A Milestone in Cannabis Reform: Rescheduling vs. Descheduling

The cannabis industry is abuzz with anticipation as the Drug Enforcement Administration (DEA) considers a historic shift: the potential reclassification of cannabis from a Schedule I to a Schedule III drug under the Controlled Substances Act (CSA). The DEA public comment period will close on July 22 and has already garnered over 30,000 comments, highlighting widespread public interest and engagement.

While this is a hugely historic moment for drug policy to right the wrongs of prohibition, it is only a first step towards the larger goal of full federal legalization of Cannabis.

Rescheduling vs. Descheduling: What’s the Difference?

Rescheduling cannabis to Schedule III would mean it could be prescribed by doctors and dispensed by pharmacies, a significant advancement but not full federal legalization. The ultimate aim remains descheduling, which would lift federal prohibition entirely.

What Rescheduling Doesn’t Do:

• No Interstate Commerce: State-level restrictions would still apply.
• Limited Access to Financial Services: Banking and financial challenges will persist.
• No IPOs: Public offerings would still face federal hurdles.

Uncertain Timeline and Political Implications:

The rulemaking timeline for rescheduling is uncertain but could feasibly occur before the January 2025 presidential inauguration, driven by political motivations to capture support from a majority (~70%) of voters who favor cannabis legalization. Legal challenges and appeals to DEA rulemaking are also possible which could cause significant delays. 

Section 280E and Tax Implications:

Rescheduling will likely offer relief from Internal Revenue Section 280E for licensed state Cannabis operators. 280E prevents Cannabis companies from deducting operating expenses, resulting in massive income tax liabilities each year. It is estimated that 280E generated $1.8-$2 billion in federal tax revenue in 2023. It is still unclear if changes to 280E will be prospective or retroactive.

Looking Ahead:

As the DEA evaluates public feedback and navigates potential legal challenges, the cannabis industry remains poised for transformation. Stay informed as we track developments towards a more equitable and regulated future for cannabis in the United States.

Follow our blog for ongoing updates and expert insights on cannabis policy and industry trends.

Brooke Jenkins, J.D.
Brooke Jenkins is the Chief Operations Officer at Upstate Elevator Supply and a graduate of Vermont Law School. She has spent over a decade working in Vermont’s cannabis industry and helped open the state’s first medical marijuana dispensary in 2013. Jenkins joined Upstate Elevator in 2017, leading the company to become Vermont’s largest cannabis brand.