DEA Publishes Notice of Proposed Rulemaking to Reschedule Marijuana from Schedule I to Schedule III

The United States Drug Enforcement Administration (“DEA”) published a notice of proposed rulemaking to reschedule marijuana from schedule I of the Federal Controlled Substance Act (“CSA”) to schedule III. As a reminder, schedule I includes drugs, substances, or chemicals with “no currently accepted medical use and a high potential for abuse” and includes, among other products, heroin and LSD. The manufacturer, distribution, and possession of schedule I controlled substances is largely prohibited. Schedule III includes products that have medical use but still have moderate to low potential for physical and psychological dependence and includes products as ketamine, anabolic steroids, and testosterone. If finalized, the rescheduling of marijuana to schedule III would mean that the regulations for schedule III controlled substances (and potentially additional controls that may be implemented as part of the final rule) would apply to marijuana.

While the manufacturer, distribution, dispensing, and possession of marijuana would remain subject to the CSA’s regulatory regime, the proposed action would open pathways for further research and potential future medical uses. DEA also acknowledges that the proposed rescheduling could impact a substantial number of businesses previously barred from claiming tax deductions for otherwise allowable expenses due to 26 U.S.C. 280E’s prohibition on claiming deductions where the business “consists of trafficking in controlled substances within the meaning of Schedule I and II of the [CSA]”. This is because by moving marijuana from schedule I to schedule III, marijuana would no longer be subject the prohibition in Section 280E.

As background, in 2022, President Biden requested the United States Health and Human Services (“HHS”) to review how marijuana is scheduled. Pursuant to this request, the United States Food and Drug Administration (“FDA”) initiated a scientific and medical evaluation of cannabis against the factors relevant to controlled substance scheduling and found among other things:

• The potential for abuse is lower than originally assessed. While there is evidence that some individuals are abusing marijuana, the vast majority of those use marijuana are doing so in a manner that does not lead to dangerous outcomes to themselves or others.
• There is credible scientific support for medical use.
• There is a moderate risk of physical dependence in chronic users with mild symptoms of withdrawal.

In August of 2023, United States Public Health Service Admiral Rachel Levin, Assistant Secretary for Health, submitted her recommendation that DEA be controlled in schedule III.

It is important to note, however, that this proposed rescheduling would not legalize recreational marijuana or its related cultivation, processing, distribution, and possession at the federal level. Rather, as noted above, marijuana would still be regulated federally but in a same manner as other schedule III products such as ketamine, anabolic steroids, and testosterone.

The United States Department of Justice (DOJ) is soliciting public comments on this proposed rule. Comments must be electronically submitted by 11:59 ET on July 22, 2024 or postmarked on or before that date. Interested persons may request a hearing on or before June 20, 2024. To ensure your comment is received, the DOJ requests you reference “Docket No. DEA1362” on all correspondence, including any attachments. The DOJ recommends submitting electronic comments to www.regulations.gov.

For questions about the proposed rulemaking to reschedule marijuana from schedule I to schedule III, please contact your local Quarles attorney or:

• Christopher Dang: (602) 230-5530 / christopher.dang@quarles.com
• Andrea Seach: (602) 229-5200 / andrea.seach@quarles.com