CSA – Cannabis Industry

April 30, 2024 by Seth A. Goldberg

DEA Recommendation to Reschedule Cannabis is Imminent

Multiple news sources reported today that the DEA will be recommending rescheduling cannabis to a Schedule III drug. The recommendation will then lead to a public comment period and then a Final Rule will be issued, so the actual reclassification of cannabis is months away. However, as with recent moves toward rescheduling, such as the HHS recommendation and President Biden’s directive to study whether to reschedule, today’s news and the forthcoming recommendation will boost the cannabis market, as operators and investors look forward to a better performing industry resulting from the reclassification. The actual reclassification will have an immediate impact on operator profitability, as IRS Code 280E, which prevents cannabis operators from deducting normal business expenses, will no longer apply to cannabis businesses. This is just one of the very significant changes to the industry that will spur more capital and more growth. Banks and other sources of capital that have been reluctant to enter the space may finally get off the sidelines and join the game, which would obviously be the shot in the arm the industry has needed for some time.

November 3, 2023 by Duane Morris

Bankruptcy Court Sides With Cannabis Business (Twice) in Reorg Plan

Lawrence Kotler and Ryan Spengler authored The Legal Intelligencer article, “Bankruptcy Court Sides With Cannabis Business (Twice) in Reorg Plan.”

“In contrast with a majority of bankruptcy courts that routinely dismiss cannabis-related cases for perceived violations of the Controlled Substances Act (CSA), the U.S. Bankruptcy Court for the Central District of California in the recent opinion In re Hacienda, No. 2:22-BK-15163-NB, (Bankr. C.D. Cal. July 11, 2023), refused to conform to the same historical standard. Instead, the Bankruptcy Court struck down the U.S. trustee’s motion to dismiss not once but twice in favor of confirming a marijuana business’ Chapter 11 plan of reorganization.”

Read the full article.

August 30, 2023 by Brad A. Molotsky

Changes to the Controlled Substances Act for Cannabis to make it a Schedule III Drug – The Winds May Be Blowing this Way

Earlier today, on August 30, 2023, the U.S. Department of Health and Human Services (HHS) officially recommended that cannabis be moved from Schedule I to Schedule III under the Controlled Substances Act (CSA) – a landmark recommendation from HHS which indicates that HHS no longer considers cannabis to be a drug with high abuse potential and no medical value.

After completing a scientific review into cannabis per a requested review from the Biden Administration, HHS advised the Drug Enforcement Administration (DEA) that it believes marijuana should be placed in Schedule III of the Controlled Substances Act.

Note, HHS’s recommendation is NOT binding on the DEA but given the report’s findings and growing public sentiment is likely that the DEA agrees with the recommendation and shifts its policy.

Historically, cannabis has been federally prohibited as a Schedule I controlled substance. As noted by many pundits, the rescheduling to Schedule III would have major implications for researchers who have long criticized the Schedule I classification that creates significant barriers to access for studies.

For researchers, this change would likely mean that they would no longer need to go through the onerous registration process with the DEA in order to access cannabis for studies as a Schedule III drug. The shift to Schedule III would also enable various federal tax deductions to become applicable to the cannabis industry and unlock value for them that is currently stuck in an onerous tax structure under the Internal Revenue Code. Schedule III drugs are not subject to the same onerous structure under federal rules.

The cannabis ball is now firmly in the DEA’s court as the DEA has the final authority to schedule a drug as Schedule III rather than Schedule I under the CSA (or transfer a controlled substance between schedules or remove such a drug from scheduling altogether).

Parting Hits – With Congress due to reconvene after Labor Day, and the Biden Administration looking for a win on moving this issue along, look for pressure to continue to mount for some type of Congressional action in the Banking arena under a SAFE legislation bill and for the DEA to move through their rule making process in a swift and firm manner.

Duane Morris has a full service cannabis group that helps clients and investors in a wide array of cannabis-related issues including, but not limited to, licensing, fundraising, intellectual property protection and real estate. If you have any questions, please do not hesitate to contact Brad Molotsky or the attorney with whom you regularly communicate at Duane Morris.

February 2, 2023 by Duane Morris

How Marijuana Pardons Affect Employee Background Checks

On Oct. 6, 2022, President Joe Biden issued a blanket pardon to all citizens and lawful permanent residents convicted of simple possession of marijuana under the federal Controlled Substances Act. The move reflects a shift in attitudes towards low-level drug offenses, and should serve as an impetus to employers to review their policies on criminal record checks.

Because marijuana possession offenses predominantly fall under the jurisdictions of the states, not the federal government, the immediate impact of these pardons is limited. Only about 6,500 people have been convicted for simple possession under federal law and a few thousand more have been convicted under the Code of the District of Columbia.

To read the full text of this article by Duane Morris attorneys Danielle M. Dwyer and Jesse Stavis, originally published in Law360, please visit the firm website.

July 1, 2020 by Duane Morris

Okla. High Court Marijuana Ruling Provides Preemption Guide

Duane Morris attorneys Justin Stern and Joseph Pangaro authored the July 1 Law360 article, “Okla. High Court Marijuana Ruling Provides Preemption Guide.”

Stern and Pangaro write:

Adult-use marijuana may be coming to Oklahoma sooner rather than later — barring any unforeseen events, legalization of marijuana for adult use will be on the state’s ballot this year.

On June 23, in the case of In re: State Question No. 807, Oklahoma Supreme Court rejected arguments that the proposed initiative was legally insufficient as preempted by federal laws making marijuana illegal. Interestingly, the court explained that state legalization of marijuana would not be “clearly or manifestly” unconstitutional as preempted by the federal Controlled Substances Act, or CSA, despite the apparent conflict.

To read the full article, visit the Duane Morris website.

January 19, 2019 by Brad A. Molotsky

Bill 420 – It’s “That” Time Again!

On 1-9-19, Rep. Earl Blumenauer (D-OR) introduced H.R. 420, the “Regulate Marijuana Like Alcohol Act.” Blumenauer, the co-sponsor of the Rohrabacher–Blumenauer amendment, better known as the on-going appropriations provision that prohibits the Justice Department from spending federal funds to enforce federal law that is in conflict with state medical cannabis laws.

Proposed Bill 420 is a total overhaul of the federal government’s treatment of marijuana. Among other things, the bill:

1. Decriminalizes marijuana by removing it from the Controlled Substances Act;
2. Amends the Federal Alcohol Administration Act to enable the Secretary of the Treasury to issue permits to those who want to to manufacture, distribute, or sell marijuana;
3. Transfers jurisdiction from the DEA to the Bureau of Alcohol, Tobacco, Firearms and Explosives;
4. Prohibits widespread advertising for marijuana; and
5. Grants to the FDA the same authority for marijuana as it has for alcohol.

Rep. Blumenauer noted: “Congress cannot continue to be out of touch with a movement that a growing majority of Americans support. It’s time to end this senseless prohibition.” In this vein, per a Pew Research Center study released last fall, nearly 66% of Americans support legalization at the federal level.

The new co-chairs of the 2019 bipartisan Congressional Cannabis Conference are Rep. Barbara Lee (D-CA) and Dave Joyce (R-OH), Rep. Earl Blumenauer (D-OR) and Don Young (R-AK).