Home Blog Cannabis Industry FDA Officials Recommend Reclassifying Pot Under Schedule III, How That Changes Everything

FDA Officials Recommend Reclassifying Pot Under Schedule III, How That Changes Everything

In a historic move Friday, officials from the U.S. Food and Drug Administration (FDA) said in documents that they support reclassifying cannabis as a Schedule III substance. This would make medical cannabis and the research supporting it legal at the federal level but still heavily regulated like hormone replacement therapy or ketamine.

The 252-page document recommended to the U.S. Drug Enforcement Administration (DEA) that cannabis should be reclassified from a Schedule I to Schedule III substance under the Controlled Substances Act (CSA). The documents start with a letter to DEA Administrator Anne Milgram, which reads that “marijuana meets the findings for control in Schedule III.”

The FDA’s Eight Factor Analysis (which are always the same) found cannabis “has a currently accepted medical use in treatment in the United States” and “is not an immediate precursor of another controlled substance.”

Under section 21 U.S.C. 811(b) of the CSA, the eight factors that are determinative of control of the drug are the following: 

  1. Its actual or relative potential for abuse. 
  2. Scientific evidence of its pharmacological effect, if known. 
  3. The state of current scientific knowledge regarding the drug or other substance. 
  4. Its history and current pattern of abuse. 
  5. The scope, duration, and significance of abuse. 
  6. What, if any, risk there is to public health. 
  7. Its psychic or physiological dependence liability. 
  8. Whether the substance is an immediate precursor of a substance already controlled.

Clearly cannabis has been deemed to have medical value, and the documents note that  43 U.S. jurisdictions are authorized to recommend the medical use of cannabis.

It marks the first time that the FDA has recommended that the Drug Enforcement Administration (DEA) place cannabis in Schedule III of the Controlled Substances Act (CSA). Medical and adult-use cannabis laws across America are generally based on laws at the state and local levels, and they’ve always existed in discord with federal law.

Keep in mind that Schedule III drugs are still heavily regulated and need prescriptions: Tylenol 3’s, ketamine, anabolic steroids, or testosterone. Schedule III substances are defined as drugs with a “moderate to low potential for physical and psychological dependence,” with less abuse potential than Schedule I and Schedule II drugs, but more than Schedule IV. Under Schedule III, Internal Revenue Code 280E (IRC 280E) would no longer apply to cannabis businesses, so you’d see things like tax deductions. Rescheduling to Schedule III, however, will not legalize state-level cannabis programs.

Cannabis Industry Reacts

Several organizations and cannabis companies sent statements to High Times. The National Cannabis Roundtable (NCR) applauded the historic acknowledgement that a federal agency has recommended cannabis be reclassified. The NCR announced that they have been instrumental in advocating for and informing the heads of the HHS in a memo, and the DEA in an open letter, as to the scientific facts and medical value of cannabis meriting its reclassification to at least Schedule III.

They acknowledged, however, the limitations of the authority of HHS and DOJ when it comes to the CSA and urged the DEA to follow the scientific findings of HHS and the FDA in this process. 

“A move to Schedule III would mean 280E no longer applies to regulated cannabis companies,” Saphira Galoob, Executive Director of the National Cannabis Roundtable, told High Times in an email. “Not only does this reduce the extreme tax burden currently faced by the industry, but it allows them to take advantage of critical tax credits on things like payroll and other routine businesses costs regularly used by other legal entities. Cannabis companies continue to face issues with access to capital and banking services, resulting in cash intense operations. The ability to reinvest more of their revenues in their operations, instead of a majority of all revenue going to taxes, will be extremely impactful for the regulated cannabis industry—particularly small and minority operators.”

Other active players in the industry reacted as well, acknowledging both the pros and cons of Schedule III.

“Health officials’ recommendation for the Drug Enforcement Administration (DEA) to reclassify cannabis from Schedule I to Schedule III of the Controlled Substances Act (CSA) is a pivotal moment for our industry,” Wurk CEO Deborah Saneman told High Times. “The relentless efforts of the cannabis sector to destigmatize the plant have played a crucial role in challenging the long-standing unjust classification of cannabis. Despite facing various challenges, the cannabis industry has demonstrated resilience, adapting swiftly while upholding exceptional standards. As a leading player in the industry, Wurk remains committed to sustaining our position as the most dependable payroll, HR, and time-keeping platform in the market.” 

“The recommendation to reclassify cannabis to a Schedule III substance is progress towards undoing generations of cannabis prohibition and a significant step in recognizing the plant’s medicinal and societal benefits,” Socrates Rosenfeld, co-founder and CEO of Jane Technologies, told High Times. “While this reclassification is not a ‘perfect’ solution, we will continue our mission until there is legal access around the world—and everyone in prison for cannabis is free. Still, this moment in history should be celebrated, and the end of cannabis prohibition has never felt closer to becoming a reality.” 

As the son of a convicted cannabis smuggler,  reading the full report from HHS (akin to a confession) that finally said the hard part out loud regarding the cannabis plants medicinal and societal value left me feeling both vindicated and excited for the future of cannabis reform,” Brady Cobb, a Washington, D.C. lobbyist and CEO of Sunburn Cannabis told High Times. “This is a groundbreaking step forward in the 70 plus year fight to end the ill fated war on the cannabis plant, and I eagerly await the DEA’s ruling to hopefully reschedule cannabis to schedule III. If that happens, this budding market will finally have a chance to operate in the sunshine with access to banking, U.S. financial services,  much needed tax reform and this move would serve as a springboard to much needed criminal justice reforms as well.

How it Happened

Last October 6, 2022, President Biden directed federal agencies to expeditiously consider reclassifying cannabis from the most restrictive category on the CSA schedule. Several organizations and businesses provided feedback on the FDA’s recent move.

The move was partly spurred by attorney Matthew C. Zorn, who sued the federal officials after using a Freedom of Information Act (FOIA) request to obtain the rescheduling memo. He’s done it before: In 2019, Dr. Sue Sisley of the Scottsdale Research Institute sued the DEA for blocking medical cannabis research. Two Texas-based attorneys, Shane Pennington and Zorn, took the case pro bono. NORML wrote that the DEA is essentially monopolizing cannabis research. Since cannabis is still illegal at the federal level, the National Institute of Drug Abuse (NIDA), the FDA, and the DEA have only allowed one man—Dr. Mahmoud ElSohly at the University of Mississippi—to grow cannabis for clinical studies. 

On Aug. 29, 2023, the U.S. Department of Health and Human Services (HHS) recommended to the DEA that cannabis be reclassified from a Schedule I drug to a Schedule III.

Schedule III would change everything, especially in terms of opening up the doors to cannabis research. Zorn first published the documents on his On Drugs blog on Friday. Before Friday, a highly redacted clip of the documents released to Zorn were released a month ago with a single page of it last October.

The industry grappled with the pros and cons Schedule III would bring as pressure mounts on the DEA to act on the recommendations from the HHS and FDA.

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