September 9, 2023
The Biden Administration is taking the first step in possibly legalizing marijuana federally.
What? I thought it was already legal?
Well, it may be legal in your state, but federally it’s not. And that contradiction has lead to all kinds of issues. Issues that could be resolved very soon.
Ok…before I tell you what just happened you have to understand the Controlled Substances Act of 1970. That federal law categorizes drugs depending on medical use and the drug’s “abuse or dependency potential.” There are five schedules. Schedule 1 drugs are substances with no currently accepted medical use and high potential for abuse – like, the most dangerous drugs. And schedule 5 drugs have the lowest potential for abuse and have limited quantities of narcotics. Currently, marijuana is classified as a schedule one drug. That’s the same category as heroin and LSD.
Ok – now that you understand the law, here’s what’s happening. In 2022 President Biden told the Secretary of Health and Human Services to review how marijuana is classified under the Controlled Substances Act. And last week – it appears that that federal review is over because HHS fired off a letter to the Drug Enforcement Agency recommending they move marijuana to a lower risk category. From schedule one to schedule three. Schedule three drugs are categorized as having “moderate to low potential for physical and psychological dependence and some medical value” and include drugs like ketamine and testosterone.
So, what does it matter if marijuana’s classification changes?
Money and access.
So yes – it’s likely that you live in a state where marijuana is fully legal, legal for medical purposes or a mix of the two. But because it’s a schedule one drug – that makes it federally illegal. And because of that banks have been hesitant to do business with companies involved with cannabis for fear of violating those federal laws. But if the classification changes to a lower category, those banks may be more willing to do business together and those companies get access to tax benefits that other companies have…like tax deductions for business expenses like salaries and benefits for employees. Right now business that sell marijuana are taxes on gross income but are not allowed to deduct any business expenses because even though it may be legal in the state — they’re dealing with a schedule one drug.
Shifting from schedule one to schedule three may also make it easier to conduct research on the health effects of cannabis consumption and for pharmaceutical companies to bring cannabis-based drugs to market.
But here’s the thing, there are lots of states where possession of marijuana is a still a criminal offense and changing from schedule one to schedule three federally, mostly — won’t change that. In some states it may reduce or eliminate the criminal penalties– but in others it won’t.
And lastly — changing the classification may give a bipartisan group of lawmakers in Washington DC the momentum they need to finally get several pieces of legislation across the finish line that would legalize marijuana federally and change the banking regulations for the cannabis industry.
But – there is a long road between now and then. Just because the Department of Health and Human Service’s review of marijuana is complete and this recommendation has been made, does not mean the DEA has to follow that recommendation. In fact in 2016, when it was recommended, the DEA denied it. Right now, the DEA is conducting its own review and then will ultimately make a decision about whether to change the classification. As of today, there is no timeframe for that decision.
