Michigan’s Cannabis Regulatory Agency on Monday laid out how the Drug Enforcement Administration’s plan to change the classification of marijuana from a Schedule I to a Schedule III drug could benefit Michigan consumers and cannabis companies, from potentially allowing businesses to file for bankruptcy to offering consumers products that meet uniform safety standards.
However, the agency said guidance from the federal government is crucial to understanding how to move forward if cannabis is reclassified as a Schedule III drug.
“Rescheduling marijuana from Schedule I to Schedule III can have profound impacts on both the medical and adult-use markets, potentially transforming how these markets operate and are perceived, but will do little good — and could potentially wreak havoc on Michigan’s existing programs — without clear guidance from all areas of thefederal government explaining the effects of rescheduling,” the CRA’s comment said. It was submitted during the public comment period that is part of the DEA’s plan to recategorize marijuana under the Controlled Substances Act.
President Joe Biden called for a review of how marijuana should be scheduled under federal law in October 2022. Last year, the Department of Health and Human Services recommended it be rescheduled to Schedule III. The Justice Department then did its own analysis and reached the same conclusion.
The proposed plan by the DEA, which is part of the Justice Department, does not legalize marijuana federally but the change from a Schedule I drug — considered highly dangerous, addictive and without medical use — to a Schedule III drug — like Tylenol with codeine and ketamine — would mean it can be lawfully prescribed as medication.
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The CRA’s input listed several situations in which a reclassification could impact Michigan’s cannabis industry and its consumers. Some of the key situations are below:
Impact to Michigan’s medical marijuana program: Example, refills
The CRA said that Michigan, along with more than 35 other states, is operating a mature medical marijuana program that likely doesn’t comply with the requirements for Schedule III drugs. For example, prescriptions for Schedule III substances can generally be refilled up to five times within a six-month period but there are currently no such limits for medical marijuana patients in Michigan.
“If marijuana is rescheduled, it is important for the federal government to clarify how the requirements that apply to Schedule III drugs will apply to marijuana,” the CRA said.
Banking and taxation
The CRA said that rescheduling cannabis could make it easier for marijuana companies to work with federally regulated financial institutions. Many financial institutions refuse to provide services to cannabis companies out of fear of violating federal law.
Cannabis companies could also benefit from tax deductions and exemptions available to businesses in other industries. If marijuana is rescheduled, Section 280E — the Internal Revenue Code that prohibits taxpayers who are engaged in the business of trafficking certain controlled substances from deducting typical business expenses associated with those activities — would likely not apply to these companies.
Bankruptcy protection
Cannabis companies can’t file for bankruptcy because marijuana is illegal under federal law and federal bankruptcy protection is not available to these companies or their lenders.
“Rescheduling would be a significant step toward enabling marijuana businesses to access bankruptcy protections and relief under federal law,” the CRA said.
Product safety
Comprehensive federal regulations for the cultivation, processing, testing and distribution of medical and recreational marijuana products could be established if cannabis is rescheduled, the CRA said.
“This would ensure that all marijuana products meet uniform safety and quality standards regardless of where they are produced or sold,” the agency said. “Such standards could cover limits on pesticides, solvents, inactive ingredients, microbials, metals, dosing amounts and potency limits.”
Transportation and interstate commerce
Marijuana can’t be transported across state lines, even if both states have legalized cannabis. The CRA said if marijuana is rescheduled, it could “potentially allow for legal interstate commerce of marijuana products between states where marijuana is legal.”
To read the full comment from Michigan’s CRA, go to Regulations.gov/docket/DEA-2024-0059 and search for Michigan’s Cannabis Regulatory Agency.
The comment period ended Monday. The proposal will be reviewed by an administrative judge and then the DEA will eventually publish the final rule.
H/T: www.usatoday.com
