by Victoria Litman, M.Div., J.D., LL.M.
On May 21, 2024, the Drug Enforcement Administration (DEA) published a Notice of Proposed Rulemaking (NPRM) signed by Attorney General Merrick Garland in the Federal Register. This publication kicks off a 62-day comment period on a rule that would move marijuana to Schedule 3 of the Controlled Substances Act (CSA), classifying it as a substance with “a moderate to low potential for physical and psychological dependence.” The process of rescheduling may be long and is unlikely to create a pathway to federal compliance for state-legal marijuana businesses without further federal legislation. Ultimately, Congress likely will need to clarify the division of federal and state regulatory powers over cannabis.
The CSA is a federal law that classifies substances into schedules based on their potential for medical use and risk of abuse. The cannabis plant has been in the most restrictive category, Schedule 1, since the CSA was enacted in 1970. In the 2018 Farm Bill, cannabis plants with less than .3% concentration of the major psychoactive component of marijuana, delta-9-tetrahydrocannabinol (THC), were removed from the CSA and legally defined as hemp. All other cannabis remains Schedule 1, defined as a substance with no currently accepted medical use (CAMU), lack of safety for use under medical supervision, and a high potential for abuse.
Despite ongoing cannabis restrictions on the federal level, since 1996 many states have enacted legislation regulating and taxing medical and recreational marijuana and creating dispensaries for patients and consumers to access it. For several decades, these state-regulated businesses have existed under the shadow of federal illegality. Marijuana’s Schedule 1 status has impacted the economic feasibility of these businesses due to punitive federal taxes, significant burdens on banks willing to work with cannabis businesses, and no legal interstate commerce.
Since 2014, Congress has passed spending amendments that limit the use of federal funds for enforcement against state-compliant medical marijuana programs. From 2009-2018, several U.S. Attorneys General issued memos directing federal prosecutors to limit enforcement against all state-compliant marijuana businesses, medical and recreational. In 2018 Attorney General Jeff Sessions technically rescinded prior memos and encouraged prosecution of federally illegal marijuana activity; however, in practice there has been limited federal enforcement.
In the fall of 2022, President Biden issued a statement on marijuana reform, announcing federal pardons for some federal crimes involving marijuana and urging state governors to pardon state-level cannabis possession charges. Biden also asked the Secretary of the U.S. Department of Health and Human Services (HHS) and the Attorney General to initiate the administrative process to review the scheduling of cannabis under the CSA.
In August 2023, HHS sent an official recommendation to the DEA that it categorize marijuana under the less restrictive Schedule 3 category. The recommendation became public in early 2024 as a result of a lawsuit. Notably, the recommendation was the first statement from a federal government agency that marijuana has a currently accepted medical use and a low potential for abuse. An April 11, 2024 opinion from the Office of Legal Counsel (OLC) asserted that DEA must “accord significant deference” to HHS’ recommendation until the beginning of formal rulemaking. However, the NPRM notes that DEA has not decided how marijuana should be scheduled.
Now that the NPRM has been published, individuals and businesses may submit comments on the proposal until July 22nd. Interested persons (defined in regulations) may request an administrative law hearing before June 20th in accordance with the requirements of the Administrative Procedure Act.
Once comments are received and after any hearing, the DEA will review all evidence and generally respond to comments when publishing the final rule. There is no set statutory time for this process but in other situations, for example telemedicine, it has taken over a year.
Once published, the DEA’s final rule will not go into effect for 30 days, during which time aggrieved parties who submitted comments and can demonstrate they have standing can challenge the final rule in court. At least one major opposition group is already fundraising for the legal effort.
The two main issues likely to be challenged are the impact of rescheduling on adherence to United Nations treaty obligations and the way HHS determined that marijuana has a CAMU. For the first time, HHS considered the existing widespread use of medical marijuana under the supervision of health care practitioners within state medical marijuana programs. The OLC’s opinion addresses these issues directly.
A letter from Democratic senators opposing rescheduling and supporting removal of marijuana from the CSA entirely explains that although rescheduling likely provides tax relief, it does not impact criminal justice and immigration issues related to cannabis criminalization. Rescheduling would not be a panacea for the challenges faced by state legal marijuana businesses and would not necessarily make marijuana easier to research.
Schedule 3 drugs must be approved by the Food and Drug Administration (FDA,) prescribed by a doctor, and distributed by a pharmacy. Thus, none of the existing state-regulated marijuana dispensaries would be able to comply without extreme cost or further regulation or legislation. Another Attorney General’s memo is expected to clarify enforcement priorities against marijuana-related businesses that are legal in the state, but federally non-compliant.
I have previously written that no matter what happens with rescheduling, Congress will need to clarify the division of federal and state regulatory powers over cannabis. Congress must specify that FDA’s jurisdiction over cannabis should be no more than that over alcohol and designate cannabis in food as “generally recognized as safe.” These, and other FDA-related fixes, already drafted as part of proposed legislation, the States Reform Act, would create legal pathways for existing state-licensed marijuana operators to be in compliance with the Federal Food, Drug, and Cosmetic Act. By doing so, Congress could reduce unnecessary spending on unfeasible federal enforcement and preserve limited federal resources to evaluate clinical research on cannabis-derived drugs. Thus, even if marijuana is moved to Schedule 3, federal legislation is necessary. The only question is how long it will take Congress to act.
Victoria Litman M.Div, J.D., LL.M. is a nonprofit tax lawyer focused on the emerging cannabis and psychedelic tax exempt sectors and an adjunct law professor. She is also an Affiliated Researcher of the Project on Psychedelics Law and Regulation (POPLAR) at the Petrie-Flom Center for Health Law Policy, Biotechnology, and Bioethics at Harvard Law School.
