Dan McKillop, Esq.โ€™s Post

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Partner | Environmental Law | Chair, Cannabis and Psychedelics Law Practice Group | Co-chair, NJSBA Cannabis and Psychedelics Law Special Committee | Co-Founder, NJSBA Psychedelics Law Subcommittee

๐‚๐€๐๐๐€๐๐ˆ๐’ ๐”๐๐ƒ๐€๐“๐„ Yesterday DEA announced it will propose that cannabis be reclassified from Schedule 1 to Schedule 3 of the CSA. What does this mean? Here's what Schedule 1 and Schedule 3 substances are and brief (and partial) notes on what DEA's announcement means and doesn't mean, what rescheduling would do and not do, and the path forward. ๐’๐œ๐ก๐ž๐๐ฎ๐ฅ๐ž ๐Ÿ ๐š๐ง๐ ๐’๐œ๐ก๐ž๐๐ฎ๐ฅ๐ž ๐Ÿ‘ ๐ฌ๐ฎ๐›๐ฌ๐ญ๐š๐ง๐œ๐ž๐ฌ Schedule 1 substances are substances with โ€œHigh abuse potential with no accepted medical useโ€ such as heroin. Schedule 3 substances have accepted medical value but are available legally only with a prescription.  ๐–๐ก๐š๐ญ ๐ญ๐ก๐ž ๐š๐ง๐ง๐จ๐ฎ๐ง๐œ๐ž๐ฆ๐ž๐ง๐ญ ๐ฆ๐ž๐š๐ง๐ฌ ๐š๐ง๐ ๐๐จ๐ž๐ฌ๐งโ€™๐ญ ๐ฆ๐ž๐š๐ง 1) DEA has accepted the prior determination by the Department of Health and Human Services that cannabis โ€œhas a currently accepted medical use in treatment in the United Statesโ€ and has a โ€œpotential for abuse less than the drugs or other substances in Schedules 1 and 2โ€. 2) The announcement does not make cannabis federally legal. 3) The announcement does not expunge prior cannabis convictions. ๐–๐ก๐š๐ญ ๐ซ๐ž๐ฌ๐œ๐ก๐ž๐๐ฎ๐ฅ๐ข๐ง๐  ๐ฐ๐จ๐ฎ๐ฅ๐ ๐๐จ 1) Rescheduling would enable state-legal cannabis entities to take advantage of several federal tax deductions currently unavailable to them under IRS code section 280E, thereby significantly improve their profitability and financial health.  2) Rescheduling would facilitate greater cannabis research and development for therapeutic uses that is precluded with respect to Schedule 1 substances. 3) Rescheduling would likely require state-legal cannabis entities to comply with federal production, record-keeping, and prescribing requirements for Schedule 3 substances. ๐–๐ก๐š๐ญ ๐ซ๐ž๐ฌ๐œ๐ก๐ž๐๐ฎ๐ฅ๐ข๐ง๐  ๐ฐ๐จ๐ฎ๐ฅ๐ ๐ง๐จ๐ญ ๐๐จ  1) Rescheduling would not make cannabis federally legal or enable state-licensed businesses to transact in interstate commerce. 2) Rescheduling would not expunge cannabis convictions.  3) Rescheduling would not necessarily facilitate banking services for cannabis entities. Other proposed federal reforms are being considered towards this end now. ๐๐š๐ญ๐ก ๐…๐จ๐ซ๐ฐ๐š๐ซ๐ 1) State cannabis markets will likely be unaffected in the short to medium term.  2) The relief from 280E tax restrictions may spur additional interest in obtaining state cannabis licenses.  3) Timeline: the rescheduling process will take months. DEA's proposal will be reviewed by the White House Office of Management and Budget, there will be public notice and comment, and then review by an administrative judge. DEA will then publish the final rule in the Federal Register, and after a waiting period the new law would become effective, barring any legal challenges (which are likely to be made by stakeholders). Fast times. Stay tuned.

Jennifer Maden

Assistant Dean @ Rowanโ€™s Rohrer College of Business | MBA, MA ESL

2mo

Thanks for the clarity in this recap, very useful!

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