Rescheduling: A Turning Point in Cannabis

As the Biden Administration and the DEA undertake a historic restructuring of laws classifying Cannabis, the industry and world watch breathlessly, waiting to see if there will be impactful change to the largest market in the $50 billion global trade value or simply more hot smoke from a disjointed federal enforcement approach.

Cannabis has been federally illegal for over a century since it was demonized as a drug and removed from pharmacopeia as a medicine. Pre-1920, Cannabis was present in over a third of pharmaceutical formulations and celebrated for its pain-relieving properties and pleasant medicinal effects. Illegal but largely ignored until the ’60s, Cannabis became connected with the hippie movement and was viewed as mostly harmless by law enforcement of the era. This changed with the inception of the Controlled Substances Act of 1970 (CSA) when Cannabis was placed in Schedule 1, the harshest of drug categories with “no accepted medical value,” and subject to the harshest of the new drug laws.

The CSA was pushed by the Nixon Administration to fundamentally curb the anti-war movement and give law enforcement a tool to arrest peaceful protestors, activists and agitators, which the government felt was associated directly with drug use. The CSA directed massive federal resources towards a new war on drugs, one that would last 50+ years and ruin lives as viciously as any hot war in a foreign country. This Drug War was revitalized by the efforts of then-Senator Joe Biden in the Violent Crime Control and Law Enforcement Act of 1994, which included the disastrous Three Strikes rule.

From the Center for Law and Social Policy, “In 1986, then-Senator Joe Biden authored the Anti-Drug Abuse Act of 1986 – a critical component of the broader War on Drugs that devastated low-income communities of color through mass criminalization and systemic police violence. The law strengthened carceral disparities between Black and white drug users by mandating a five-year minimum sentence for trafficking five grams of crack cocaine while requiring 500 grams of the chemically-equivalent powder cocaine to incur the same conviction. Later in 1994, Sen. Biden spearheaded a deeply controversial crime bill that funded 100,000 new cops and accelerated mass incarceration by increasing federal funding to states that impose harsher sentences.”

While much has been recently written praising the Administration for taking the historic step of rescheduling Cannabis, this rescheduling is fraught with peril from the perspective of both activists and members of the Cannabis industry who have fought against the Drug War for decades.

Just as Biden’s first Presidential run in 1987 was ended after journalists uncovered plagiarism, mistruths and exaggerations, when Time magazine called him “a shallow vessel for other people’s ideas,” we now face a Biden Administration that is high on their own supply. When Biden announced his plan to “pardon thousands of federal Cannabis convictions,” the country and mainstream media celebrated the plan, and everyday folks envisioned real change. To date, according to justice.gov, pardons have only been issued to 206 individuals by the Department of Justice.

While Biden stated that rescheduling is “consistent with his belief that nobody should be jailed over Cannabis possession,” the move to Schedule 3 does not end the criminalization of Cannabis at the federal level. Much like the hollow promise of thousands of pardons, the shift to Schedule 3 is fraught with negatives and potential sinkholes that could hurt or end the current industry, paving the way for corporations and Big Pharma to swoop in like vultures on the remnants of decades of activism and an industry that rose from the ashes of the War on Drugs.

Given the track record of Biden, the DEA and the War on Drugs, should trust be placed to handle this transition with respect to patients, industry and the plant itself?

Lowering the bar from Schedule 1 to 3

The Controlled Substances Act of 1970 established a classification system for drugs, putting them in categories based on their propensity for abuse, and with more than a small hit of bias from the establishment.

How else can it be explained that Cannabis, MDMA and LSD are considered more dangerous than cocaine and meth? LSD and MDMA have well-documented medical applications, from end-of-life therapy to treatments for PTSD, depression and more.

By dropping Cannabis into Schedule 3, a category of drugs that requires a pharmacy to dispense and a prescription to use, Cannabis is suddenly at risk of capture by the Big Pharma web of profit, lies and control. This has been a fear within activist circles for the last 20 years, knowing that drug companies would love an advantage to exploit within Cannabis.

Simply put, rescheduling could allow the federal government to assign control of the Cannabis industry to Big Pharma, shuttering dispensaries and small growers in favor of a pharmacy-based system of dispensing Cannabis.

States’ Rights, right?

Our Founding Fathers understood that absolute power absolutely corrupts, so they envisioned a democratic republic where the federal government had limited power, and states had their own rights to set laws, regulations, taxes and more based on the will of voters and their elected officials.

This unique approach is what makes America the greatest country in the world, as we have a diversity of states with unique approaches to living the American dream. Today that includes 24 states that have legalized Cannabis and 38 total with medical programs. While there are still states where Cannabis is illegal, most places have lowered criminal penalties around simple possession.

Each state that has legalized has built its own regulatory system from scratch. Licenses, rules and taxes all differ from state to state. Additionally, states like Washington that tax Cannabis at 46% and higher at the register receive hundreds of millions in tax revenue annually. These state-run systems are poised for a potential conflict with the federal reclassification. Will the federal government allow states to continue running their Cannabis programs independently?

This question needs to be considered as we head into rescheduling and look toward a future of decriminalization or full federal legalization. The last thing our industry deserves is to be swept aside for big corporations to inherit the marketplace that has taken decades of sacrifice and risk to emerge.

Wasn’t there good news?

As with all legislation, the pathway to passing is paved by money, and there is a major tax change that is dangled in the shift to Schedule 3.

The Cannabis industry has long been smothered in taxation, surviving under a tax code known as 280E, or the Al Capone tax law. 280E prohibits any “illegal or unlawful business” from writing off ordinary business expenses and losses, things like rent or employee costs or the electric bill. This forces the Cannabis industry to have a 20-40% increased tax burden depending on the type of business. Removing 280E is the single shining light in the rescheduling proposal, as it would ease taxation on businesses, and take struggling companies from breaking even to profitability.

All the investor and industry optimism assumes that there won’t be passage of a new federal tax on Cannabis, which given the history of taxation without representation for the Cannabis industry, is highly likely.

Final Thoughts

We must remain engaged and hyper-vigilant as this process unfolds, or unravels. As an industry and community of people who all benefit from the plant, whether as patients or for our livelihoods, our futures depend on the ability of our plant to remain free and out of the hands of pharmaceutical corporations. As with all political processes, the health of the process comes from engagement, and for the betterment of Cannabis and our country, we must embrace the spirit of activism that legalized Cannabis and once again raise our voices for the plant.