Potential Impacts of Rescheduling Cannabis as a Schedule III Drug

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Updated with New Commenting Deadline

The Drug Enforcement Administration (the “DEA”) issued a notice of proposed rulemaking on rescheduling marijuana on May 16, which was published in the Federal Register on May 21.  Several sources familiar had advised the press in late April that a notice was forthcoming, but this marks the official beginning of the process that could move cannabis from Schedule I to Schedule III of the Controlled Substances Act (the “CSA”).  If approved by Attorney General Merrick Garland, cannabis (also known as “marijuana” or “marihuana” under federal law) would be moved to Schedule III of the CSA without congressional action, due to an existing law that delegates the authority to add and remove drugs from the CSA and to move them between schedules to the U.S. Attorney General. 

The Attorney General will weigh public comments, as well as the rescheduling recommendation issued by the Department of Health and Human Services in August 2023, which included a number of conclusions on the legal test for rescheduling.  21 U.S.C. § 811(c).  Those interested in submitting comments may do so at  Comments are due by 11:59 p.m. ET on July 20, 2024.  Members of the public are also permitted to request a public hearing on the matter, though the Attorney General has discretion over whether to grant hearing requests.  Hearing requests must be made by mail, postmarked on or before June 20, 2024, and should be sent to three different people at the DEA, at the Springfield, Virginia addresses shown in the notice.

Changing cannabis from a Schedule I drug under the CSA to a Schedule III drug has the potential to upend the cannabis industry.  Such a shift would not fully legalize cannabis, but it would mean that cannabis could be prescribed for medical use and dispensation by businesses approved by the Food and Drug Administration (the “FDA”).  Rescheduling cannabis would only be the beginning in a series of steps to regulate the medical cannabis industry.  The FDA would need to issue guidance in a significant number of areas before prescriptions could be issued, such as labelling rules for cannabis and what forms, volumes, and concentrations of cannabis can be dispensed by prescription.

Although rescheduling cannabis as a Schedule III drug would not legalize recreational cultivation, sale, use, or other recreational cannabis activities under federal law, it could make operating a recreational cannabis business more lucrative.  The change would give cannabis businesses the opportunity to deduct their business expenses the same way that businesses in other industries do.  Section 280E of the Tax Code—which, to date, has barred cannabis cultivators, manufacturers, retailers, and others from deducting ordinary business expenses—only prohibits deducting business expenses related to the trafficking or sale of Schedule I and Schedule II drugs under the CSA.  While operating a cannabis business, including a medical cannabis business which does not meet the forthcoming regulatory requirements of the DEA and FDA, will still violate federal law, the prospective rescheduling will provide a significant economic opportunity for businesses operating in the state-authorized recreational and medical cannabis markets.

Please contact Catherine Burke, Esq. ( or Zachary Berger, Esq. ( of Gravel & Shea PC for more information or legal assistance.