Politico and Bloomberg both reported today that the U.S. Department of Health and Human Services (HHS) is officially recommending that marijuana be moved to Schedule III from Schedule I under the Controlled Substances Act (CSA), a historic shift that indicates the top health agency no longer considers cannabis to have high abuse potential with no medical value.

The rescheduling recommendation is not binding on the Drug Enforcement Administration (DEA), but DEA is statutorily obligated to accept HHS’s scientific and medical evaluation. If DEA decides to reschedule cannabis, the agency will go through a rulemaking process that includes a public comment period before issuing a final rule.

This development follows the completion of a scientific review into cannabis directed by President Biden last October. Marijuana is presently listed in Schedule I under the CSA, subjecting it to the greatest level of control reserved for substances deemed to have “no accepted medical use” and a “high potential for abuse.” As a result of its classification, state-licensed cannabis businesses operate under extreme regulatory burdens.

Lawyers and business professionals from Perkins Coie were instrumental in formulating the Coalition for Cannabis Scheduling Reform (CCSR), a diverse group of cannabis companies and scientific and legal authorities. In June, CCSR released a comprehensive report on the federal classification of cannabis co-authored by Andrew Kline, Co-Chair of Perkins Coie’s Cannabis Industry Group, with support from associate Tommy Tobin, and edited by paralegal Hanna Barker Mullin.

CCSR made the case in its report that marijuana is improperly placed in the same schedule as drugs like heroin and argues that the more appropriate options are to either remove the plant from the list of controlled substances altogether or reschedule it to Schedule III or below. The report outlines the scientific, economic, legal, and social justice considerations of these options compared to the status quo.

While cannabis would remain federally illegal under Schedule III, the reclassification would remove Internal Revenue Code Section 280E tax penalty, which prevents businesses “trafficking” in schedule I and II substances from taking deductions for ordinary business expenses, resulting in an effective tax rate of up to 80%. Rescheduling would eliminate this financial burden, providing much needed relief for regulated cannabis businesses. Moving cannabis out of schedule I would also eliminate a major obstacle for researchers, who presently must register with DEA to access cannabis for use in medical and scientific studies.

Perkins Coie is proud of its support for this burgeoning industry and will be working tirelessly to get this policy change over the finish line in the coming weeks.