Easing Marijuana Restrictions: What Reclassification of Cannabis in the United States Means

The Department of Justice's recent proposal to reduce marijuana restrictions marks a substantial shift in federal drug policy, recommending the reclassification of marijuana from a Schedule I to a Schedule III controlled substance. This reclassification would align marijuana with drugs like ketamine and certain codeine combinations, which are considered less addictive and have recognized medical uses. However, it's important to clarify that reclassifying marijuana as Schedule III would not legalize recreational cannabis nationwide, nor would it directly impact the existing medical or recreational marijuana programs already licensed in various states.

Reclassification means that while marijuana would still be a controlled substance, it would be subject to federal rules allowing certain medical uses and federal prosecution for illegal trafficking. This shift would not immediately affect the current legal status of cannabis in the states with medical marijuana programs or the states with legal recreational markets.

Unfortunately, the reclassification also would not provide any immediate relief for individuals currently incarcerated for marijuana offenses. As David Culver from the U.S. Cannabis Council explained, moving marijuana to Schedule III “is not getting people out of jail,” given that federal prosecutions for simple possession have already been rare, even under its Schedule I classification.

However, the reclassification could significantly benefit research and the cannabis industry financially. Currently, the strict classification of marijuana as a Schedule I drug severely hampers clinical research due to the high restrictions on studying such substances. Although barriers to research would not disappear overnight, the change could gradually improve the situation, making it less challenging to conduct studies and possibly involving marijuana from state-licensed dispensaries.

The financial implications for the cannabis industry are significant. Presently, businesses involved in the cannabis industry are burdened with an excessive federal tax rate because they cannot deduct common business expenses like rent and payroll due marijuana being listed as a Schedule I drug. The proposed change to Schedule III would alleviate this tax burden, allowing cannabis companies to deduct these expenses and thus lowering their operational costs significantly.

While reclassification would not solve the banking issues faced by cannabis businesses, as federal financial institutions remain hesitant to engage with the cannabis sector due to its legal status, it is a step towards more significant financial normalization. The industry continues to hope for legislative changes like the bill for the SAFE Banking Act, which has seen some movement in the House but has stalled in the Senate.

It is hopeful that the reclassification could strengthen state-legal programs, enabling them to better compete against illegal market competitors. In October 2023, the Canadian Government released Research to Insights: Cannabis in Canada after five years of legalized cannabis in Canada; the report noted that 70% of cannabis consumed in Canada is now from from legal sources, a whopping increase from 22% when legalised marijuana had just begun. It's safe to say that the legal cannabis market in Canada has significantly displaced the illegal market, and it is hopeful that the US reclassification of marijuana would also have a positive impact displacing some of the illegal cannabis market.

Overall, while the reclassification of marijuana as a Schedule III drug wouldn't solve all the issues related to its use and regulation, it represents a meaningful shift towards a more scientifically and economically rational approach to cannabis policy at the federal level.