DOJ Reclassifies State-Licensed Medical Marijuana and Schedules Hearing for Full Reclassification
The Order today by the DOJ immediately reclassifying marijuana subject to a state medical marijuana license to Schedule III of the controlled substances act is a big step toward leveling the playing field for the cannabis industry to operate just like any other industry. The biggest burden on the industry, by far, has been the imposition of IRS Code 280(E), which precludes businesses based on unlawful Schedule I controlled substances from deducting normal business expenses. That restriction has been lifted as to medical marijuana, and for operators in states like Pennsylvania and Florida, where medical marijuana is legal, but adult-use marijuana is not legal, today’s Order may go a long way in improving balance sheets by removing those businesses from the purview and burden of 280(E). Operators in those states may also enjoy greater services from financial institutions such as commercial banks, investment banks, and insurance companies, now that the specter of Schedule I criminal penalties is completely removed as to medical marijuana.
However, the vast majority of the state-legal cannabis industry is in states that have legalized both medical marijuana and marijuana for adult-use, and the industry has evolved such that in those states there is little distinction between the two, as operators are generally licensed to sell both adult-use and medical marijuana. As a result, such operators are not necessarily out of the woods, as their adult-use operations are, for the time being, still subject to Schedule I. There may be opportunities for those operators to take advantage of the Order from a 280(E) and financial services standpoint, but until adult-use marijuana is also reclassified to Schedule III, i.e., full reclassification, adult-use licensed operators and those doing business with them have to be mindful of the continued application of Schedule I, and all of its attendant consequences, to their operations. Again, there are ways they can benefit from the Order, but the Order does not give them a green light.
The Order sets June 29 as the start date for a new hearing process on full rescheduling, and the hearing must be concluded by July 15. Given the reclassification of medical marijuana, it seems the full reclassification has the wind at its back.
Pashman Stein’s Cannabis Practice Group looks forward to working with operators and ancillary business to better understand how the Order affects and may result in improved operations.
The DOJ’s Order may be accessed here: Office of Public Affairs | Justice Department Places FDA-Approved Marijuana Products and Products Containing Marijuana Subject to a Qualifying State-issued License in Schedule III, Strengthening Medical Research While Maintaining Strict Federal Controls | United States Department of Justice
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