Top Cannabis Experts Explain US Agency's Move To Relax Marijuana Laws: Is Legalization Here? Or Another Red Herring?

In a pivotal move that could reshape the federal stance on marijuana, a top official at the Department of Health and Human Services (HHS) has recommended that the substance be reclassified as a Schedule III substance under the Controlled Substances Act. The recommendation was directed to Drug Enforcement Agency (DEA) administrator Anne Milgram in a letter dated Aug. 29, according to documentation obtained by Bloomberg News.

Benzinga spoke to cannabis industry insiders to get further insights. More from Kim Rivers, CEO at Trulieve Cannabis Corp TCNNF; George Archos, CEO at Verano Holdings Corp VRNOF, Cory Gardner, NCR Advisory Member; Charlie Bachtell, CEO and co-founder of Cresco Labs CRLBF; and Boris Jordan, founder and chairman of Curaleaf Holdings CURLF, below.

It’s Confirmed!

The Assistant Secretary for Health Rachel Levine stated in the letter that her recommendation was influenced by a Food and Drug Administration (FDA) review, conducted following President Biden's October pardon of federal offenses for simple marijuana possession. The President, around the same period, had requested the HHS secretary and the U.S. Attorney General to review marijuana's scheduling under federal law.

Later, Health and Human Services (HHS) Secretary Xavier Becerra confirmed his agency has responded to President Biden's directive to provide scheduling recommendations for cannabis to the Drug Enforcement Agency.

“Following the data and science, HHS has expeditiously responded to President Biden’s directive to HHS Secretary [Xavier Becerra] and provided its scheduling recommendation for marijuana to the DEA on August 29, 2023,” an HHS spokesperson said.

According to The Hill, White House press secretary Karine Jean-Pierre declined to comment on the process when asked about possibly rescheduling marijuana, only noting it is “independent” and led by HHS and the Department of Justice (DOJ).

“[Biden’s] asking HHS and DOJ to take a look at it, to do an initial administrative kind of process or review if you will,” Jean-Pierre said. “It’s going to be an independent process. They’re going to certainly use the evidence. It’s going to be guided by evidence and so I’m going to leave it to HHS and DOJ to move that process.”

Implications And Repercussions

If enacted, this change would represent a momentous departure from marijuana's current status as a Schedule I drug, a category that effectively stigmatizes the substance as having no medical utility and places it alongside high-risk narcotics like heroin. A reclassification to Schedule III would significantly ease federal regulations surrounding the drug, potentially unlocking medical research opportunities and paving the way for banking access for cannabis businesses.

Marijuana's present Schedule I classification is a primary factor that hampers cannabis companies from securing bank services, engaging in interstate commerce and conducting critical medical research. Dozens of U.S. states have legalized marijuana for medical purposes, but the FDA is the sole federal authority that can grant approval for medicinal drug usage across the United States. The reclassification could thus be a linchpin in harmonizing federal and state laws, a schism that has led to an inconsistent legal landscape.

The push for reclassification comes on the heels of various legislative attempts to decriminalize or legalize marijuana, both at the state and federal levels. It also aligns with growing public sentiment for a more nuanced, evidence-based approach to drug classification and legalization.

Top Cannabis Insiders React

In an exclusive conversation with Benzinga Cannabis, former United States Senator Cory Gardner said: "I've seen it described as monumental. I've seen it described as a very, very big event for the industry. And what it means, I think, is that this is a new chapter to what was kicked off a year ago by the Biden administration in terms of looking at how the administration, the executive branch, is going to be handling this issue… But while this is a monumental announcement, monumental day, there's still it's still to follow must be congressional action, including on things like Safe Banking Act."

Trulieve’s Kim Rivers also spoke with Benzinga, arguing that, "the reduction of cannabis from a Schedule I to a Schedule III is monumental and could have significant practical impacts for our business. But in addition, of course, it's the next very meaningful step from a policy and from a perception change as we continue to work to legitimize our industry."

"Basically what it says is that, based on scientific evidence and a full scientific review, the FDA agrees that there is in fact medical there's medical purpose for cannabis, which we all, of course, have known, and this is a long time coming."

Rivers added that her company has paid more than $220 million of 280e taxes in the last 24 months. "So we think about really what's to come for this industry and the ability for us to have additional dollars to invest in all of the growth opportunities ahead."

For Cresco Labs' Charlie Batchell, this is "a watershed moment for cannabis. This is something that we'll look back on decades from now as potentially like the first official domino in federal reform."

He too agreed that the most direct and therefore, potentially, the most significant impact of this "would be if cannabis is no longer under the draconian impact of I.R.S. code 280e."

"I think this is a very important step forward for all stakeholders of cannabis. And that includes people who aren't even in the industry, who have been negatively impacted by cannabis laws," he added.

Fed agency recommending #cannabis rescheduling is "a watershed moment... We'll look back on this as the first official domino in federal reform" - @crescolabs' @CharlesBachtell tells @Benzinga

Get more of his insights in Chicago - Join us Sept 27-28https://t.co/CxznNV6BRx pic.twitter.com/R0PoQIYKNh

— Javier Hasse (@JavierHasse) September 1, 2023

Weighing in on the issue as well was Curaleaf's Boris Jordan, who said his team had been expecting this for some time. "The last time these markets rallied was when President Biden came out and said he made a recommendation to the HHS, that request to review this matter."

Jordan revealed that insiders had a sense that the process would move more swiftly than public expectations, which initially assumed a "3 to 5 year to 10-year process like CBD was." The Health and Human Services Department had indicated a timeline for recommendations, he continued, and now it's delivered "a little bit earlier than we thought." In his view, this accelerated timeline could be influenced by upcoming elections, suggesting that the ultimate decision on rescheduling could serve as a political lever.

"So the real question is, do they approve it in February, which is the natural timeline because that's when the candidates really stop doing anything... Congress basically shuts down in an election year" he said. "Or do they or do they keep this out until September and sign this and approve this right before the election to get the votes up?"

However, Jordan remains cautiously optimistic on the issue as there's a wild card in the deck. More on this, later.

Finally, Benzinga spoke with Verano Holdings' George Archos. "This is unlike SAFE Banking. This is a process that will go through the DEA. This is a big recommendation. Normally after this, this is a step towards making something happen and moving this to Schedule III, which changes our entire business," he said.

"This is an opportunity for a lot of the social equity entrepreneurs are coming into the space to finally succeed. They've been stuck and again in limbo, not being able to raise capital, access, banking, etc... So this will change all of that.

The Benzinga Cannabis Capital Conference, the place where deals get done, is returning to Chicago this September 27-28 for its 17th edition. Get your tickets today before prices increase and secure a spot at the epicenter of cannabis investment and branding.

Original publication: 2023-08-30 7:36 pm ET