“A victory lap for the rescheduling of cannabis is premature and shortsighted, while federal prohibition on cannabis is still alive.”
Khurshid Khoja is Greenbridge Corporate Counsel
Contrary to the decades-long reefer madness propagated our federal government, Food and Drug Administration now acknowledges marijuana’s accepted medical uses. The reports that cannabis prohibition is dead are exaggerated. The FDA’s conclusion of its scientific review of marijuana’s current Schedule I classification is undoubtedly a milestone in federal cannabis policies.
The Department of Health and Human Services (HHS) recommendation that the Drug Enforcement Administration (DEA), based on FDA review, reschedule cannabis on August 29, 2023 will finally provide relief from the federal Gross Receipts Tax levied against struggling state-licensed marijuana businesses. It also highlights the urgent need (1) to continue pushing forward with descheduling before the critical momentum disappears and some industry stakeholders settle for rescheduling but without decriminalization and (2) to demand that marijuana is ex
It’s important to note that rescheduling marijuana would not be the first time the federal Food Drug and Cosmetic Act would apply to it. The FDCA already applies to marijuana and, like the federal Controlled Substances Act, would continue to do so after rescheduling. The FDCA will continue to apply to hemp products and cannabis products alike, unless there is a statutory provision that allows FDA to do something else. This was previously discussed in “Cannabis Cannibalism – How Federal Rescheduling could Consume the State Licensed Industry without Safe Harbors under the Federal Food, Drug and Cosmetic Act”, available at this.
The FDA and DEA will be more motivated to pursue enforcement of marijuana if it is moved from Schedule I. This is what happened after the CSA relaxed its prohibitions on hemp beginning with the 2014 Farm Bill and then scrapped it under the 2018 Farm Bill. The 2018 Farm Bill deschedulled hemp by carving out the federal CSA definitions of marijuana and THC.
Former agency officials (retained as consultants and lobbyists by Wall Street Cannabis) have a href=”https://www.marijuanamoment.net/former-top-fda-official/predicts that the agency will make a schedule iii marijuana recommendation with election cycle in mind/” rel=”noopener” target=”_blank”>chortled it “defies logic” that FDA would choose to regulate Schedule III marijuana when it would not Former agency officials (retained by Wall Street Cannabis as consultants and lobbyists) have chortled it is “defying logic” that FDA chooses to regulate Schedule III cannabis while it would not regulate Schedule I pot. This position, however, denies actual enforcement efforts of DEA and FDA.
To preserve state markets, jobs for small businesses, and access to consumers, it is necessary to remove smokable cannabis flower, “full spectrum” concentrated products, and other products that are naturally derived from marijuana plants (which I will refer to as “whole plant cannabis products”) from FDA’s legal definitions as “drugs”, “foods”, and “dietary supplements”. This work will lay the groundwork for reasonable federal regulations of these goods when descheduling allows interstate cannabis trade.
Schedule I may not be better than Schedule III but simply rescheduling is not sufficient.
It is important to note that the immediate benefits from a rescheduling of cannabis businesses licensed by state governments, who desperately need relief under Internal Revenue Code Sec. 280E.
There is no contradiction in recognizing the immediate tax equity that Schedule III brings, while also being aware of its downstream consequences or prepared to deal with them. This includes acknowledging the fact that criminal penalties imposed by both the FDCA as well as the CSA are not better than criminal penalties imposed only under the CSA, because both penalties would be applicable to cannabis after rescheduling.
While rescheduling alone would not immediately “capsize existing state market and give way for further big business control of industry,”, there is a significant and real risk that collective myopia and excess self-congratulation by rescheduling supporters will blind the other industry to the fact that FDA can, and will, exercise its existing authority on “drugs,” dietary supplements,” and “food,” (and in fact has already done so regarding hemp products).
In order to gain immediate tax relief and increase profits, the largest players in the cannabis industry would have to make a concerted attempt to push this demand simultaneously with the request to reschedule. Large multi-state cannabis operators may have rushed to declare victory without fully assessing the downstream legal effects.
The current FDCA framework will not only prevent smaller state-licensed marijuana companies from expanding through interstate trade after descheduling but also allow FDA intervene in state markets before descheduling for adult-use and medical cannabis products (e.g. on the basis that such products were interstate diverted or the non-cannabis components, ingredients or other inputs had previously travelled interstate). The high cost of compliance in this framework will likely prevent only the best-capitalized companies from competing.
Whether marijuana was rescheduled to Schedule I or not, it is a fact that FDA has deferred to DEA in cannabis policy because of the Schedule I designation.
Once FDA’s deference to DEA is over, could it become more assertive about enforcing FDCA in relation to state-legal marijuana goods? FDA could threaten criminal penalties for Schedule III marijuana under the FDCA even though harsh prison sentences and ruinous fins remain in place. Could dual enforcement by FDA and DEA be a positive thing? And in those adult-use state markets where Congress hasn’t tied DEA’s pursestrings on marijuana enforcement (through the Rohrabacher-Blumenauer Amendment), could rescheduling possibly represent an escalation in the War on Drugs?
Political reality dictates that FDA enforcement and public demand for FDA oversight will increase once whole plant cannabis can be legally transported across state lines after marijuana is de-scheduled. The FDA is able to satisfy the interstate trade trigger that allows the FDCA application for state-legal products well before the FDCA becomes lawful. This can be based both on the unlawful diversion of the goods and their legal purchases by visitors from out-of-state.
Reclassification alone would not give FDA new powers. However, it would allow them to use their existing authority under the FDCA in order to regulate the state-regulated marijuana industry in ways that were previously politically unwise before DEA backed away from the Schedule I classification. This could also encourage more capital-rich interests to take advantage of the high costs associated with complying with the FDCA “drug” regulations and lobby Congress to codify these barriers to entry.
It’s interesting that advocates of rescheduling essentially parrot my proposal to carve out from the FDCA, but do not demand an actual change to statute or regulation. “FDA could provide further clarity by releasing enforcement guidance that it would continue to refrain from taking enforcement action against state legal products and activities ….. [R]escheduling might need to be accompanied by additional action to ensure the policy change achieves its desired outcomes without unintended
There’s good reason to believe that FDA would exercise this authority if the FDCA was to be amended to Schedule III (or lower) or if the substance were to be deschedule.
DEA will still have the authority to enforce CSA, but it is likely that some resources will be reallocated from marijuana enforcement towards the enforcement of criminal prohibitions for remaining Schedule I controlled drugs. FDA will also be more motivated to enforce the FDCA’s prohibitions on explicit and implicit health claims made about adult-use and medical cannabis products.
I do not believe we need a carve-out, because rescheduling would give FDA the authority they don’t have currently. I believe that removing marijuana from Schedule I will end the FDA’s practice of deferring Schedule I trafficking to the DEA. This is consistent with other legal scholars’ observations that the FDA, historically, has deferred to the DEA in the enforcement of federal laws against commerce and Schedule I controlled drugs, including marijuana.
It’s reasonable to draw the same conclusions from the above arguments (from Cannabis Cannibalism) and the FDA’s efforts to enforce the FDCA on hemp products before and after 2014 and 2018 Farm Bills, which effectively descheduled hemp and hemp-derived cannabinoids.
The FDA enforces the FDCA only against hemp cannabinoid-based products sold and marketed in interstate commerce. Prior to the 2014 Farm Bill, however, the term “hemp”, was not defined in terms of the amount of THC in the cannabis plant. According to federal court precedents, “hemp”, was defined to refer to the non-psychoactive cannabis plant parts that were specifically carved-out of the statutory definition “marihuana”. These included: “the mature stems of this plant, the fiber produced from these stalks, the oil or cake made from seeds of this plant, any compound, manufacture or derivative of such mature stalks or fiber (excluding the resin extracted from them), oil or cake or the sterilized seed which is incapable to germination.
The DEA argued that hemp food products containing trace amounts of THC could be banned from importation due to their trace amounts.
FDA took no action in this case, despite the fact that the FDCA gave FDA the authority to prohibit the sale and marketing of adulterated food in interstate commerce. Synthetic THC (or dronabinol), was an active ingredient approved by FDA for a drug in 1985. It is possible that FDA did not take action because DEA insisted such products were more than “hemp food” with trace amounts naturally occurring THC. They were also legally identical to Schedule I THC and prohibited from being imported under the CSA.
Compare this apparent omission to FDA’s enforcement of the FDCA in relation to hemp CBD products that are sold interstate after hemp and hemp cannabinoids have been successively carved out of Schedule I “marihuana”, and “THC”, through the 2014, and 2018 Farm Bills.
In May 2022, FDA increased its enforcement efforts to include other intoxicating cannabinoids derived by hemp. They sent a series warning letters to companies that were marketing and selling Delta-8 products in interstate commerce.
The FDA issued these letters only after the DEA responded to the Alabama Board of Pharmacy’s inquiry on September 15, 2021 regarding the status of Delta-8-THC under the CSA. The DEA said in that letter that Delta-8 THC derived by hemp is not a controlled drug under the CSA. However, Delta-8 produced synthetically, or derived “marihuana”, would still be a Schedule I substance.
It’s also true, that prior to certain non-cannabis drugs being deemed Schedule I and policed solely by DEA under the CSA, they were regulated pursuant to the FDCA by FDA. It was the same for LSD, before the CSA passed. And it was the same for MDMA, after the CSA had already been in place and DEA scheduled it. It’s therefore not unreasonable to think that FDA would take a more assertive stance to protect public health. This is especially true since the Biden Administration has described the rescheduling process as a shift away from more punitive cannabis policies.
It’s too early to celebrate, even if cannabis is rescheduled by DEA.
In Cannabis Cannibalism, my proposal was to improve the results of rescheduling in order to benefit state-licensed operators and consumers as well as regulators. I also wanted to make sure that these historical changes didn’t reinforce or consolidate existing injustices. My observations and proposals are not meant to be an attack on incremental reform. They are not meant to undermine the benefits of moving cannabis from Schedule I or the need for IRC 280E relief (including retroactive relief to all state-licensed business).
It worries me when advocates seem to confuse the benefits of descheduling and rescheduling. The former would eliminate all criminal penalties under 21 USC 841, the Controlled Substances Act. However, the latter would not do so (and expose users to criminal penalties under FDCA). After marijuana was rescheduled to Schedule III, DEA can still enforce federal criminal penalties on state-licensed cannabis companies.
As well, while federal recognition of the medical benefits of cannabis is a milestone that has been long overdue, it doesn’t protect existing state-licensed marijuana businesses from federal criminal penalties, as proponents of rescheduling appear to suggest. It would not benefit minority-owned or socially equitable cannabis businesses more than others. The most important thing to remember is that rescheduling does not make descheduling inevitable or end cannabis prohibition.
Even if DEA implements HHS’s recommendation, there is still much to do. Advocates and stakeholders need to continue working diligently and quickly toward descheduling and ensuring a future federal regulatory framework for whole plant cannabis products. It is shortsighted and premature to celebrate a rescheduling victory while the federal prohibition of cannabis is still in place.
The author’s LinkedIn profile contains citations to sources and footnotes.
Khurshid Khoja founded Greenbridge Corporate Counsel. He is also the chair emeritus of National Cannabis Industry Association’s Board of Directors. He co-authored a model of social equity legislation for Minority Cannabis Business Association.
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