DEA has a new permanent head. What’s next for rescheduling? 👀

OH, DEA
The DEA has a new permanent head. So what’s next for rescheduling?

What happened: The Drug Enforcement Administration finally has a new head, Terrance Cole, who was confirmed by the Senate on Tuesday.

Cole has said that restarting the process to reclassify cannabis from the most restrictive Schedule I of the federal Controlled Substances Act to the far less restrictive Schedule III would be one of his first priorities upon taking office. 

But he also has a history of anti-cannabis comments, and declined to answer lawmakers’ questions about what he’d like the intended result of the process to be, just that he would restart it.

And on Wednesday, the judge overseeing the rescheduling process, John Mulrooney, said he would retire, handing over the rescheduling process directly to Cole. 

Cole could try and jam it through himself, or appoint a new administrative law judge to oversee a new round of hearings. The ball’s in his court. 

What he’s saying: “Until there is a change in this circumstance, all matters filed in this case will be forwarded to the DEA Administrator, for whatever action, if any, he deems appropriate,” Mulrooney said in a letter announcing his retirement. 

What they’re saying: The industry is spinning Cole’s appointment as a positive.

"We congratulate Terry Cole on his confirmation as [DEA] Administrator. During his hearing, Cole identified advancing the agency's review of rescheduling as a priority. We look forward to working with the Trump Admin. to move our nation beyond the failed policies of the past," The US Cannabis Roundtable, the biggest industry trade group, said on social media.

Back up for a second: The cannabis industry has been anxiously waiting for any crumb of news about rescheduling. The process was initiated by the Biden Administration, but has since sputtered under President Trump. 

The first round of hearings, planned for January, were paused as parties on both sides of the debate fought over the witnesses, and who’s allowed to say what, and when. They’re still paused. 

Reading the tea leaves: Trump supported rescheduling and other limited cannabis reform on the campaign trail last year. 

He’s a president who values loyalty above all else, and if we had to guess, the question of cannabis must’ve come up when he chose Cole to lead the DEA. That’s not to say they’re entirely aligned — fentanyl is obviously the big priority — but it would be surprising if Cole remained the choice if his views were totally opposite to Trump’s. 

And earlier this month, a bunch of pro-Trump social media influencers, with millions of followers combined, posted suspiciously similar talking points pushing rescheduling and other federal cannabis reform.

At the same time, some attorneys who have intimate knowledge of the DEA’s inner workings say that the pushback among the agency’s rank-and-file might be too intense to overcome, regardless of what Cole wants. 

The agency’s existence is predicated on the decades-old Drug War, and rescheduling would be a major admission of defeat and may risk the agency’s future funding. 

Let them eat cake: With Trump embroiled in the fallout and discontention among his base over the Department of Justice’s decision not to release the Epstein files, cannabis looks like a great distraction.

Trump is also losing support among the Gen-Z voters that ushered him into office. Cannabis reform is very popular among that cohort: 65% of 18-29 year olds said in a recent Pew poll they support legalization.

A big tent: Rescheduling also splits the difference between his MAGA base and the traditional social conservatives of the Republican Party. 

It’s not outright legalization, which surely would offend the religious Ron DeSantis and Mike Johnson wing of the party, but it would help stimulate small business in a growing, American industry. 

So the political benefits for Trump are clear. He can go into the midterms with a win (if it happens that quickly), shore up support among young voters, and fulfill a campaign promise. 

If only the Trump Administration worked so logically, this would be a done deal by now. But, again, this is Donald Trump we are dealing with. And to be fair, Biden was unable to get it done before he left office, letting the DEA run the show. 

The benefits of rescheduling are clear: While rescheduling stops well short of full legalization, it would be the biggest change to federal cannabis policy since the Nixon Administration.

First, it would get rid of the 280E tax, which bars companies selling Schedule I or II drugs from deducting regular business expenses. That rule forces cannabis companies to pay exorbitant rates, hurting profitability. 

Second, long-suffering cannabis stocks would go up, bringing more life and energy into the sector. 

Third, it may also give banks a bit more cover to work with the industry’s growing companies, opening up M&A opportunities, and could help lower the cost of much-needed capital for struggling operators. 

That could be a big boost for ailing social equity programs in states like New York and Illinois, where many entrepreneurs are laden with debt and have been unable to open their stores and make money.  

But there are still lots of unknowns: It’s unclear whether the move to Schedule III would be enough to allow major stock exchanges like the Nasdaq or NYSE to list companies that sell cannabis recreationally. 

And, it still leaves state-regulated dispensaries in the odd position of selling a Schedule III drug to consumers without a prescription. Depending on which attorney you ask, you may get different answers to all these questions. 

So all this will have to be ironed out if or when the DEA makes its decision.

The final word: Some social equity advocates have said that Schedule III would only serve to entrench the large companies who have the capital and legal teams to navigate these treacherous regulatory waters, and it would allow the federal government to pass the buck on more fulsome reform for decades. 

They certainly have a point, but again, this is a teetotaling Trump and Republican majority we’re talking about — the industry should take what it can get. 

-JB

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