Wheels Moving on Reclassification of Cannabis as AG Launches Rulemaking Process

On May 16, 2024, President Joe Biden announced that his administration is committed to reclassifying cannabis. Shortly thereafter, Attorney General Merritt Garland initiated the formal rulemaking process to move cannabis from a Schedule I to a Schedule III drug under the Controlled Substances Act (CSA).

“This is monumental,” President Biden said in a video statement announcing the rescheduling. “Today my administration took a major step to reclassify cannabis from a Schedule I to a Schedule III drug. It’s an important move towards reversing longstanding inequities.”

While the Department of Justice’s Notice of Proposed Rulemaking (NPRM) to transfer cannabis to Schedule III is welcome news for the cannabis industry, the change is not yet a done deal. Once published in the Federal Register, the proposal will be subject to a 60-day comment period, which is expected to generate significant feedback, as well as a potential administrative hearing by the U.S. Drug Enforcement Agency (DEA). During that process, and until a final rule is published, cannabis remains a Schedule I controlled substance.

Classification of Cannabis

Cannabis has been classified as a Schedule I drug since the CSA was enacted in 1970. The Schedule I classification is reserved for drugs with “high abuse potential with no accepted medical use,” such as heroin.  Meanwhile, Schedule III drugs have accepted medical value but are available legally only with a prescription.

On October 6, 2022, President Joe Biden asked the Attorney General and the Secretary of Health and Human Services (HHS) to conduct a scientific review of how cannabis is scheduled under federal law. The review conducted by HHS concluded that cannabis “has a currently accepted medical use in treatment in the United States” and has a “potential for abuse less than the drugs or other substances in Schedules I and II.” HHS also recommended to the DEA that cannabis be rescheduled.

After receiving HHS’s recommendations last August, the Attorney General sought the legal advice of the Justice Department’s Office of Legal Counsel (OLC). The OLC supported rescheduling the drug from a legal perspective. In reaching its decision, the OLC determined that DEA’s current approach to determining whether a drug has a “currently accepted medical use in treatment in the United States” (CAMU) is “impermissibly narrow.” It went on to find that satisfying HHS’s two-part inquiry is sufficient to establish that a drug has a CAMU even if the drug has not been approved by the U.S. Food and Drug Administration (FDA) and would not satisfy DEA’s more stringent five-part test.

Role of the DEA and DOJ in Scheduling Drugs

The CSA authorizes the Attorney General to add, transfer, and remove drugs from the schedules using formal rulemaking procedures. The Attorney General has in turn generally delegated these functions to the Administrator of the Drug Enforcement Administration (DEA). However, as noted in the NPRM, the Department of Justice can independently exercise its authority under the CSA, which it did in this case.

“The HHS Assistant Secretary for Health has provided a recommendation for transferring marijuana to schedule III,” the NPRM states. “In light of that recommendation, the Attorney General is exercising the Attorney General’s authority under 21 U.S.C. 811(a) to initiate a rulemaking that proposes the placement of marijuana in schedule III.”

In determining that rescheduling cannabis is appropriate, the DOJ conducted an eight-factor analysis that considers criterion such as abuse potential, pharmacological effects, public health risks, and dependence liability. “Overall, these data demonstrate that, although cannabis is associated with a high prevalence of abuse, the profile of and propensity for serious outcomes related to that abuse lead to a conclusion that cannabis is most appropriately controlled in schedule III under the CSA,” the NPRM states.

Notably, the NPRM makes several references to the DEA’s belief that additional information is required to make an informed decision regarding rescheduling. How this will impact the process, particularly the timeline for finalizing the rule, is unclear at this point.

NPRM Highlights Caveats to Rescheduling Cannabis

In its NPRM, the DOJ emphasized what reclassification would not do. Most notably, cannabis would remain illegal under federal law, even if it is rescheduled. The rulemaking states:

If marijuana is transferred to Schedule III, the regulatory controls applicable to Schedule III controlled substances would apply, as appropriate, along with existing marijuana-specific requirements and any additional controls that might be implemented, including those that might be implemented to meet U.S. treaty obligations. The manufacture, distribution, dispensing, and possession of marijuana would also remain subject to applicable criminal prohibitions under the CSA.

The rulemaking also confirms that any drugs containing a substance within the CSA’s definition of “marijuana” would also remain subject to the applicable prohibitions in the Federal Food, Drug, and Cosmetic Act (FDCA). Additionally, rescheduling “would not apply to synthetically derived THC, which is outside the CSA’s definition of marijuana.”

Key Takeaway

The DOJ’s NPRM to reschedule cannabis to Schedule III is a historic policy shift that will greatly benefit the cannabis industry, particularly with regard to tax treatment and medical research opportunities. However, it is important to recognize that rescheduling does not legalize cannabis at the federal level. (You can read more about what the reclassification means here.)

Finally, although the full impact of the DEA’s policy shift is still months away, we encourage impacted entities to contact the attorneys of Scarinci Hollenbeck’s dedicated Cannabis Law Practice Group with any questions.