Licensing Blog

Biden’s Marijuana Reform: Federal Pardons & Review of Cannabis Scheduling

Biden’s Marijuana Reform: Federal Pardons & Review of Cannabis Scheduling

On October 6th, 2022, President Biden shocked the nation by announcing federal pardons for any person charged or convicted under federal law for a simple possession of cannabis. However, Biden’s announcement did not stop there—he further proclaimed that he is instructing his administration to review the possibility of re-scheduling or de-scheduling cannabis. In a statement by the President himself, “I am asking the Secretary of Health and Human Services and the Attorney General to initiate the administrative process to review expeditiously how marijuana is scheduled under federal law. Federal law currently classifies marijuana in Schedule I of the Controlled Substances Act, the classification meant for the most dangerous substances.

Federal Pardons

President Biden’s signature on federal pardons for those incarcerated for simple possession of cannabis is long overdue not only based on his campaign promise to free those incarcerated due to the racially-motivated War on Drugs, but also as a free democracy as a whole. With 37 states legalizing medicinal marijuana and an even further 19 states approving of adult-use cannabis within their borders, there is absolutely no rhyme or reason to have individuals incarcerated due to the War on Drugs’ consequences when we have states allowing businesses such as cannabis consumption lounges. “There are thousands of people who were previously convicted of simple possession who may be denied employment, housing, or educational opportunities as a result,” Biden wrote. “My pardon will remove this burden.”

Although this an insurmountable step towards righting the government’s wrongs, these pardons only apply to those convicted under federal law, not state law where most marijuana possession convictions occur. Now, it is up to the states to follow the President’s lead.

Re-Scheduling or De-Scheduling?

 Re-scheduling cannabis under the federal Controlled Substances Act would still require marijuana to be labeled as an illegal substance under federal law; however, it would remove several hurdles researchers face when working with the Food and Drug Administration (“FDA”) and the Drug Enforcement Administration (“DEA”) to approve of clinical trials. Even though this is a substantial step to further identifying the beneficial effects of the cannabis plant, the use and approval of marijuana has been primarily a state’s issue, especially as each state has their own version of the Controlled Substances Act. Since legalization has blazed its way through the United States, those states who have legalized cannabis businesses have found the benefits of being in control of all aspects of the industry from increase in employment rates to generating significant revenue under their own rules and regulations. Due to these state-run benefits, it’s highly unlikely to see all state products cleared from the market by the FDA.

Further, re-scheduling would not immediately create federal authorization for Interstate Commerce in cannabis as it would still be scheduled as an illegal substance, which would only create exceptions through FDA-approved prescriptions. Moreover, immense legal challenges will arise anywhere from the Dormant Commerce Clause to the United States Constitution as it makes all state laws permitting the sale of cannabis produced within their state more susceptible to claims. For example, state residency requirements to acquire a state cannabis business license are vulnerable to Commerce Clause violations, as well as state-specific testing, labeling, and potency standards.

In the financial sector, if cannabis were re-scheduled to Schedule III or below, there are several implications that will occur. First, licensed cannabis businesses will be given the same business deductions as other businesses as the disallowance under 26 U.S. Code § 280E of those conducting trade or business activities of Schedule I and II controlled substances would be removed. In addition to lowering cannabis businesses’ tax burdens, there will be a flood of new capital as the U.S. stock exchange would now be allowed to list cannabis companies under their rules.

For most cannabis consumers, there is a strong desire to skip the re-scheduling phase entirely and go straight to de-scheduling cannabis from the Controlled Substances Act. This is hard to imagine for those operating in the legal sector of the cannabis industry as years ago, Congress delegated their scheduling authority to the Attorney General, who has instead given that authority to the DEA. With decades of DEA pushback on any movement within the cannabis industry, it is no surprise that this avenue has more significant hurdles to overcome than re-scheduling cannabis under the Controlled Substances Act. In the event administrative rulemaking makes it through the next administrations to come, the cannabis industry will be forever changed as the domino-effect would be extraordinary—from the benefits of access and affordability to the detriments of lack of licensing/ registration and testing.

What Are the Next Steps?

There is no denying the common agreeance with the statement written by President Biden that: “We classify marijuana at the same level as heroin—and more serious than fentanyl . . . [i]t makes no sense.” However, the next steps both the federal government and state governments take in evolving the cannabis industry will be detrimental for the industry for years to come. The country needs to ensure we are not stepping into a similar pathway we have taken with the opioid epidemic. It is vital that federal and state agencies work together to ensure not only that those incarcerated for possession of cannabis are freed, but also that they tread lightly when it comes to ensuring cannabis is regulated in the proper spheres. Hopefully, we as a nation will see comprehensive legislation that paves way for state regulations, while creating uniform national standards when phasing into interstate commerce. Additionally, we hope to see the preservation of residency restrictions that allow social equity mandates to ensure the industry is diverse and inclusive.

Although President Biden’s announcement is a gigantic step in the right direction, it is only a swift release of breath for those working in the industry as the next steps to come can be life-changing to the cannabis plant.