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Justice Department submits rule to re-schedule cannabis

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The Justice Department announced Thursday that it had submitted a rule that would ease restrictions on cannabis, but the move falls short of the full legalization sought by some advocates.

U.S. Attorney General Merrick Garland submitted a notice of proposed rulemaking to the Federal Register, kicking off a formal rulemaking process to consider moving marijuana from a Schedule I drug to a Schedule III drug under the Controlled Substances Act. News of the move first broke in late April.

“Too many lives have been upended because of our failed approach to marijuana,” President Joe Biden said in a video message posted on social media.

Marijuana has been an illegal Schedule I drug since 1970, but re-scheduling it to be a Schedule III drug could have a limited effect on cannabis consumers, although some cannabis businesses have said the move will allow them to deduct more business expenses, which could result in lower prices, but is not guaranteed.

President Joe Biden had asked Garland and the Secretary of Health and Human Services to launch a scientific review of how marijuana is scheduled under federal law back in 2022. Health and Human Services recommended that DEA reschedule marijuana to Schedule III in 2023.

For decades, cannabis has been classified as a Schedule I drug, a class defined as drugs with no accepted medical use and a high potential for abuse. Other Schedule I drugs include heroin, LSD, ecstasy and methaqualone, the hypnotic sedative sold under the brand name Quaalude before it was discontinued in the 1980s.

Under the plan, cannabis would be reclassified as a Schedule III drug, defined as drugs with a moderate to low potential for physical and psychological dependence. Other Schedule III drugs include products containing less than 90 milligrams of codeine per dosage unit, ketamine, anabolic steroids and testosterone.

“The rescheduling of a controlled substance follows a formal rulemaking procedure that requires notice to the public, and an opportunity for comment and an administrative hearing,” the Justice Department said in a statement Thursday. “This proposal starts the process, where the Drug Enforcement Administration will gather and consider information and views submitted by the public, in order to make a determination about the appropriate schedule. During that process, and until a final rule is published, marijuana remains a schedule I controlled substance.”

Matthew Schweich, executive director of the Marijuana Policy Project, previously called it a “modest step.”

“It is important to acknowledge that this rescheduling would not affect the criminalization of medical cannabis patients and cannabis consumers under state laws – so we must continue the work of enacting sensible and fair cannabis legalization and medical cannabis laws through state legislatures and ballot initiatives,” he said in a statement.

The rulemaking to reschedule marijuana could mean big changes for those in the industry, but most Americans won’t see any difference in how marijuana is handled elsewhere.

If Biden is successful, and cannabis is moved from a Schedule I drug to a Schedule III drug, it will still be illegal at the federal level.

While changes could be ahead for businesses and investors, they could have a limited impact on how the drug is treated throughout the country.

Cannabis businesses pay effective tax rates of more than 70% because of how cannabis is treated under the 280E tax code. Any company selling a Schedule I drug can’t deduct expenses such as travel and rent from their tax bill. That would change if cannabis was moved to Schedule III.

Those who use cannabis, legally or illegally, could benefit if lower taxes lead to lower prices for consumers. But that’s not guaranteed.

Tiffany Chappell Ingram, executive director of the Cannabis Business Association of Illinois, said the proposed rulemaking recognizes the medical benefits of the drug.

“In the decades since marijuana was erroneously categorized, Black and Brown communities have experienced countless repercussions stemming from the war on drugs. While this decision cannot reverse that damage, it does recognize the medical benefits of cannabis and enhances the viability of marijuana companies, including allowing for the same expense deductions enjoyed by other businesses,” she said in a statement Thursday. “This is an important step in the right direction for the cannabis industry and our society at large, and we hope this continues to pave the path towards federal legalization.”

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