Michigan Cannabis Regulatory Agency calls for clearer guidelines for changes
Biden administration announces historic marijuana rescheduling
President Joe Biden has announced that his administration will take a “big step” to reclassify marijuana from Schedule I to Schedule III.
The Michigan Cannabis Regulatory Agency (CRA) on Monday outlined how the Drug Enforcement Administration’s plans to change marijuana from a Schedule I drug to a Schedule III drug could benefit both consumers and Michigan cannabis companies, potentially allowing the companies to file for bankruptcy and offer consumers products that meet consistent safety standards.
However, the agency said federal guidance was critical to understanding how to proceed if cannabis is reclassified as a Schedule III drug.
“Reclassifying marijuana from Schedule I to Schedule III has the potential to have profound effects on the medical and recreational markets, potentially changing how those markets operate and are perceived. However, it will do little good — and could potentially destroy Michigan’s existing programs — without clear guidance from all branches of the federal government explaining the impact of the reclassification,” the CRA comment said. It was submitted during the public comment period, part of the DEA’s plan to recategorize marijuana under the Controlled Substances Act.
President Joe Biden called for a review of marijuana’s classification under federal law in October 2022. Last year, the Department of Health and Human Services recommended moving it to Schedule III. The Justice Department then conducted its own analysis and came to the same conclusion.
The plan proposed by the DEA, which is under the Justice Department, does not involve legalizing marijuana nationwide. However, changing it from a Schedule I drug – considered highly dangerous, addictive and without medical benefit – to a Schedule III drug – like Tylenol with codeine and ketamine – would mean it could be legally prescribed as a medicine.
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The CRA’s post listed several situations where reclassification could impact the cannabis industry and its consumers in Michigan. Some of the key situations are listed below:
Impact on Michigan’s Medical Marijuana Program: Example: Refills
The CRA said Michigan, like more than 35 other states, operates a mature medical marijuana program that likely does not meet the requirements for Schedule III drugs. For example, prescriptions for Schedule III substances can typically be renewed up to five times within a six-month period, but there are currently no such restrictions for patients taking medical marijuana in Michigan.
“If marijuana is reclassified, it is important that the federal government clarify how the requirements that apply to Schedule III drugs apply to marijuana,” the CRA said.
Banking and Taxes
The CRA said the cannabis reclassification could make it easier for marijuana businesses to work with federally regulated financial institutions. Many financial institutions refuse to provide services to cannabis businesses for fear of violating federal law.
Cannabis businesses could also benefit from tax deductions and exemptions available to companies in other industries. If marijuana is reclassified, Section 280E — the Internal Revenue Code, which prohibits taxpayers who deal in certain controlled substances from deducting typical business expenses related to those activities — likely would not apply to those businesses.
Insolvency protection
Cannabis businesses cannot file for bankruptcy because marijuana is illegal under federal law and there is no federal bankruptcy protection available to these businesses and their lenders.
“Restructuring would be an important step in enabling marijuana businesses to access bankruptcy protections and relief under federal law,” the CRA said.
Product safety
If cannabis is reclassified, comprehensive federal regulations could be introduced for the cultivation, processing, testing and distribution of medical and recreational marijuana products, the CRA said.
“This would ensure that all marijuana products meet consistent safety and quality standards, regardless of where they are manufactured or sold,” the agency said. “Such standards could include limits on pesticides, solvents, inactive ingredients, microorganisms, metals, dosage amounts and potency limits.”
Transport and interstate trade
Marijuana cannot be transported across state lines, even if both states have legalized cannabis. The CRA said if marijuana is reclassified, it could “potentially allow legal interstate commerce of marijuana products between states where marijuana is legal.”
To read the full commentary from Michigan’s CRA, go to Regulations.gov/docket/DEA-2024-0059 and search for “Michigan’s Cannabis Regulatory Agency.”
The comment period ended Monday. The proposal will be reviewed by an administrative law judge and the DEA will then issue the final rule.
Contact Adrienne Roberts: [email protected]
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