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 tell NBC News.
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 most strict Schedule I to the less stringent Schedule III, marking the first time that the U.S. government would acknowledge its potential medical benefits and begin studying them in earnest.
“DOJ continues to work on this rule,” a Biden administration official said. “We have no further comment at this time.”
What rescheduling means
Since 1971, marijuana has been in the same category as heroin, methamphetamines and LSD. Each substance under 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 now 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 Internal Revenue Services code Section 280E which currently prohibits legal cannabis companies from deducting what would otherwise be ordinary business expenses.
The Department of Justice’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 that are fiercely regulated and highly taxed.
Years in the making
President Joe Biden directed the Department of Health and Human Services in October of 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 at the State of the Union address this spring, for the first time referencing 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,” the president said during the speech.
When Biden served as Vice President in former President Barack Obama’s administration, the White House was opposed to any legalization of marijuana because it would “pose significant health and safety risks to all Americans.”
Jim Cole, who served as deputy attorney general in the Obama administration authored the now infamous Cole Memo in 2013 which paved the way for the modern marijuana market. The memo scaled back federal intervention in states that 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, told NBC News 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 advisor, said that the decision to reclassify marijuana was “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,” said Sabet. “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.”
Some challenges ahead
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 proposed rescheduling decision. In the meantime, the drug and the industry will immediately benefit from the DEA’s announcement.
But, once the public comment period has concluded and the Office of Management and Budget reviews it, Congress would be able to overturn the rule under the Congressional Review Act, which gives the legislative branch the power to weigh in on rules issued by federal agencies. Democrats control the Senate with a 51 seat majority and for a CRA to be successful, two-thirds of the House and Senate needs to support it, making it unlikely to pass. 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 six in ten Americans say that 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 would allow for more small and minority-owned shops to flood the marketplace.
The SAFER Banking Act, for example, would grant legal marijuana businesses access to traditional banking and financial services and 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 resources to automatically expunge criminal records for petty, non-violent 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 impacted by the War on Drugs.
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, oftentimes without regulation, particularly in states where marijuana is not legal.
It’s a gray area that has earned pushback from both sides of the aisle, most recently with the rise of Delta-8: a synthetic THC product that uses chemicals — some of them harmful — to convert hemp-derived CBD into Delta-8 tetrahydrocannabinol.