the drug.
The Republican-led Senate legalized hemp production in the 2018 farm bill, a decision that led to synthetic and exotic cannabinoids’ being sold over the counter, often without regulation, particularly in states where marijuana isn’t legal.
It’s a gray area that has drawn pushback from both sides of the aisle, most recently with the rise of Delta-8, a synthetic tetrahydrocannabinol product that uses chemicals — some of them harmful — to convert hemp-derived CBD into Delta-8 THC.
