At the time of writing, marijuana is classified as a Schedule I drug under the Controlled Substances Act. This means that marijuana is currently classified under the Controlled Substances Act as a drug that has a high risk for abuse and is considered to have no medical value, putting marijuana in the same level as other schedule I drugs such as heroin.

As a result of marijuana being classified under Schedule I, scientists and cannabis-related businesses have to face various roadblocks because of the current federal restrictions. The most noteworthy controversies that marijuana business have to deal with is Section 280e of the IRS tax code, which classifies marijuana-related businesses as drug traffickers under federal law and prevents them claiming standard business credit or deductions as a result.

Removal of marijuana-related business ventures from Section 280e would relieve their onerous tax burden. Photo Credit: 420 Tours, CC BY-SA 4.0 via Wikimedia Commons

Removal of marijuana-related business ventures from Section 280e would relieve their onerous tax burden. Photo Credit: 420 Tours, CC BY-SA 4.0 via Wikimedia Commons

On the research side, scientists currently have to go through a complex registration process with Drug Enforcement Administration (DEA) in order to access marijuana that would be used for their research, a controversy that the National Institute on Drug Abuse (NIDA) Director Nora Volkow has been openly critical of and has admitted that she personally avoids doing studies with Schedule I drugs because of the approval process with the DEA. But this is all something that has a high possibility to change in the very near future.

Back in late August, the U.S. Department of Health and Human Services (HHS) concluded after a nearly yearlong scientific review that recommend that marijuana be lowered from being classified as Schedule I to Schedule III, a much less restrictive classification that would put marijuana in the same classification as Anabolic steroids and ketamine.

Former Pennsylvania Health Secretary and HHS Assistant Secretary for Health, Rachel Levine informed the DEA of the HHS’s recommendation which comes two months after the HHS Secretary Xavier Becerra stated that he was hoping that the review would be concluded by the end of the year.

Assistant Secretary for Health Admiral Rachel L. Levine, US Public Health Service Commissioned Corps /Photo Credit:Sean Smith, U.S. Public Health Service Commissioned Corps, Public domain, via Wikimedia Commons

Assistant Secretary for Health Admiral Rachel L. Levine, US Public Health Service Commissioned Corps /Photo Credit:Sean Smith, U.S. Public Health Service Commissioned Corps, Public domain, via Wikimedia Commons

While the DEA still has the final say on reclassing marijuana, influence from the HHS’s findings on top of public support for reclassification, could result in the DEA following through on the recommendation sometime after they conclude their own review of the findings.

If marijuana’s classification is lowered, then charges for marijuana-related crimes at the federal level would be lowered, and the FDA could create federal guidelines or subject cannabis to existing regulatory authority.

Other noteworthy changes that marijuana-related business could see would be on the finance side of the industry. While marijuana would still not be legal nation-wide, one of the most noteworthy changes that we could see almost immediately as a result of reclassification would be the immediate removal all marijuana-related business ventures from Section 280e. Section 280e applies to businesses that deal with drugs classified as Schedule I and Schedule II, and does not allow them to deduct business expenses that all other business are entitled to do.

For many cannabis businesses, this would lower their extremely hefty tax burdens by almost seventy percent. It would also help level the playing field against the illegal marijuana enterprises, many of which are run by cartels and other dangerous operators that don’t pay attention to the laws and often pollute the environment.

Marijuana businesses currently have an onerous tax burden because of 280e. /Photo Credit: My 420 Tours, CC BY-SA 4.0 via Wikimedia Commons

Marijuana businesses currently have an onerous tax burden because of 280e. /Photo Credit: My 420 Tours, CC BY-SA 4.0 via Wikimedia Commons

These companies would also no longer face the credit restrictions of Section 280e, would be able to take in more debt that could be used for expansions into new business projects that wouldn’t be possible currently. Investors that might be currently more reluctant to hand business loans to cannabis companies could potentially reconsider their reluctance if the government shows signs of relaxing it’s stance on the topic.

When it comes to states where medical or recreational marijuana have yet to be legalized, marijuana being moved from Schedule I to Schedule III won’t change much in near future. Marijuana still won’t be legal at the federal level and while they aren’t as strict as the regulations for Schedule I substances the Controlled Substance Act still has plenty of regulations for Schedule III drugs.

The Food and Drug Administration also has to approve how different types of drugs are manufactured and distributed. In other words, if the FDA approves one type of drug containing marijuana, it doesn’t mean that they would approve all forms of cannabis use and this means little change for recreational marijuana and most types of medical marijuana.

Though the silver lining for people in these is that this could create an increased momentum towards the possibility of more state and hopefully even federal legalization with advocates citing the deregulation as a way to justify rolling back policies even further.

Marijuana stocks could get a boost if Cannabis is reclassified to Schedule III. Photo Credit: Gerd Almann from Pixabay

Marijuana stocks could get a boost if Cannabis is reclassified to Schedule III. Photo Credit: Gerd Almann from Pixabay

There have also been some that see reclassification as a major opportunity for publicly traded cannabis companies such as Curaleaf (CURA), Cresco Labs (CNSX), Green Thumb Industry (GTII), and Trulieve (TRUL) to increase their number of stockholders.

To wrap things up, the overall benefits of the reclassification of marijuana from a Schedule I drug to a Schedule III would most likely be the following:

  • Charges for marijuana-related crimes at the federal level would be lowered
  • Less restrictions when doing scientific research on the benefits of marijuana
  • FDA could create federal guidelines or subject cannabis to existing regulatory authority
  • Immediate removal all marijuana-related business ventures from Section 280e relieving their onerous tax burden
  • Cannabis companies could potentially be traded on more stock exchanges
  • Could create an increased momentum towards the possibility of federal legalization

While many were hoping that the HHS’s review would have resulted in marijuana being removed from the Controlled Substance act all together and be treated in the same category as alcohol, plenty of advocates see this as a step in the right direction for now. Hopefully sometime in the next year or so we’ll see the DEA conclude they’re own review and decide to reclassify marijuana down to Schedule III.

In the meantime, we could see even more changes happen at the state-level with the most noteworthy change at the moment being in Ohio, which will have Marijuana Legalization on the ballot this November.

If passed, Ohio Issue 2 will result in allowing the sale and purchase of recreational marijuana to individuals 21+ in the state, making it the 24th state to do so. We have also seen legislation proposals in Pennsylvania and a petition in Florida that could result in recreational legalization in those states next year.

AJ Favorito is a freelance writer, photographer, and filmmaker specializing in comedy and animation. 

Works Cited

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“Florida Cannabis Activists Gather Enough Signatures to Put Legalization on 2024 Ballot.” Business Insider, Business Insider, 1 June 2023, markets.businessinsider.com/news/stocks/florida-cannabis-activists-gather-enough-signatures-to-put-legalization-on-2024-ballot-1032365288.

Jaeger, Kyle. “Top Federal Health Agency Says Marijuana Should Be Moved to Schedule III in Historic Recommendation to DEA.” Marijuana Moment, Marijuana Moment, 30 Aug. 2023, www.marijuanamoment.net/top-federal-health-agency-says-marijuana-should-be-moved-to-schedule-iii-in-historic-recommendation-to-dea/.

Krane, Kris. “HHS Call to Reschedule Marijuana Is a Big Deal: Here’s Why.” Forbes, Forbes Magazine, 12 Sept. 2023, www.forbes.com/sites/kriskrane/2023/08/31/hhs-call-to-reschedule-marijuana-is-a-big-deal-heres-why/?sh=28db8d992a4a.

“Ohio Issue 2, Marijuana Legalization Initiative (2023).” Ballotpedia, ballotpedia.org/Ohio_Issue_2,_Marijuana_Legalization_Initiative_(2023). Accessed 18 Sept. 2023.

“State Sen. Dan Laughlin Introduces Bipartisan Approach to Marijuana Legalization in Pennsylvania.” Erie News Now, WICU and WSEE, 6 July 2023, www.erienewsnow.com/story/49162290/state-sen-dan-laughlin-introduces-bipartisan-approach-to-marijuana-legalization-in-pennsylvania.

Pendarvis, Mary. “From Schedule I to Schedule III: Potential Shift in Marijuana’s Legal Status.” McGlinchey Stafford PLLC, McGlinchey Stafford, 31 Aug. 2023, www.mcglinchey.com/insights/from-schedule-i-to-schedule-iii-potential-shift-in-marijuanas-legal-status/.