DEA Publishes Marijuana Rescheduling NPRM: Schedule I to Schedule III

On May 21, 2024, the Drug Enforcement Administration published a Notice of Proposed Rulemaking (NPRM) in the Federal Register proposing to transfer marijuana from Schedule I to Schedule III of the Controlled Substances Act. This follows the August 2023 recommendation from the Department of Health and Human Services (HHS) and a directive from the Biden administration to review cannabis scheduling in light of evolving scientific understanding. Under the proposed rule, marijuana would no longer be classified as a substance with no accepted medical use and a high potential for abuse. Schedule III classification acknowledges accepted medical use and a moderate-to-low potential for abuse compared to Schedule I and II substances. Key implications if finalized: (1) Cannabis businesses could deduct ordinary and necessary business expenses under federal tax law, eliminating the 280E penalty estimated at $1.8 billion annually across the industry; (2) Research barriers would significantly diminish; (3) Interstate banking relationships would improve; (4) FDA would assume primary regulatory authority over medical cannabis products. The comment period runs 60 days from Federal Register publication. The rulemaking is expected to face legal challenges from both sides of the policy debate, and implementation timelines remain uncertain.