yesterday afternoon Washington Post and other sources report that President Trump is expected to issue an executive order directing federal agencies to reclassify marijuana as Schedule III. It’s some sexy reporting, though WaPo sources cautioned that “Trump could still change his mind” and “(a) White House official said no final decisions have been made on moving marijuana.”

That said, this is a story with legs, and I want to get back to some important points – aside from my usual refrain that marijuana shouldn’t be scheduled at all. Here are some important points to understand about a potential move to Schedule III.

Trump has options for moving marijuana

A WaPo story reports that an executive order may be in the cards. More likely – and depending on the content of the order – it will lead to a more direct, decisive approach than a formal one.”statement” and “request” released by President Biden in October 2022, which brought the redistricting process to a halt.

In August of this year, when Trump told reporters that his administration was considering moving marijuana, I laid out the following options:

1. resume the stalled rulemaking process, adopt last year’s proposal to list marijuana in Schedule III;
2. begin a new rulemaking process, presumably with a new proposed rule; or
3. do away with rulemaking hearings entirely and the DOJ simply publishes a final rule listing marijuana in Schedule III (or wherever); or
4. do nothing. Say, “We like marijuana where it’s at, science and treaties be damned.”

I noted:

One thing to address from the outset is the oft-repeated fiction that Trump could simply restore or repeal marijuana on his own via executive order. He can’t. However, he could lead the process in the same way that Biden did when Biden issued a request in 2022 that ordered HHS to review the controlled status of marijuana. Basically, Trump can say whatever he wants to see happen, and it’s likely to happen — especially given the strict loyalty the Justice Department has shown to him.

By this point, my colleague Jason Adelstone had arrived persuasive argument for the fifth option, which is that Trump could rely on Attorney General Pam Bondi to move marijuana on his own, even without rulemaking, under 21 USC § 811(d)(1). Jason concluded that “all it would take is a press release and a pen.”

Given the novelty of that approach, it is a given Prohibitionist Bondisuch a result would surprise me. In my previous post, I advocated for Option #3, which is the publication of the DOJ final rule. I explained:

Marijuana can then move to Schedule III (or wherever) within 30 or 60 days of the rules being published. Of course, people can appeal this rule. However, given the strength of the HHS findings and the apparent legal authority behind the Justice Department, it seems like an uphill battle.

I hope this is the chosen path and the administration will learn a lesson numerous, predictable errors former President Biden, DOJ Merrick Garland, and the Department of Anti-Ann Milgram when that administration made its failed foray into Schedule III.

The legal cannabis industry has benefited the most from marijuana’s transition

Schedule III was something of a holy grail for the cannabis industry, primarily because marijuana businesses would finally be taxed like other businesses. I explained:

When marijuana falls into Schedule III, the margin destruction statute, known as IRC § 280E will not apply and the cannabis industry will be changed forever. At the same time, the taxation of cannabis at the state level will not change. Or it could change for the worse if states feel emboldened to raise taxes on hemp in the absence of § 280E.

. . . .

However, I cannot stress enough that removing § 280E would change the industry forever. Having worked with cannabis companies for 13 years, I see taxation as the biggest insult to marijuana businesses – more than access to banking, intellectual property coverage, no bankruptcy, whatever. That would be HUGE.

Five things Schedule III won’t fix

We would like to remind people that Schedule III marijuana is not a one-size-fits-all solution. Here are five of the most persistent problems, in my opinion:

Criminal penalties for individuals. Possession, distribution and sale of non-FDA and non-hemp cannabis will still be criminal acts. State and local laws will not be violated in any way. We could see another 200,000 local arrestsannually, surrounded by List III.

Business headache. Like end users, state-licensed cannabis businesses would not theoretically be immune from federal prosecution. In addition, they will remain embargoed by the bankruptcy courts, will continue to fight over trademarks, and will still pay a premium for many shared services. Moreover, the intensive government regulation to which they are subject is unlikely to ease.

Banking issues. This is related to the above, and although banking it’s not the headache it used to beit still hurts. Schedule III marijuana would still be a controlled substance, and state-licensed businesses would still be “dealing” in that controlled substance, which is against federal law. Banks will continue to struggle with these dynamics.

Headache research. Contrary to popular belieffederal research won’t get any easier without significant intervention from Congress and administrations. It’s really a puzzle, but that’s our prediction.

Hemp. The industry of hop products from hemp took a big kick in the shorts last month when Congress passed PL 119-37. Most of these products will not survive the new law. The state-legal marijuana industry will benefit from less competition, and if marijuana becomes Schedule III, those operators will be less likely to lobby the hemp crowd for a “one-size-fits-all” federal hemp policy.

Schedule III Marijuana – Completion

I hope this happens and Christmas comes early for all our industry customers. However, I am cautious after viewing and to write about the rumor of carrying marijuana for most of the decade.

Source: Legal Canna Blog