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‘Biggest thing, ever’: Marijuana rescheduling recommendation hailed
The disclosure Wednesday that top Biden administration health officials this week officially recommended marijuana be reclassified from a Schedule 1 substance to Schedule 3 – the same category as Tylenol with codeine – was hailed as the biggest development in MJ policy reform in more than 50 years.
Marijuana investors concurred, boosting stocks of major U.S. cannabis companies approximately 20%.
“It’s historic. It’s the biggest thing that’s happened in cannabis reform at the federal level, ever,” Shane Pennington, a partner at Washington DC-based law firm Porter Wright, told MJBizDaily in a phone interview.
While much more needs to happen before tangible effects are felt – including a separate U.S. Drug Enforcement Administration review and, possibly, a judicial review –the health officials’ statement that cannabis has medical value remains “a game changer,” Pennington noted.
“This is essential to ending the dumpster fire that is cannabis policy,” added Pennington, who has published extensively on federal marijuana law.
“It’s a huge deal. And it has an even broader effect.”
Rescheduling marijuana would dramatically reduce the steep federal taxes now paid by U.S. marijuana companies.
It also could spur more banks and financial institutions to offer traditional banking services to cannabis companies, reducing their long dependency on cash.
The letter Tuesday from Assistant Secretary for Health Rachel Levine, sent to DEA Administrator Anne Milgram – first reported by Bloomberg News – is the latest development in a first-of-its-kind process launched last October by President Joe Biden.
For more than 50 years, federal law has classified marijuana as a Schedule 1 controlled substance, officially designated as more harmful than fentanyl and methamphetamine and on the same level as heroin and LSD.
Schedule 1 cripples industry
Long dismissed as scientifically and medically unsound by a generation of experts, that classification has also stymied the state-legal marijuana industry, shutting off access to banks, blocking typical business deductions on tax returns and forbidding interstate commerce.
On Oct. 6, 2022, calling current federal drug laws a “failed approach,” Biden announced he would direct the attorney general and the secretary of the Department of Health and Human Services to “review expeditiously how marijuana is scheduled under federal law.”
Earlier in the summer, Health Secretary Xavier Becerra suggested that an HHS review could be completed by the end of the year.
Instead, “This administrative process was completed in less than 11 months, reflecting this department’s collaboration and leadership to ensure that a comprehensive scientific evaluation be completed and shared expeditiously,” an HHS spokesperson told MJBizDaily via email.
A DEA spokesperson confirmed receipt of the letter from the assistant secretary for health in a statement Wednesday:
“DEA has the final authority to schedule or reschedule a drug under the Controlled Substances Act. DEA will now initiate its review.”
The agency declined to comment further.
Neither agency provided a copy of the letter, which MJBizDaily requested via a Freedom of Information Act request.
DEA response before Election Day – or sooner?
There’s no hard and fast deadline for a DEA response, but most observers believe a recommendation is likely before the November 2024 presidential election.
However, the unprecedented speed with which the HHS completed its leg of the process suggests the DEA could issue a recommendation even sooner – which would then trigger a federal rulemaking process.
More federal reform would be required for marijuana companies to legally ship product between states or other countries.
But the cannabis industry was near ecstatic Wednesday, as the value of shares in major multistate operators such as Cresco Labs and Green Thumb Industries shot up by more than 20%.
The gains reflected the knowledge that the IRS’ punitive Section 280E, which prohibits marijuana companies from taking typical business deductions on their federal tax returns, would no longer apply – even as business leaders called for rescheduling to happen on an even more accelerated timeline.
“We hope that this recategorization occurs promptly,” said Boris Jordan, executive chair of New York-based MSO Curaleaf Holdings.
“It’s very clear that Americans are ready for this, and it’s time for our political leaders to catch up.”
The future of SAFE Banking
Wednesday’s revelation could also help break a logjam in Congress, where still-necessary reform measures such as federal legalization and banking protections remain in near-limbo.
“Ultimately, I believe that cannabis should be descheduled with strong federal regulations put in place to protect public health and safety,” said U.S. Sen. Ron Wyden, an Oregon Democrat and the lead sponsor of the SAFE Banking Act, which would forbid federal banking regulators from penalizing financial institutions that do business with state-legal marijuana operators.
Previous versions of SAFE Banking have passed the House of Representatives seven times only to be blocked in the Senate, though the bill did have an informational hearing in May.
Experts say SAFE Banking will still be necessary even if marijuana is rescheduled.
“However, the recommendation of HHS to reschedule cannabis as a Schedule III drug is not inconsequential,” Wyden added in his statement.
“If HHS’s recommendation is ultimately implemented, it will be a historic step for a nation whose cannabis policies have been out of touch with reality.”
Other lawmakers were more circumspect.
“This is a step in the right direction but it is not sufficient,” said U.S. Rep. Earl Blumenauer, an Oregon Democrat and chair of the House Cannabis Caucus.
“I hope it is followed by more significant reforms,” he added. “This is long overdue.”
Source: https://mjbizdaily.com/biden-health-officials-say-marijuana-should-be-rescheduled/
New Mexico regulators fined a cannabis operator nearly $300,000 and revoked its license after the company allegedly created fake reports in the state’s traceability software.
The New Mexico Cannabis Control Division (CCD) accused marijuana manufacturer and retailer Golden Roots of 11 violations, according to Albuquerque Business First.
Golden Roots operates the The Cannabis Revolution Dispensary.
The majority of the violations are related to the Albuquerque company’s improper use of BioTrack, which has been New Mexico’s track-and-trace vendor since 2015.
The CCD alleges Golden Roots reported marijuana production only two months after it had received its vertically integrated license, according to Albuquerque Business First.
Because cannabis takes longer than two months to be cultivated, the CCD was suspicious of the report.
After inspecting the company’s premises, the CCD alleged Golden Roots reported cultivation, transportation and sales in BioTrack but wasn’t able to provide officers who inspected the site evidence that the operator was cultivating cannabis.
In April, the CCD revoked Golden Roots’ license and issued a $10,000 fine, according to the news outlet.
The company requested a hearing, which the regulator scheduled for Sept. 1.
At the hearing, the CCD testified that the company’s dried-cannabis weights in BioTrack were suspicious because they didn’t seem to accurately reflect how much weight marijuana loses as it dries.
Company employees also poorly accounted for why they were making adjustments in the system of up to 24 pounds of cannabis, making comments such as “bad” or “mistake” in the software, Albuquerque Business First reported.
Golden Roots was fined $298,972.05 – the amount regulators allege the company made selling products that weren’t properly accounted for in BioTrack.
The CCD has been cracking down on cannabis operators accused of selling products procured from out-of-state or not grown legally:
- Regulators alleged in August that Albuquerque dispensary Sawmill Sweet Leaf sold out-of-state products and didn’t have a license for extraction.
- Paradise Exotics Distro lost its license in July after regulators alleged the company sold products made in California.
Golden Roots was the first alleged rulebreaker in New Mexico to be asked to pay a large fine.
Source: https://mjbizdaily.com/new-mexico-cannabis-operator-fined-loses-license-for-alleged-biotrack-fraud/
Four marijuana companies, including a multistate operator, have filed a lawsuit against U.S. Attorney General Merrick Garland in which they allege the federal MJ prohibition under the Controlled Substances Act is no longer constitutional.
According to the complaint, filed Thursday in U.S. District Court in Massachusetts, retailer Canna Provisions, Treevit delivery service CEO Gyasi Sellers, cultivator Wiseacre Farm and MSO Verano Holdings Corp. are all harmed by “the federal government’s unconstitutional ban on cultivating, manufacturing, distributing, or possessing intrastate marijuana.”
Verano is headquartered in Chicago but has operations in Massachusetts; the other three operators are based in Massachusetts.
The lawsuit seeks a ruling that the “Controlled Substances Act is unconstitutional as applied to the intrastate cultivation, manufacture, possession, and distribution of marijuana pursuant to state law.”
The companies want the case to go before the U.S. Supreme Court.
They hired prominent law firm Boies Schiller Flexner to represent them.
The New York-based firm’s principal is David Boies, whose former clients include Microsoft, former presidential candidate Al Gore and Elizabeth Holmes’ disgraced startup Theranos.
Similar challenges to the federal Controlled Substances Act (CSA) have failed.
One such challenge led to a landmark Supreme Court decision in 2005.
In Gonzalez vs. Raich, the highest court in the United States ruled in a 6-3 decision that the commerce clause of the U.S. Constitution gave Congress the power to outlaw marijuana federally, even though state laws allow the cultivation and sale of cannabis.
In the 18 years since that ruling, 23 states and the District of Columbia have legalized adult-use marijuana and the federal government has allowed a multibillion-dollar cannabis industry to thrive.
Since both Congress and the U.S. Department of Justice, currently headed by Garland, have declined to intervene in state-licensed marijuana markets, the key facts that led to the Supreme Court’s 2005 ruling “no longer apply,” Boies said in a statement Thursday.
“The Supreme Court has since made clear that the federal government lacks the authority to regulate purely intrastate commerce,” Boies said.
“Moreover, the facts on which those precedents are based are no longer true.”
Verano President Darren Weiss said in a statement the company is “prepared to bring this case all the way to the Supreme Court in order to align federal law with how Congress has acted for years.”
While the Biden administration’s push to reschedule marijuana would help solve marijuana operators’ federal tax woes, neither rescheduling nor modest Congressional reforms such as the SAFER Banking Act “solve the fundamental issue,” Weiss added.
“The application of the CSA to lawful state-run cannabis business is an unconstitutional overreach on state sovereignty that has led to decades of harm, failed businesses, lost jobs, and unsafe working conditions.”
Alabama regulators are targeting Dec. 1 to award the first batch of medical cannabis business licenses after the agency’s first two attempts were scrapped because of scoring errors and litigation.
The first licenses will be awarded to individual cultivators, delivery providers, processors, dispensaries and state testing labs, according to the Alabama Medical Cannabis Commission (AMCC).
Then, on Dec. 12, the AMCC will award licenses for vertically integrated operations, a designation set primarily for multistate operators.
Licenses are expected to be handed out 28 days after they have been awarded, so MMJ production could begin in early January, according to the Alabama Daily News.
That means MMJ products could be available for patients around early March, an AMCC spokesperson told the media outlet.
Regulators initially awarded 21 business licenses in June, only to void them after applicants alleged inconsistencies with how the applications were scored.
Then, in August, the state awarded 24 different licenses – 19 went to June recipients – only to reverse themselves again and scratch those licenses after spurned applicants filed lawsuits.
A state judge dismissed a lawsuit filed by Chicago-based MSO Verano Holdings Corp., but another lawsuit is pending.
Source: https://mjbizdaily.com/alabama-plans-to-award-medical-cannabis-licenses-dec-1/
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