DOJ Proposes Rescheduling Marijuana, But the Outlook for Finalization Is Hazy

On May 21, 2024, the U.S. Department of Justice (“DOJ”) published its long-anticipated notice of proposed rulemaking (“NPRM”) announcing its intention to reschedule marijuana. The rule proposes to move botanical cannabis (Cannabis sativa L.) with tetrahydrocannabinol (“THC”) content over 0.3% from schedule I to schedule III, a less-restrictive schedule, under the Controlled Substances Act (“CSA”).

If finalized, rescheduling would ease some restrictions on cannabis-related research, in turn potentially promoting cannabinoid drug development, and would adjust the legal framework in which cannabis manufacturers and distributors operate. However, marijuana would still be subject to substantial regulation by both the Drug Enforcement Administration (“DEA”) and Food and Drug Administration (“FDA”). While the rescheduling of marijuana to schedule III would be the most significant shift in federal drug policy in decades, it would not mean that cannabis-related activities and commerce permitted under state law (e.g., cultivation and sale under a state-authorized medical marijuana program or through changes in enforcement) would become fully legal under federal law.

This Alert summarizes the proposed rescheduling of marijuana, the next steps and potential hurdles in the rulemaking process, and the potential impacts if the rescheduling is finalized.

Background and Overview of the NPRM

The CSA classifies substances into five “schedules” based on the substances’ potential for abuse, medical use, and risk of harm or dependence. The CSA defines “marijuana” as “all parts of the plant Cannabis Sativa L.,” including seeds, compounds, derivatives, mixtures, and other preparations, but excluding hemp products and other select plant components. Marijuana has long been classified alongside such drugs as heroin, lysergic acid diethylamide (“LSD”), and midomafetamine (“MDMA”) in schedule I, which houses drugs with a high potential for abuse, no accepted medical use, and a lack of accepted safety for use under medical supervision.¹ If the proposed rule takes effect, marijuana would join drugs such as ketamine, anabolic steroids, and testosterone in schedule III, which is reserved for substances that have “a potential for abuse less than the drugs or other substances in schedules I and II,” an accepted medical use, and for which abuse may “lead to moderate or low physical dependence or high psychological dependence.²

The NPRM is the latest step in the Biden Administration’s efforts to reconsider the federal government’s regulatory posture towards marijuana. In October 2022, President Biden asked the Secretary of the Department of Health and Human Services (“HHS”) and the Attorney General to review marijuana’s designation as a schedule I substance.³ In August 2023, HHS shared the scientific and medical evaluation conducted by FDA and other HHS constituents with DEA, recommending that marijuana be controlled in schedule III.⁴ HHS’s review was guided by the eight scheduling factors outlined in the CSA: (1) the drug’s actual or relative potential for abuse; (2) scientific evidence of its pharmacological effect, if known; (3) the state of current scientific knowledge regarding the drug or other substance; (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 the substance is an immediate precursor of an already-controlled substance.⁵ HHS’s latest conclusion differs significantly from its findings from eight years ago when DEA and HHS last considered whether to reschedule marijuana. At that time, HHS concurred with DEA that marijuana should remain a schedule I drug based on the scientific data then available.⁶

In the NPRM, DOJ proposes to transfer marijuana from schedule I to schedule III, consistent with HHS’s view that marijuana has a currently accepted medical use, as well as HHS’s views about marijuana’s abuse potential and level of physical or psychological dependence. DOJ concurred with HHS’s conclusion that marijuana has a currently accepted medical use based on HHS’s determination that there is (1) widespread current experience with medical use of marijuana in the United States by licensed health care practitioners operating in accordance with implemented state-authorized programs, where the medical use is recognized by entities that regulate the practice of medicine; and (2) some credible scientific support for at least one of those medical uses (specifically, anorexia related to a medical condition; nausea and vomiting; and pain).

The NPRM notably does not contain any express DEA endorsement of the proposed rescheduling, which suggests, at a minimum, tension between the views of DEA and those of DOJ and HHS. The NPRM, while technically issued by both DOJ and DEA, is signed only by Attorney General Merrick Garland and not by DEA Administrator Anne Milgram, even though the DEA Administrator usually signs rescheduling actions like this one. The NPRM also states that “DEA has not yet made a determination as to its views of the appropriate schedule for marijuana” (emphasis added). It later adds that “DEA believes that additional information arising from this rulemaking will further inform the findings regarding the appropriate schedule for marijuana.”

The Long Road to Finalization

The NPRM is but one step in a complex administrative and political process involving numerous stakeholders whose commitment to rescheduling marijuana is unclear.

The rescheduling of marijuana is subject to formal rulemaking procedures under the Administrative Procedure Act. This means that, in addition to the public comment period typical for federal agency rulemaking, rulemaking must be conducted on the record after the opportunity for a hearing before an administrative law judge. If the DEA Administrator were to grant a request for a hearing, the purpose of such hearing would be to receive factual evidence and expert opinion regarding whether marijuana should be transferred to schedule III. In the short time since the NPRM was published, the public has already responded with thousands of comments. If this trend continues as expected, reviewing and responding to public input and addressing any requests for a public hearing could require a lengthy period of agency deliberations. The likelihood of a final rule being issued prior to the end of President Biden’s term seems remote.

Additionally, as noted above, DEA has not yet determined its position on the rescheduling of marijuana and will use the public comment process to inform its views. While HHS’s scientific and medical determinations will continue to be afforded significant deference throughout the rulemaking process, it is unclear if DEA and DOJ will proceed with finalizing the rescheduling of marijuana to schedule III if DEA continues to have reservations. DOJ may have felt comfortable proceeding with the NPRM without the direct support of DEA, but they may be less inclined to publish a final rule without DEA’s endorsement, especially in the face of congressional scrutiny on this point.⁷ Additionally, if the November election results in a new presidential administration, that transition would inject even further uncertainty into the future of rescheduling.

Lastly, the NPRM states that, upon finalization, the regulatory controls applicable to schedule III-controlled substances would apply to marijuana, “along with existing marijuana-specific requirements and any additional controls that might be implemented, including those that might be implemented to meet U.S. treaty obligations.” The NPRM does not specifically propose such additional controls, but it suggests that marijuana-specific manufacturing quotas and import/export authorization regulations may be necessary to comply with U.S. treaty obligations if marijuana is moved to schedule III. It is unclear if DOJ and DEA would (or legally could) proceed with finalizing the rescheduling of marijuana and allowing it to become effective prior to any required additional controls being in place.

The Potential Impact of Rescheduling Marijuana

Even if finalized, moving marijuana from schedule I to schedule III would not transform the drug into a fully legal product at the federal level. Marijuana would remain subject to significant regulation by DEA and FDA. Nevertheless, the rescheduling of marijuana would have benefits for cannabis-related businesses operating in compliance with state-authorized cannabis programs and would also ease burdens on clinical research using cannabis.

Benefits to Cannabis-Related Businesses. While state-legal cannabis businesses would continue to operate as they do today with all of the same state licensure limitations and restrictions, rescheduling would mean they would no longer be prohibited from taking certain tax credits and deductions—including deductions for ordinary and necessary business expenses—and would gain expanded access to bankruptcy courts.

Clinical Research Involving Cannabis. Research involving marijuana would likely become easier to conduct. Generally, researchers of schedule III substances—both in academia and industry—are subjected to less onerous registration requirements than researchers of schedule I substances.⁸ Researchers using schedule III substances operate with a greater degree of flexibility under their DEA registrations, as they are not obligated to obtain DEA approval of each individual research protocol and modification as required for a schedule I substance.⁹ Rescheduling marijuana would not, however, affect the FDA regulatory obligations of researchers conducting clinical investigations of marijuana.

Criminal Penalties Under the CSA. The move of marijuana from schedule I to schedule III would not change the criminal prohibition on manufacturing, distributing, dispensing, or possessing with the intent to manufacture, distribute, or dispense any controlled substance under 21 U.S.C. § 841. However, given that recent presidential administrations have chosen not to prioritize prosecution of state-legal medical or recreational marijuana activities,¹⁰ it remains unclear if and when DOJ and DEA would begin to enforce the applicable schedule III and marijuana-specific requirements for state-authorized programs. This policy of enforcement discretion applies in addition to, and to more conduct than, Congress’s annual appropriations rider, which since 2014 has prohibited DOJ from prosecuting state-authorized medical marijuana activities.

FDA Regulation and Potential Enforcement. Rescheduling would not alter marijuana’s status as a new drug requiring FDA approval under the Federal Food, Drug, and Cosmetic Act.¹¹ While FDA has, to date, approved four products that are related to or derived from cannabis, these approvals apply to specific cannabinoids in particular dosages and for narrow indications – not to an entire species of plant, nor for the wide variety of conditions for which marijuana is often recommended in state-authorized medical marijuana programs.¹² The proposed rescheduling action would additionally have no impact on the legal status of recreational marijuana, obtained and consumed for non-medical purposes. While FDA has historically taken a hands-off approach to marijuana-related enforcement—with certain exceptions for particularly egregious therapeutic claims¹³—it remains to be seen whether rescheduling marijuana to schedule III might encourage the agency to change its stance.

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Interested persons may submit a request for a hearing by June 20, 2024. The comment period on the NPRM ends July 22, 2024. Ropes & Gray will continue to monitor developments in this area. If you are interested in discussing the proposed marijuana rescheduling, please reach out to your usual Ropes & Gray advisor.