Yesterday afternoon, the Washington Post and other sources reported that President Trump is expected to issue an executive order directing federal agencies to reclassify marijuana, to Schedule III. That’s some sexy reportage, although WaPo’s sources cautioned that “Trump could still change his mind” and “[a] White House official said no final decisions have been made on rescheduling of marijuana.”
Still, it’s a story with legs and I want to revisit some important considerations—beyond my usual refrain that marijuana shouldn’t be scheduled at all. Here are some critical things to understand about a potential Schedule III move.
Trump has options for rescheduling marijuana
The WaPo story reports that an executive order may be in the cards. Most likely—and depending on the order’s contents—this would make for a more direct, decisive approach than the formal “statement” and “request” issued by President Biden in October of 2022, which led to a stymied rescheduling process.
This August, when Trump told reporters that his administration was considering rescheduling marijuana, I laid out the following options:
- resume the stalled rulemaking process, to adopt last year’s proposal placing marijuana in Schedule III;
- begin a new rulemaking process, presumably with a new proposed rule; or
- jettison rulemaking hearings altogether, and DOJ simply publishes a final rule, placing marijuana on Schedule III (or wherever); or
- do nothing. Say, “we like marijuana where it is, science and treaties be damned.”
I noted:
One thing to address at the outset, though, is the oft-repeated fiction that Trump could simply re- or deschedule marijuana on his own, via executive order. He cannot. He could, however, direct the process much like Biden did, when Biden issued a 2022 executive order directing HHS to revisit the control status of marijuana. Essentially, Trump could say what he’d like to see, and it will probably happen—especially given the strict fealty shown to him by DOJ.
To that point, my colleague Jason Adelstone has made a compelling argument for a fifth option, which is that Trump could lean on Attorney General Pam Bondi to reschedule marijuana on her own, even without rulemaking, pursuant to 21 U.S.C. § 811(d)(1). Jason concluded that “all it would take is a press release and a pen.”
Given the novelty of that approach, and given the novelty of Bondi’s prohibitionist record, that outcome would surprise me. In my previous post I advocated for option #3, which is the publication of a final rule by DOJ. I explained:
Marijuana could then go to Schedule III (or wherever) within 30 or 60 days of rule publication. People could litigate that rule, sure. Given the strength of the HHS findings, though, and the clear statutory authority behind DOJ, it seems like an uphill battle.
Hopefully, this is the chosen path and the administration learns from the numerous, foreseeable errors of former President Biden, the Merrick Garland DOJ and Anne Milgram’s DEA, as that administration made its half-assed foray into Schedule III.
The biggest beneficiary of marijuana rescheduling is the state-legal cannabis industry
Schedule III has been a holy grail of sorts for the cannabis industry, primarily because marijuana businesses would finally be taxed like other businesses. I’ve explained:
If marijuana goes to Schedule III, the margins-crushing statute known as IRC § 280E would not apply, and the cannabis industry would change forever. That said, state-level taxation of cannabis will not change. Or, it may change for the worse, as states feel emboldened to raise cannabis-related taxes in the absence of § 280E.
. . . .
Still, I cannot emphasize enough that removal of § 280E would change the industry forever. Having worked with cannabis businesses for 13 years, I view taxation as the largest affront to marijuana businesses—more than banking access, intellectual property coverage, lack of bankruptcy, you name it. This would be HUGE.
Five things Schedule III will not do
We like to remind people that marijuana on Schedule III is not a universal solve. Here are the five most persistent issues, in my view:
Criminal penalties for individuals. The possession, distribution and sale of non-FDA, non-hemp cannabis would still be criminal acts. State and local laws would not be preempted in any respect. We could see another 200,000 local arrests, annually, in a Schedule III milieu.
Business headaches. Like end users, state-licensed cannabis businesses wouldn’t be immunized from theoretical federal prosecution. In addition, they would remain embargoed from bankruptcy courts, they would continue to struggle with trademarks, they would still pay a premium for many general services, and the intensive, state-level regulation to which they are subject would hardly abate.
Research headaches. Contrary to popular belief, federal research will not become easier without significant Congressional and administrative intervention. That one is a real head-scratcher, but it’s our forecast.
Banking issues. Although banking isn’t the headache it once was, it’s still a pain. At Schedule III, marijuana would still be a controlled substance and state-licensed businesses would still be “trafficking” in that controlled substance, contrary to federal law. Banks would continue to struggle with this dynamic.
Hemp. The intoxicating hemp products industry took a huge kick in the shorts last month, when Congress passed P.L. 119-37. Most of these products won’t survive the new law. The state-legal marijuana industry stands to benefit from less competition, and if marijuana goes to Schedule III, those operators will be less inclined to work with the hemp crowd on a “universal solve” for federal cannabis policy.
Marijuana to Schedule III – wrapping up
I hope it happens, and Christmas comes early for all of our industry clients. That said, I’m cautious after watching and writing about marijuana rescheduling rumors for the better part of a decade.
If we do get confirmation on this WaPo reporting, though, rest assured— we’ll be all over it. In the meantime, check out the following posts:
- Trump’s Cannabis Plays, Explained
- Marijuana to Schedule III is Necessary, But Let’s Be Honest About Its Limits
- One Signature Could Remove Marijuana From Schedule I Tomorrow
- Thoughts on the Terrible Pageant of Marijuana Rescheduling
- Three Myths and Three Facts on the HUGE Marijuana Rescheduling Recommendation
- What Rescheduling Means for Cannabis Investments
- Cannabis Rescheduling and Trademarks
- What Rescheduling Marijuana Means for California’s Cannabis Industry
- Federal Reclassification of Cannabis Will Not Kill the Industry
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