Rescheduling Cannabis Might Not Change Much At All

Though legal in many states across the country, at the federal level cannabis is still regulated in Schedule I of the Controlled Substances Act. Current cannabis businesses operating within the bounds of state laws are still subject to many challenges stemming from the federal classification of the plant. In recent months, however, the DEA has revealed that it is re-examining the current scheduling of cannabis.

Schedule of Controlled Substances
Schedule of Controlled Substances

What does this change mean for current industry stakeholders? Opinions vary widely, and range from entirely closing down the system as it stands today to federally legalizing medical cannabis. A few weeks ago John Hudak, writing for the Brookings Institution, weighed in on the effect rescheduling would have on the cannabis industry, and in his opinion not much will change for those already operating within the bounds of state cannabis laws. For several compelling reasons, both legal and societal, Hudak does not see vast upheaval in the wake of cannabis potentially moving to Schedule II.

Primarily this opinion stems from the fact that state markets already exist in spite of the Controlled Substances Act, not because of it.

“The Controlled Substances Act does not authorize state-approved and regulated marijuana enterprises to remain open. In fact, the CSA explicitly outlaws any such enterprise. The authority under which cannabis enterprises continue to operate, despite the substance’s “absolute” prohibition under the CSA, is a series of memoranda issued by the U.S. Justice Department.”

Through documents like the Cole and Ogden memos and the FinCEN guidelines the executive branch carved out a space for states to operate legal cannabis markets. In following years the legislative branch has followed suit through the annual passage of the Rohrabacher amendment prohibiting the use of federal funds to interfere with state-legal medical cannabis programs. Now that states are operating regulated, legal markets even though cannabis is in Schedule I Hudak writes that it is unlikely that moving the plant to Schedule II will change anything with regards to federal enforcement.

“Rescheduling does not automatically create an FDA-approved marijuana pharmaceutical, and does not create any new penalties for state-level marijuana businesses.  Because rescheduling has no impact on the administrative deference that the federal government has given state programs, state-legal businesses would operate in exactly the same gray area post-rescheduling as they do now.”

While it may seem that the existence of the legal cannabis market currently relies too much on Presidential selective enforcement Hudak states that this stance is unlikely to change no matter who wins the election this fall. Both Hillary Clinton and Donald Trump have indicated that they are willing to let states continue to be “laboratories of Democracy” with regard to legalizing cannabis, and according to the article it would take a prohibitive amount of time, effort, and political capital to put this particular genie back in the bottle. State cannabis markets have support from both national politicians and a majority of state legislatures. Voters, especially those in key swing states, overwhelmingly approve of medical cannabis and the demographics of supporters of full legalization are increasing even in older generations.

If rescheduling won’t have any negative effects on the current market, will it change things for the better? Slightly.

Hudak writes that the biggest change will occur in cannabis research.

“There are fewer obstacles to conducting research on drugs in Schedule II for research than Schedule I. Rescheduling would send a powerful signal to the medical community that the government supports research into legitimate medical uses of cannabis, which is hardly the case currently. Rescheduling also puts administrative pressure on the DEA to relax the monopoly on cannabis available for research, another substantial obstacle.”

A change in cannabis scheduling – and the research possibilities it opens - would, Hudak writes, mean the beginning of large pharmaceutical interests in the space. Even this, though, would mostly likely mean a two-tiered market with refined, FDA-approved drugs made from isolated cannabinoids sold in pharmacies while the current market continued on with approval from individual states.

One of the biggest challenges in legal cannabis to date was the market’s volatility. The Brookings article indicates that even with a change in schedule the cannabis space might finally begin to see some stability.

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