How Rescheduling Cannabis Could Change the Industry and Society:

The recent recommendation by the Department of Health and Human Services (HHS) to reclassify cannabis from a Schedule I to a Schedule III substance has sparked a lot of debate and speculation about the potential impacts of such a move on the cannabis industry and society at large. While the final decision rests with the Drug Enforcement Administration (DEA), which has 90 days to issue an interim final rule, many experts and stakeholders are weighing in on the pros and cons of rescheduling cannabis.

What does rescheduling mean?

Currently, cannabis is classified as a Schedule I substance under the Controlled Substances Act (CSA), which means it has no currently accepted medical use, a high potential for abuse, and a lack of accepted safety for use under medical supervision. This classification puts cannabis in the same category as heroin, LSD, and ecstasy, and makes it illegal under federal law.

Rescheduling cannabis to Schedule III would mean that it has some accepted medical use, a lower potential for abuse than Schedule I or II drugs, and a moderate or low physical dependence or high psychological dependence. Schedule III substances include anabolic steroids, ketamine, and testosterone, and can be obtained with a prescription. Rescheduling would also remove some of the barriers to scientific research, banking, taxation, and interstate commerce that currently plague the cannabis industry.

How would rescheduling affect the cannabis industry in Michigan and nationwide?

The cannabis industry in Michigan and nationwide has been growing rapidly in recent years, as more states have legalized cannabis for medical or recreational use. According to the Marijuana Business Factbook 2023, legal cannabis sales in the U.S. are projected to reach $30.4 billion by 2023, up from $17.5 billion in 2021. Michigan is one of the largest cannabis markets in the country, with sales expected to reach $1.8 billion by 2023.

Rescheduling cannabis could have both positive and negative effects on the cannabis industry, depending on how the DEA implements the change and how other federal agencies respond. Some of the possible impacts are:

More access to banking and financial services: One of the biggest challenges facing cannabis businesses is the lack of access to banking and financial services, due to the federal prohibition and the risk of money laundering charges. Rescheduling cannabis could open up more opportunities for cannabis businesses to obtain loans, credit cards, insurance, and other financial products, as well as reduce the costs and risks associated with cash transactions.

More access to scientific research: Another major challenge facing the cannabis industry is the lack of scientific research on the safety, efficacy, and quality of cannabis products, due to the strict regulations and bureaucratic hurdles imposed by the federal government. Rescheduling cannabis could facilitate more research by allowing more researchers to obtain licenses, more sources of cannabis for study, and more funding from federal agencies and private institutions.

More access to interstate commerce: Rescheduling cannabis could also enable more interstate commerce of cannabis products, by allowing states that have legalized cannabis to trade with each other without violating federal law. This could create more competition, innovation, and diversity in the cannabis market, as well as lower prices for consumers.

More regulation by federal agencies: Rescheduling cannabis could also subject the cannabis industry to more regulation by federal agencies such as the Food and Drug Administration (FDA), the Federal Trade Commission (FTC), and the Internal Revenue Service (IRS). This could impose more standards and requirements on cannabis products, such as testing, labeling, packaging, advertising, and taxation. While some regulation could improve the quality and safety of cannabis products, too much regulation could also increase the costs and burdens for cannabis businesses and consumers.

More competition from big pharma: Rescheduling cannabis could also pave the way for more pharmaceutical companies to enter the cannabis market, by allowing them to develop and market synthetic or natural cannabinoid-based drugs that are approved by the FDA. This could create more competition for existing cannabis businesses, especially those that focus on medical use. However, it could also create more opportunities for collaboration and innovation between different sectors of the industry.

How would rescheduling affect veterans?

Veterans are one of the groups that could benefit most from rescheduling cannabis, as many of them suffer from conditions that could be treated with medical cannabis, such as post-traumatic stress disorder (PTSD), chronic pain, depression, anxiety, and insomnia. According to a 2019 survey by Iraq and Afghanistan Veterans of America (IAVA), 83% of veterans support legalizing medical cannabis at the federal level, and 22% use or have used medical cannabis themselves.

Rescheduling cannabis could improve access to medical cannabis for veterans in several ways:

More coverage by VA health care: Currently, veterans who use medical cannabis are not covered by VA health care or insurance, as VA doctors are prohibited from recommending or prescribing cannabis due to its Schedule I status. Rescheduling cannabis could allow VA doctors to recommend or prescribe medical cannabis to veterans who qualify, and VA health care or insurance to cover the costs of medical cannabis products.

More access to VA research: Rescheduling cannabis could also allow VA researchers to conduct more studies on the effects of medical cannabis on veterans, especially those with PTSD and chronic pain. Currently, VA researchers face many obstacles to obtaining approval and funding for cannabis research, as well as sourcing cannabis from the National Institute on Drug Abuse (NIDA), which is the only authorized supplier of cannabis for federal research. Rescheduling cannabis could make it easier for VA researchers to obtain licenses, funding, and cannabis for their studies, and to collaborate with other researchers and institutions.

More protection from federal prosecution: Rescheduling cannabis could also protect veterans who use medical cannabis from federal prosecution, as long as they comply with state laws and regulations. Currently, veterans who use medical cannabis in states where it is legal still risk being arrested, prosecuted, or penalized by the federal government, as cannabis remains illegal under federal law. Rescheduling cannabis could reduce the legal risks and stigma associated with medical cannabis use by veterans.

How would rescheduling affect taxes?

Taxes are another important aspect of the cannabis industry that could be affected by rescheduling cannabis. Currently, cannabis businesses face a heavy tax burden due to the federal prohibition and the IRS code section 280E, which prevents them from deducting ordinary business expenses such as rent, payroll, utilities, and advertising. As a result, cannabis businesses pay an effective tax rate of up to 70%, compared to an average of 21% for other businesses.

Rescheduling cannabis could reduce the tax burden on cannabis businesses in several ways:

More eligibility for tax deductions: Rescheduling cannabis could allow cannabis businesses to deduct more of their business expenses, as long as they comply with federal regulations and reporting requirements. This could lower their effective tax rate and increase their profitability and competitiveness.

More eligibility for tax credits: Rescheduling cannabis could also allow cannabis businesses to qualify for more tax credits, such as those for research and development, energy efficiency, and hiring veterans. This could incentivize more investment and innovation in the cannabis industry, as well as create more jobs and social benefits.

More revenue for federal and state governments: Rescheduling cannabis could also generate more tax revenue for federal and state governments, by expanding the tax base and increasing compliance. According to a 2020 report by the Congressional Budget Office (CBO), legalizing and taxing cannabis at the federal level could raise $13.7 billion in revenue over 10 years. Rescheduling cannabis could have a similar effect, depending on how the DEA and other federal agencies regulate and tax the industry.

How would rescheduling affect enforcement of cannabis laws?

Enforcement of cannabis laws is another area that could be impacted by rescheduling cannabis. Currently, cannabis enforcement is a complex and inconsistent patchwork of federal, state, and local laws and agencies, which often conflict with each other and create confusion and injustice for both law enforcement officers and citizens. According to the FBI’s Uniform Crime Report (UCR), there were 545,602 arrests for marijuana-related offenses in 2019, accounting for 35% of all drug arrests.

Rescheduling cannabis could improve enforcement of cannabis laws in several ways:

More clarity and consistency: Rescheduling cannabis could create more clarity and consistency in the legal status of cannabis at the federal level, by aligning it with its medical value and potential for abuse. This could reduce the ambiguity and contradiction between federal and state laws, and make it easier for law enforcement officers to enforce the law according to their jurisdiction and authority.

More discretion and flexibility: Rescheduling cannabis could also give more discretion and flexibility to law enforcement officers in how they handle minor or non-violent marijuana-related offenses, such as possession or consumption. This could allow them to focus more on serious or violent crimes, such as trafficking or driving under the influence, and divert more offenders to treatment or education programs instead of incarceration.

More fairness and justice: Rescheduling cannabis could also promote more fairness and justice in the criminal justice system, by reducing the racial and social disparities in marijuana arrests and convictions. According to a 2020 report by the American Civil Liberties Union (ACLU), Black people are 3.6 times more likely than white people to be arrested for marijuana possession nationwide, despite similar usage rates. Rescheduling cannabis could help address this issue by lowering the penalties and stigma associated with marijuana offenses, expunging or sealing past records, and providing more opportunities for rehabilitation and reintegration.

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