2024 Cannabis Regulation Changes: Impact on Industry

The landscape of cannabis regulation in the United States is on the verge of a significant transformation. In May 2024, the Attorney General published a Notice of Proposed Rulemaking (NPRM) that could see marijuana reclassified from a Schedule I to a Schedule III substance under the Controlled Substances Act (CSA). This proposed change follows directives from President Biden and recommendations from the Department of Health and Human Services (HHS). In a recent webinar, Faye Caldwell, Attorney at Law at Caldwell Everson PLLC, discussed the changes. Here's what you need to know.

Current Scheduling and Classification of Marijuana

The CSA categorizes substances into different schedules based on their medical use, potential for abuse, and safety under medical supervision. Currently, marijuana is a Schedule I drug, indicating it has no accepted medical use and a high potential for abuse. Schedule III substances, however, are recognized for having medical use and a lower potential for abuse, including ketamine, anabolic steroids, Tylenol with Codeine, and buprenorphine (Suboxone).

The Rulemaking Process and Public Input

The NPRM is the first step in a formal rulemaking process that invites public commentary. As of June 20, 2024, over 23,000 comments had been submitted. The DEA will consider these comments before making a final decision on rescheduling marijuana.

Implications of Reclassification for Marijuana

If marijuana is reclassified as a Schedule III substance, it would remain subject to strict federal regulation but would facilitate more extensive medical research and usage. This change would not legalize marijuana recreationally at the federal level, nor would it override state-specific marijuana programs. The patchwork of state laws regarding marijuana use would remain, continuing to pose challenges for businesses operating across state lines.

8 Factors to be Considered for Rescheduling (21 U.S.C. § 811(c))

1. Marijuana’s actual or relative potential for abuse;

2. Scientific evidence of its pharmacological effect, if known;

3. The state of current scientific knowledge regarding marijuana or other substances;

4. Its history and current pattern of abuse;

5. The scope, duration, and significance of abuse;

6. What, if any, risk there is to the public health;

7. Its psychic or physiological dependence liability; and

8. Whether marijuana is an immediate precursor of a substance already controlled

*The 8 factors do not include the impact on other federal or state laws

Financial and Regulatory Implications for the Cannabis Industry

For the cannabis industry, rescheduling could have profound implications. Under current IRS rules (IRS 280E deductions), businesses “trafficking” Schedule I and II substances cannot deduct/claim tax credits for those expenses. Reclassifying marijuana to Schedule III would allow cannabis businesses to deduct typical business expenses, such as rent and payroll, potentially transforming the industry's financial landscape. However, issues such as banking reform remain uncertain, as federal restrictions on banking services for cannabis businesses could persist without additional legislative changes.

Collateral Effects of Rescheduling

The potential rescheduling of cannabis raises significant questions about federally regulated drug testing programs, which currently mandate testing for Schedule I and II substances. Executive Order 12564 mandates drug-free federal workplaces, requiring each executive agency to establish a drug testing program for "illegal" drugs, defined as those in Schedule I or II. Under the Department of Transportation (DOT), testing laboratories must be certified by the Health and Human Services (HHS) and comply with all applicable HHS requirements. Any modifications, particularly for safety-sensitive positions, would likely require Congressional action.

What Would Change?

Rescheduling cannabis from a Schedule I substance would necessitate a reevaluation of current drug testing policies. This change could mean revised testing protocols to account for cannabis being classified differently, impacting federally regulated drug testing programs. Employers, especially in safety-sensitive industries, may need to update their drug testing policies and procedures to align with new federal guidelines. Ensuring compliance with evolving federal and state laws will be crucial, affecting how employers manage drug testing and maintain workplace safety and compliance.

How DISA Can Help

As the landscape of cannabis regulation continues to evolve, DISA is committed to assisting employers in navigating these changes. Our experts can provide invaluable support during this transitional period, ensuring compliance with new federal and state laws. Despite the regulatory shifts, our reliable drug testing services can help your workforce remain safe and compliant. With DISA's support, you can confidently adapt to the changing regulatory environment and maintain a drug-free workplace.