DOJ Recommends Rescheduling Cannabis – What This Could Mean for the Cannabis Industry
On April 30, 2024, the US Department of Justice recommended that cannabis be rescheduled as a Schedule III controlled substance, a classification shared by prescription drugs such as ketamine and Tylenol with codeine. Cannabis is currently scheduled as a Schedule I controlled substance, a classification used for drugs with no medical value and a high potential for abuse. Rescheduling cannabis acknowledges the medical benefits of cannabis and carries broad implications for cannabis-related research and the industry at large.
The US Department of Justice’s recommendation is awaiting review by the White House Office of Management and Budget. Once published by the Federal Register, the formal rulemaking process, which is lengthy and could take months to complete, will begin. For now, we wait – and prepare.
Rescheduling cannabis could be a game-changer. Currently, 24 states have legalized cannabis for adult recreational use, and 38 states allow medical use of cannabis products. The cannabis industry is expected to generate $32.1 billion in sales this year. Not only could rescheduling increase financing options in the cannabis industry, but cannabis-related businesses would also be able to bank more easily. Most significantly, rescheduling could render moot IRS Code Section 280E, which denies standard business deductions from income generated by sales of cannabis. As a result, cannabis business could realize significant tax savings.
Rescheduling would also require federal officials to revisit far-reaching policies and legal implications, such as international treaties restricting cannabis distribution and rules governing how banks can (or cannot) interact with cannabis-related businesses. Rescheduling could also cause some initial confusion regarding whether cannabis-related businesses are governed by the Federal Drug Administration or state cannabis officials who have established their own regulatory systems.
We will continue to monitor this development and provide additional information as it becomes available.