Marijuana could be rescheduled by feds. What it means for Michigan?
DEA Plans to Reschedule Marijuana, but Challenges Remain for Michigan's Cannabis Industry.
After decades of regulation that stood in direct opposition to the will of many American voters -- and the majority Michigan voters since 2008 -- the DEA plans to eliminate its strict federal prohibition on marijuana.
Citing five anonymous sources, the AP reports the DEA will propose that marijuana will be reclassified as a Schedule III substance, alongside codeine pain pills, ketamine and steroids, all drugs that require a doctor’s prescription. Since 1971, marijuana has been classified a Schedule I drug with heroin and LSD, where it became a target in the government’s expansive War on Drugs and was deemed highly addictive with no acceptable medical use.
However, California legalized medicinal cannabis use in 1998. Michigan followed in 2008, with voters approving recreational marijuana use in 2018. Michigan’s first marijuana retail store opened in December 2019 and today legal marijuana accounts for nearly $3 billion in annual sales, despite remaining federally illegal.
“While this move is unprecedented and helps to correct the ongoing lie that cannabis has no medical value, it does not reverse or necessarily discontinue the damage caused by its inappropriate and unscientific placement on the controlled substances list in the first place,” said longtime marijuana legalization advocate Jamie Lowell. “Complete removal of cannabis from the federal list is, ultimately, the only reasonable solution.
“Some cannabis reformists ... believe it will result in rights being taken away. I have never, personally, subscribed to this concept, (but) I can guarantee that any attempt by prohibitionists to peel back existing cannabis rights in Michigan will not work out well for them.”
The short-term impact of the change might result in greater ease of financing, since many banking laws prohibit marijuana-related commerce. It could also: eliminate hiring prohibitions for marijuana users; provide new tax breaks to marijuana retailers, which could translate to lower prices for consumers and make marijuana research more affordable and accessible.
Bu it will have little immediate impact on how the Michigan marijuana market operates, insiders agree.
The process to reclassify marijuana at the federal level requires White House approval and a public comment period before change takes effect.
“This is not federal legalization,” said Lance Boldrey, a cannabis attorney with the Lansing-based Dykema law firm. “This doesn’t change too much, probably, in terms of the state regulatory framework and the underlying market, particularly in Michigan.
“We don’t really have anything like a recreational ketamine industry.” Michigan’s recreational marijuana market is “still outside the scope of federal regulation.”
Boldrey said the change is important from a “public policy and philosophy standpoint,” but in order to be a legal Schedule III drug, marijuana would need to undergo complicated, time-consuming and costly FDA approval, so it’s likely to be regulated with the same blind-eye approach that’s existed the last decade.
In the meantime, Michigan marijuana industry insiders and cannabis advocates -- with the caveat that nothing is certain until rescheduling occurs and accompanying legislation is passed -- are speculating on the wide range of issues that could impact Michigan marijuana business and everyday life for Michigan residents.
Gun ownership
The ATF Federal firearms application that most Michigan gun buyers are required to complete during a purchase disqualifies anyone who checks the box stating they are an “unlawful marijuana user,” noting that “possession of marijuana remains unlawful under federal law, regardless of whether it has been legalized or decriminalized for medicinal or recreational purposes in the state where you reside.”
Some speculate the ATF could follow the DEA’s lead and make some changes to its hardline approach.
“Gun laws are about illicit usage ... so it is possible that the ATF will change their form and remove that statement now that there will be legal forms of usage,” said Cassim Coleman, an organic chemist and cannabis industry consultant. “Although, technically, until the FDA approves a THC product, there are not any legal forms. That process could take years.”
Javier Hasse, managing director of Benzinga Cannabis, which focuses on marijuana financial news, said changes to gun restrictions are uncertain.
“Changes to federal gun laws would require specific legislative adjustments, which are currently not detailed and could take some time after rescheduling,” he said.
Lower prices
One point that nearly every marijuana expert MLive spoke with raised is the issue of taxes. Currently, federal laws presume Michigan marijuana retailers are selling an illegal drug. This prohibits them from capitalizing on certain federal tax breaks or deductions that other industries enjoy.
“Besides the fact that it’s a rejection of a century of just awful policy, the big impact is going to be on taxes,” Boldrey said. “These companies will be able to deduct business expenses like everyone else.
“That’s going to free up a lot of capital and help a lot of these companies that are really struggling right now, financially.”
With lower costs, it could translate to a stronger market and lower prices for consumers, insiders said.
Ryan Basore, who owns Redemption Cannabis, a Michigan brand that’s expanded to Ohio, Maryland and Oklahoma, said the tax changes represent a “huge windfall” for retailers, their employees and the overall market.
“Retailers are paying up to 30% in extra taxes, just because they can’t write off certain expenses,” he said. “They’re struggling to pay suppliers, and then it trickles down.”
Increased knowledge
One of the greatest barriers federal guidelines have erected for decades is access to good, scientific studies surrounding marijuana and its effects.
In order to receive authorization for a federal study, researchers must to present a legitimate purpose. “Previously, there was no legitimate purpose,” Coleman said.
Now Coleman believes access to research will be greater and the rules looser.
“It’s still quite difficult to get DEA approval,” said Coleman. “If that goes away, you don’t have to have vaults anymore, you don’t need the extra security systems.
You would be able to handle marijuana similar to the way a pharmacy currently handles controlled prescription drugs, “the barriers to entry would be less and you wouldn’t need to ask for permission in the same way to do that research.”
New taxes, regulation, interstate commerce?
Most marijuana industry experts don’t believe the change will result in any new taxes or regulations on state marijuana markets, at least immediately.
But as the acceptance of marijuana spreads, Hasse with Benzinga said it’s possible a federal excise tax could emerge.
A tax “similar to those on alcohol and tobacco might be considered if marijuana moves to Schedule III,” he said. And “federal standardizations post-rescheduling could override more lenient state regulations, particularly in terms of potency and safety standards.”
Basore doesn’t believe there will be blanket regulations or taxes “any time soon,” since recreational marijuana remains federally illegal.
“I do not see the federal government imposing any regulatory restrictions or taxes at this juncture,” said cannabis attorney Denise Pollicella, a managing partner with the Pollicella, Langwith and Gertsberg law firm. “The taxes are generally only collected from interstate commerce action” and the change “would not make marijuana legal at the state level, and it would absolutely not be able to cross state lines or the U.S. border.”
This also rules out the possibility of international trade in the near term, according to Pollicella.
Government assistance, banking and jobs
The trickle-down effect of federal marijuana prohibition extends to many aspects of life. Streams of federal funding, even when filtered through state governments, often include zero-tolerance policies for marijuana use.
This includes housing programs, like Section 8 assistance, and employment with the federal government, its contactors or state agencies that rely on federal funds.
“Federal drug testing and workplace safety rules for cannabis is zero tolerance,” Basore said. “I think this at least opens the doors for it to be treated like medicine.”
National banks have been hesitant to service marijuana businesses, due to federal regulations that perceive financing marijuana as aiding and abetting illegal conduct.
In fact, Basore said a well-known online stock and equity trading company “flagged” and canceled his account after learning he operated a marijuana business.
Marijuana employees “are getting turned down for mortgage loans because they’re working for a cannabis company,” Basore said. “So this opens up the regular banking, it opens up investments for someone like me.”
Lowell, the operations manager for the Meds Cafe cannabis retail chain and a board member with Michigan NORML, a marijuana legalization advocacy group, hopes the federal announcement leads Michigan to likewise reclassify marijuana on the state Schedule of Drugs, where it still remains Schedule I and impedes citizen access to certain services.
Michigan state House Rep. (Jimmie Wilson Jr, D-Ypsilanti) announced the upcoming introduction of ‘The John Sinclair Act’ which would remove cannabis from Michigan’s controlled substances where it still sits, according to Lowell. He says this is illogical and “causes unnecessary legal issues for innocent citizens.”
For significant change to occur at the federal level, it’s going to require congressional and administrative action.
“In general, all of these changes require a change in statute not just in policy,” Coleman said. “So we’d need to see quite a bit of legislation, which I’m not sure will happen with the current House.
“I’ll be in D.C. in two weeks talking to the Cannabis Caucus about this stuff and hitting up other legislators... It’s possible this will have changed minds and loosened the stigma to gain votes which did not exist before.”
