Justice Department reclassifies state-licensed medical marijuana as a less dangerous drug

By Hannah Rabinowitz, Steve Contorno, Alicia Wallace, CNN

(CNN) — Acting Attorney General Todd Blanche signed an order Thursday reclassifying state-licensed medical marijuana as a less dangerous drug, changing a policy that has for decades made the drug’s potential medicinal benefits more difficult to research.

The order from Blanche does not make recreational use legal under federal law. Instead, it moves licensed medical marijuana from Schedule I — which are the most restricted drugs such as heroin and ecstasy — to Schedule III, the same category as some prescription medicines like ketamine and Tylenol with codeine.

It also gives a tax break to licensed medical marijuana dealers and eases some restrictions on researching its effects.

“These actions will enable more targeted, rigorous research into marijuana’s safety and efficacy, expanding patients’ access to treatments and empowering doctors to make better-informed healthcare decisions,” Blanche wrote in a social media post on X.

The Drug Enforcement Administration will also hold administrative hearings before a judge on reclassifying marijuana more broadly, Blanche said.

The effort to downgrade marijuana’s classification has been discussed and attempted by several administrations, but none were successful in finalizing a rule. Former President Joe Biden initiated a new attempt in the last year of his presidency, but it wasn’t completed before he left office.

Critics blamed reluctancy from then-DEA Administrator Anne Milgram for slow-walking the process. The rule had been similarly scheduled for administrative hearings before the end of Biden’s term but was put on pause indefinitely by the DEA’s top judge.

In an executive order last December, President Donald Trump ordered the Justice Department to expedite the process and push through Biden’s proposed rule change.

But there was little public movement in the proceeding months, and advocates of eased regulations grew frustrated.

Trump himself appeared to express frustration about the delay over the weekend, telling podcaster Joe Rogan, a supporter of rescheduling marijuana, at an Oval Office event that “they’re slow-walking me.”

Sources told CNN that in the White House and Justice Department have also faced increasing pressure from the cannabis industry to get the scheduling change over the line.

As a plan to move forward was being finalized, some in the department hoped to publicize its efforts on April 20 — a day of celebration for marijuana enthusiasts — but were told that it would be unseemly, two sources familiar with the discussions said.

Now, the reinvigorated effort is likely to face swift legal challenges from critics who say that the downgrade could encourage recreational use of a harmful drug.

Smart Approaches to Marijuana, an advocacy organization that opposes marijuana legalization, said in a statement that it will be “taking legal action immediately” against the order.

“The only thing today’s decision advances are the interests of an addiction-for-profit industry—and if the president isn’t going to use the Food and Drug Administration as the law requires, why doesn’t he simply abolish it,” the statement said.

Still, loosening restrictions around marijuana is broadly popular. A 2024 Pew Research Center survey found nearly six in 10 Americans support the legalization of recreational cannabis.

Twenty-four states, two territories and Washington, DC, have legalized cannabis for adult recreational use, and 40 states, three territories and DC allow medical use of cannabis products, according to data from the National Conference of State Legislatures. Since the first adult-use cannabis sale took place in 2014 in Colorado, cannabis has blossomed into a multibillion-dollar industry that has attracted the attention of multinational companies across sectors such as alcohol, agriculture, pharmaceutical and tobacco.

It remains unclear how Wednesday’s rescheduling directive could affect state-legal cannabis businesses that have both recreational and medical licenses.

Kim Rivers, the CEO of the marijuana company Trulieve, thanked both Trump and Blanche for “delivering” on their promise to reclassify marijuana.

“The dual approach of utilizing the treaty pathway and the rulemaking process ensures rescheduling medical marijuana happens quickly and completely and is an unequivocal statement of the President’s commitment to make good on his campaign promise,” she said.

Economic impacts

The federal government acknowledging marijuana’s medical value is not only symbolically powerful but also could serve as a permissive signal to state-level lawmakers currently weighing cannabis legislation, said Brian Vicente, a founding partner of Vicente LLP, a Denver-based cannabis law firm.

A rescheduling would carry practical implications as well, he said, noting one of the most significant being that cannabis businesses might no longer be subject to Internal Revenue Code Section 280E, an early 1980s tax provision that prohibits businesses engaged in the “trafficking” of Schedule I or II substances from deducting ordinary business expenses or claiming tax credits.

“We’re talking about billions of dollars in new economic activity, tens of thousands of new jobs or just really a wind in the sail for this industry that’s really paid a very heavy tax burden for years,” Vicente said. “That would be life-changing for many, many state-legal cannabis businesses.”

Since 2018, cannabis businesses have paid an estimated $15 billion in excess 280E-related taxes, according to an analysis released earlier this month by Whitney Economics. Subject to 280E, some cannabis businesses have an effective tax rate of 70% or more, according to the Portland, Oregon-based cannabis and hemp consulting and economic research firm.

“By removing this tax burden, you’re going to have a substantial positive impact on these businesses, their ability to hire, their ability to pay higher wages, their profitability,” Vicente said. “In somewhat of a challenging economy, this could be a real win for those states that have these businesses.”

The Internal Revenue Service would likely have to issue guidance on moving marijuana to Schedule III, Vicente said.

Another real-world implication of rescheduling would be the acceleration of medical research on cannabis, he said.

“For years in Colorado and across the country, I’ve talked to universities and hospitals that want to allow research, but they’re afraid of federal illegality and losing federal funds,” he said. “While this would not change the legality of cannabis, it would move it to Schedule III, which would help fast-track research and certainly reduce some of the stigma attached to this medicine.”

What is not expected to change, he said, will be the state-level laws and regulations involving recreational and medical cannabis.

Rescheduling marijuana will not solve the longstanding federal-state conflict: The cultivation, manufacture, sale and possession of marijuana for recreational use would remain illegal under federal law and potentially subject to enforcement and prosecution.

States’ legal medical marijuana businesses do currently have some federal protections in place via appropriations legislation that restricts the Justice Department from interfering in these programs.

This story has been updated with additional information.

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