Lucy Sky Dispensary's recreational shop on Broadway in the city's infamous Green Mile district. (Vince Chandler, The Denver Post)

Rescheduling marijuana: The good, the bad and the ugly unknowns of Schedule II

The DEA is talking about rescheduling marijuana, but what would happen to the fast-growing cannabis industry if that happens?

We know the Drug Enforcement Administration is thinking about rescheduling marijuana. But we don’t know what will happen to the way we regulate all things marijuana — and America’s existing cannabis industry, too — if the drug is rescheduled from Schedule I to Schedule II, as some predict will happen.

So here are the good, the bad and the ugly unknowns of rescheduling marijuana — which, mind you, is still not a sure thing.

The Good

Easing up scientists’ abilities to research cannabis would be a major benefit to rescheduling marijuana, as USA Today writes:

Reclassifying marijuana would make it easier for researchers to work with the plant, which is currently subject to strict limitations and officially can be acquired only from a single government garden. Schedule 2 drugs include morphine, methamphetamine and oxycodone.

“I think it’s just common sense to allow good science to be done,” said congressman Jared Polis, who supports the change. Polis, a Colorado Democrat, has repeatedly pushed President Obama’s administration to loosen restrictions and enforcement around cannabis use.

Rescheduling cannabis would be a game-changer for traditional physicians and their patient interactions on the subject as well, as Leafly writes:

Arguably, one of the most significant changes — and one that has been rarely discussed in the media — is that physicians would be legally permitted to prescribe cannabis. Under current law, because Schedule I drugs “technically” have no medical value, doctors are prohibited from prescribing them. This is why doctors in states where medical marijuana is legal will only issue recommendations, rather than prescriptions.

Whereas current cannabis markets are restrained by state boundaries, rescheduling marijuana could lift those restrictions, writes Inc:

If the DEA recommends rescheduling marijuana to II, III, IV, or V, or removing it from the list of controlled substances, any change in designation will have big implications for the legal industry across 23 states and Washington, D.C., says Aeron Sullivan, the co-founder of Tradiv, an online wholesale marketplace for legal marijuana businesses to buy and sell marijuana. If pot is rescheduled, it could also open up the industry to import-export and help increase the potential for a nationwide, regulated market. In short, it could welcome marijuana into the mainstream economy.

Rescheduling cannabis could also alleviate some of the mammoth federal taxes that pot businesses (alone) pay, according to Rolling Stone — but these companies won’t likely see this break at the Schedule II mark:

Rescheduling could bring another important benefit for pot businesses. They are eager to rid themselves of a burdensome tax provision — known as 280E — that prohibits businesses that deal in schedule I and II controlled substances from deducting many of their business expenses. As a result of 280E, state-legal marijuana companies can have an effective federal tax rate of more than 60 percent. “For the most part, businesses are disregarding 280E or creating legal workarounds that may or may not withstand scrutiny of the IRS,” says Aaron Herzberg, a partner at the southern California company CalCann.

The tax restriction originated in 1982, after a Minnesota dealer named Jeffrey Edmondson tried to deduct business expenses on his taxes. (Ill-gotten lucre is taxable — that’s how they got Al Capone.) Edmondson sued in tax court and partially won his case. In response, incensed members of Congress swiftly enacted the federal restriction. State-legal businesses have since made its repeal a top priority. Rescheduling marijuana to III or lower would take care of the issue, but a change to Schedule II would not. The DEA said in its letter to Congress that its decision will focus on medical marijuana research, suggesting that reducing marijuana business taxes is not a part of the agency’s plan.

Even if marijuana is rescheduled from I to II, it would mark a significant change in how the federal government addresses the medical efficacy of cannabis. A Schedule I substance “has no currently accepted medical use in treatment in the United States,” while a Schedule II substance “has a currently accepted medical use in treatment in the United States or a currently accepted medical use with severe restrictions,” according to the Controlled Substances Act. As Rolling Stone writes:

At the same time, Constance Finley, CEO of Richmond, Calif.-based Constance Therapeutics, believes rescheduling will help her company achieve medical credibility. Constance Therapeutics plans to conduct a trial of its marijuana products on former NFL players to determine if they relieve chronic pain and brain trauma, which players commonly treat with opioids. She thinks the introduction of new rules, even the FDA’s rigorous approval process, would enable it to differentiate itself from competitors. “I’m no longer afraid we’ll be washed out,” she says.

Rescheduling marijuana would even protect newspapers — and possibly federal employees, writes Marijuana.com:

Reclassification to Schedule III or lower, for example, would protect federal employees who use marijuana from a Reagan-era executive order that defines illegal drugs as Schedule I or II substances. …

Moving cannabis out of Schedule I would also put an end to threats that newspapers who mail publications containing marijuana advertisements are facing from the U.S. Postal Service, since the federal law that agency cites to justify its actions only applies to Schedule I drugs.

If nothing else, rescheduling marijuana sends a potent message to law enforcement, lawmakers and judges, says Leafly.

Contrary to popular belief, rescheduling doesn’t automatically ease federal criminal penalties, nor would it make the manufacture, possession, or distribution of marijuana legal. Patients and caregivers could still be prosecuted and their assets seized. However, according to attorney and drug policy reformer Luke Zimmerman, Esq., “If the DEA reschedules cannabis, it would send a powerful message to law enforcement and the courts in many of the more conservative municipalities, and that could result in more clemency and broader policy reform.”

The Bad

There are a lot of what-ifs here. But one familiar refrain says that rescheduling alone would not help marijuana’s many state-versus-federal conflicts, as Leafly writes:

Bill Piper, Senior Director of National Affairs at the Drug Policy Alliance, is cautiously optimistic, and says, “I believe at the very least, the DEA will reschedule non-psychoactive CBD — if not remove it from scheduling altogether, and chances are good that they will also reschedule THC.” But, Piper cautions that while rescheduling would be a logical move on the part of the DEA, “it doesn’t solve the conflict between the states and federal government. De-scheduling would be ideal, but ultimately what we need is overall reform of the [antiquated], non-scientific scheduling system.”

The Ugly

While The Good severely outnumbers The Bad and The Ugly combined, this next one is a big concern for the marijuana industry and those relying on it: Rescheduling cannabis could dramatically change the regulatory environment for legal weed, adding costly and timely steps to the pot-selling process that some say could bankrupt most of these businesses.

It’s complicated, too — because forcing marijuana businesses to be approved by the Food and Drug Administration would ultimately make these products better and safer. But as Rolling Stone writes, it would also shutter businesses all over the U.S.

If the federal government determines that medical marijuana must be subjected to FDA approval, companies would have to enter a process that can take years to complete and cost more than $1 billion per product. Few, if any, cannabis companies in the U.S. have the resources for that, which might open the door for Big Pharma to muscle in and take over the business. “They could put every medical provider in the country out of business in a matter of months,” says Dean Heizer, chief legal strategist at LivWell, one of Colorado’s largest marijuana companies.

Merry Jane adds to that point:

The move would also annihilate thousands of medical marijuana businesses currently in operation by entangling them in a costly regulatory battle with the Food and Drug Administration (FDA) and would pit them up against the megalithic pharmaceutical industry with its bottomless pockets and standing relationships with the FDA. …

“The cost to bring a Schedule II drug to market is enormous, to the level that not a single company in the cannabis industry right now could afford to do so,” said Brandon Whitley, director of operations at Aquarius Cannabis. “The knowledge gap between government regulators and outside companies that would come into the industry would be enormous, and the industry as we know it would be dead.”