Cannabis companies say DEA has closed mind against a less-dangerous pot ranking
Advocates accuse Drug Enforcement Administration of blocking the reclassification of cannabis as a Schedule III drug under the Controlled Substances Act
Pro-cannabis businesses have accused the U.S. Drug Enforcement Administration of "an unalterably closed mind" toward lowering marijuana to a less-dangerous category level and said the federal agency should be removed from the effort.
Cannabis advocates said the DEA is choosing to include anti-cannabis groups in upcoming hearings on reclassifying cannabis to Schedule III from Schedule I of the Controlled Substance Act and excluding some pro-cannabis perspectives and state agencies from Colorado, which has had legal adult-use cannabis for a decade.
Uncertainty over federal reforms has weighed on marijuana stocks, with the AdvisorShares Pure US Cannabis ETF MSOS lower by about 45% in 2024.
The process to reclassify cannabis marks the first time that any attempt has been made to reschedule a drug since the Controlled Substances Act went into effect in 1970.
Meanwhile, a formal statement from a DEA official filed Jan. 2 that summarizes its current scientific knowledge of cannabis questioned the medical value of cannabis and cited research data on its potential for abuse and harmful health effects.
"The use of unapproved cannabis and cannabis-derived products can have unpredictable and unintended consequences, including serious safety risks," said the 106-page statement from DEA pharmacologist Luli R. Akinfiresoye. "Furthermore, there has been no Food and Drug Administration (FDA) review of data from rigorous clinical trials to support safety and efficacy of the unapproved products for the various therapeutic uses for which they are being used."
The statement also provides data showing that cannabis impairs driving, its availability to people under the age of 21 and its potential for abuse and negative impacts on mental health.
The DEA did not reply to emails from MarketWatch seeking comment on its formal position on re-scheduling cannabis,.
The reclassification has been endorsed by both President Joe Biden and President-elect Donald Trump. Trump voiced support for the move in September. He takes office on Jan. 20.
The move to reclassify cannabis currently faces a series of hearings by the DEA beginning on Jan. 21, after advocates and opponents and other interested parties filed comments and requested permission to provide testimony.
Once the hearings wrap up as expected in March, any conclusions from the testimony are non-binding.
The DEA would then make a final decision on the August, 2023 recommendation from the Department of Health and Human Services (HHS) to lower cannabis to Schedule III from Schedule I under the U.S. Controlled Substances Act.
U.S. Attorney General Merrick Garland has also endorsed the recommendation from HHS.
Shane Pennington, a lawyer for cannabis advocates, told MarketWatch that the DEA has been hostile toward reclassifying cannabis from its current status as Schedule I, the same category as heroin and LSD with no medical uses. Under federal law, marijuana is also considered more dangerous than Schedule II drug fentanyl, which has killed at least 250,000 Americans.
Under Schedule III, cannabis would be in the same bucket as Tylenol with codeine, ketamine, anabolic steroids and testosterone.
"It's worked in secret-and thus in violation of law-to help the anti-rescheduling parties and to exclude qualified pro-rescheduling parties like Colorado from participating in the hearing to support the Schedule III rule," Pennington said in an email to MarketWatch. "It has refused to disclose those secret communications, which also violates a federal statute. It continues to this day to make public statements that reinforce the key talking points underlying the anti-rescheduling side's position."
Pennington, a partner at Porter Wright Morris & Arthur LLP who is representing Village Farms International Inc. (VFF), Hemp for Victory and other pot advocates, on Tuesday filed a 50-page request for reconsideration in the DEA's hearing process.
The request said the DEA should be disqualified from participating in the hearings, and the Department of Justice should step in.
"There is clear and convincing evidence that DEA has an unalterably closed mind, [and] this tribunal should disqualify it from these proceedings," the statement said. "In short, DEA's secret machinations have deprived this tribunal, the parties, and the public of the records necessary to assess whether the administrator's decisions selecting and excluding various [parties] were arbitrary and capricious."
The DEA should be ordered to formally declare its opposition to rescheduling, the document said.
Cannabis companies have supported the move because it would no longer require them to follow the 280E tax law that prevents claiming standard business deductions for legal pot businesses. The change would save companies millions in tax payments.
Other pot proponents have argued that cannabis is less harmful than tobacco and alcohol and therefore should not be included in the Controlled Substances Act (CSA) at all. Neither alcohol or tobacco are subject to the CSA.
The process for reclassifying cannabis has been slow, after the Department of Health and Human Services under President Joe Biden recommended the move in August of 2023.
The legal wrangling that's taking place now over the DEA's upcoming rescheduling hearings suggests that the process could be subject to more litigation.
One analyst said recently that it could take until 2026 or later for any changes to take place.
The potential role of Trump's nominee for Secretary of Health and Human Services, Robert F. Kennedy, is seen as pro-cannabis, but he's yet to be formally named to the post and will require approval from the U.S. Senate.
