DEA Vs. White House: Agency Pushes Back On Medical Benefits Of Cannabis, Weed Stocks Wobble

Tension between the White House and the Drug Enforcement Administration (DEA) over marijuana rescheduling seems to be increasing, according to a Wall Street Journal report noting that some DEA officials are resisting this change on the basis that cannabis' "medicinal benefits remain unproven and that it has a high potential for abuse, people familiar with the matter said."

This is in contradiction to the Department of Health and Human Services (HHS) January release of 252 pages of documents stating that cannabis "has a currently accepted medical use in treatment in the United States" and a "potential for abuse less than the drugs or other substances in Schedules I and II.”  

In addition to reportedly doubting the scientific evidence presented by HHS, the DEA also expressed concern about the increasing potency of THC, the psychoactive compound in cannabis. Marijuana advocates and stakeholders question the motivations behind these anonymous claims, as the DEA itself has not publicly opposed the recommendation. The agency is conducting its own review, with Administrator Anne Milgram promising to consider all available research.

Despite the DEA’s final say on rescheduling cannabis, the Congressional Research Service said the agency would likely follow the HHS’s lead based on past practices, although the DEA has said on various occasions that it alone will decide on rescheduling cannabis.

Rescheduling will not legalize marijuana federally, but it would unlock significant benefits for the cannabis industry. Businesses could finally claim federal tax deductions currently prohibited under IRS code 280E. Additionally, it could open the doors to more scientific research on marijuana’s therapeutic potential.

The Wall Street Journal report also highlighted a legal wrinkle in the rescheduling process. The HHS has reportedly sought legal advice from the Department of Justice’s Office of Legal Counsel (OLC) regarding potential international complications. Opponents of reform argue reclassifying marijuana could violate international treaties.

Meanwhile, cannabis stocks took a dip after the bleak Wall Street Journal report.

AdvisorShares Pure US Cannabis MSOS, dropped intra-day then settled at $7.84 after hours.

Shares of Curaleaf Holdings Inc CURLF, the biggest U.S. cannabis company by revenue, wobbled then settled at $4.24 after hours.

Green Thumb Industries Inc GTBIF, Verano Holdings Corp VRNOF and Trulieve Cannabis Corp TCNNF pulled back 4% to 6% then finally leveled off.

In a research note from Morningstar on Monday morning, Alliance Global Partners analyst Aaron Grey said there was still a high probability the DEA would adopt the rescheduling recommendation despite the concerns cited in the Wall Street Journal report, given the extensive number of studies in the HHS’s recommendation that justify moving cannabis to a less-restrictive category.

Photo: Benzinga edit with Billion Photos and Yarygin by Shutterstock