MJBiz - November/December 2023 - 52

'Unprecedented'
Steps Forward
DEA likely to
approve marijuana
rescheduling
recommendation,
but election and
lawsuits could get
in the way
By Chris Roberts
F
rom zealous drug warrior to outof-touch
elder statesman to the
regulated marijuana industry's
savior apparent.
President Joe Biden's long arc in public
life might have more twists ahead. One
year after setting into motion the most
signifi cant transformation in federal
marijuana policy since 1970, the same
politician whose views as a U.S. senator
escalated the drug war to its apex has
now, as president, laid the cornerstone
for a stable and lasting legal marijuana
industry.
" Love him or hate him, " said Andrew
Kline, Denver-based senior counsel
at national law fi rm Perkins Coie,
" this industry should show him some
appreciation. "
HOW IT STARTED
Drug reformers had low hopes for
a Biden White House. A law-andorder
hard-liner as a senator, Biden
was routinely ridiculed on the 2020
campaign trail for refusing to adapt
to changing attitudes about drug use.
But his October 2022 declaration that
a half-century of federal marijuana
prohibition was a " failed approach " is
the most pro-reform statement from a
sitting president.
Biden's accompanying executive
order for federal health regulators to
" expeditiously " reevaluate the way the
country regulates marijuana culminated
with an Aug. 29 recommendation from
the U.S. Department of Health and
Human Services (HSS) that the drug be
reclassifi ed as a Schedule 3 controlled
substance.
The recommendation is the federal
government's fi rst admission that
marijuana has medicinal value. Legal
experts say the Drug Enforcement
Administration has no choice but to
codify the recommendation, which
would immediately relieve cannabis
operators from Section 280E of the IRS
code. 280E prohibits plant-touching
businesses from taking normal business
deductions on federal tax returns.
Given that the recommendation
appeared less than a year after the
review process was launched, it is a
clear indicator that the White House is
taking drug-policy reform seriously. A
second Biden term, if it materializes,
52 November-December 2023 | MJBizMagazine
The U.S. Department of Health and
Human Services this summer recommended
that marijuana be removed
from Schedule 1 of the Controlled
Substances Act and instead be classifi
ed under Schedule 3. Executives
in the regulated cannabis industry
have long called for descheduling
marijuana, while rescheduling
presents a mixed bag for businesses
in the space. Potential pros and cons
include:
* Section 280E of the IRS tax code
does not apply to companies
producing drugs classifi ed under
Schedule 3, meaning marijuana
businesses would no longer be
subject to the heavy tax bills that
currently plague state-regulated
companies.
* While Schedule 3 drugs are
acknowledged to have " medicinal
value, " pharmaceutical companies
would likely be wary of spending
millions of dollars to research
products that consumers in 40 states
can legally access.
* Rescheduling alone would not
protect fi nancial institutions
that off er banking services to
plant-touching companies. Such
protections would need to come
from federal lawmakers in the form
of the SAFER Banking Act.
* Likewise, major U.S. stock
exchanges are unlikely to list
marijuana companies until
Congress signals that the exchanges
themselves would be protected.
* California, Oregon and Washington
state already have passed laws
allowing interstate commerce in the
case of marijuana legalization, but it
is unknown whether law enforcement
would continue, ater rescheduling,
to crack down on the transportation
of marijuana across state lines.
might trend toward interstate
marijuana commerce and federal
legalization, observers say.
HOW IT'S GOING
As of mid-October, the U.S. Drug
Enforcement Administration was
evaluating that recommendation,
the fi nal step before the DEA issues a
proposed change to federal law.

MJBiz - November/December 2023

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