Federal Reclassification of Marijuana: What Will It Do?
In mid-May of this year, the United States Department of Justice published a proposed regulation to reclassify marijuana under the federal Controlled Substances Act from a Schedule I drug (the most restrictive classification) to a Schedule III drug (a less restrictive classification). Nevada residents and visitors may wonder how the shift, if implemented, would affect marijuana production, sale, and use in the state, especially since Nevada already has laws legalizing recreational use of marijuana.
Procedural Status of the Reclassification
The proposed rulemaking to reschedule marijuana from a Schedule I to a Schedule III drug under the federal Controlled Substances Act, published by the U.S. Department of Justice on May 21, 2024, initiated a formal rulemaking process provided in the Act. After a 60-day comment period ends on July 22, 2024, and review by an administrative judge, the United States Drug Enforcement Administration (DEA), as part of the Department of Justice, can eventually publish the final rule to reclassify marijuana.
The proposed change follows an initiative of the Biden Administration started in October 2022. According to commentators, the reclassification of marijuana, if implemented, would be one of the most significant changes in federal drug policy in recent history. But as a Schedule III drug, marijuana would still be a controlled substance subject to strict rules and regulations of the DEA that include production, record-keeping, prescribing, and other requirements.
Effect of Reclassification
The proposal would recognize the medical uses of marijuana, but would not legalize it for recreational use nationwide or affect existing state laws governing medical and recreational marijuana use. The 23 states with recreational marijuana laws — including Nevada — are not expected to experience changes in their recreational marijuana markets.
The change would not affect federal criminal law provisions that subject individuals who traffic in the drug without permission to federal criminal prosecution, nor would it affect the status of anyone convicted of a federal or state marijuana offense. Federal prosecutions for simple possession have been relatively rare in recent years, so the impact on that aspect of the federal criminal justice system is likely to be minimal.
What Reclassification Impacts
The primary benefits of the reclassification on research and on marijuana business taxes.
While there are many calls for more marijuana research in recent years, there have been barriers to doing that research. With marijuana classified as a Schedule I substance, researchers have difficulty conducting authorized clinical trials that involve administration of the drug. Instead, they rely on self-reporting of the marijuana use of individuals. Reclassification of marijuana opens the door to potentially more effective research using human subjects and administration of the drug.
In addition, certain companies operating in the cannabis industry would receive a cut in taxes. Currently, if a business is involved in “trafficking” Schedule I (the current classification of marijuana) and Schedule II drugs, provisions of federal tax law prohibit the deduction of certain expenses allowed for other businesses. However, the deduction rule does not apply to Schedule III drugs. If reclassification occurs, some companies operating in the cannabis industry would be able to deduct certain business expenses for the first time and thus benefit from a reduction in taxes.
Proponents say that this tax law change treats the marijuana industry like other industries and helps them compete against illegal competitors. Some advocates also expect there will be increased marijuana promotion and advertising, if those costs become deductible by businesses in the industry. The one area that rescheduling is not likely to affect is the difficulty accessing bank resources controlled by federally regulated institutions. Different pending legislation would address that issue.
Implementation of the Reclassification
The reclassification of marijuana will not occur until (and unless) the DEA publishes the notice of final rulemaking after the 60-day comment period ends. At this point, it is not possible to predict when or even if the reclassification might occur through a final rulemaking, or what provisions the new regulation will contain.
There are vocal proponents of the change — and equally vocal opponents. Both sides are expected to make their detailed positions known during the comment period. Loosening restrictions by reclassifying marijuana would have numerous consequences, some viewed as positive and some viewed as negative. The final outcome of this long-developing initiative of the Biden Administration remains to be seen.
For the time-being, Nevada marijuana laws and the state’s marijuana industry remain in status quo. But affected businesses and individuals will be watching closely to see how the reclassification effort develops.
Talk With a Las Vegas Marijuana Defense Attorney
If you are under investigation or arrested on a marijuana criminal charge or a related charge, a conviction on your record can significantly impact your life. You need a skillful, knowledgeable attorney on your side. Las Vegas criminal defense attorney Joseph Gersten helps Nevada residents and visitors who face federal or state criminal charges arising from use, possession, or sale of marijuana. If you’ve been arrested in Las Vegas or anywhere else in Clark County, contact Attorney Gersten to schedule a free consultation.
