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Is the DEA pushing back on rescheduling?

Plus, no uplisting yet, experts say

Wednesday, May 22, 2024

Good morning.

Today, we’ll be watching oral arguments for a lawsuit filed by David Boies’ firm on behalf of a group of cannabis firms, including Verano, challenging the legitimacy of federal cannabis prohibition in a federal court in Western Massachusetts. 

You can listen to the audio here, kicking off at 10:30 AM ET. And if you want background on the case, read our interview with one of the lawyers working on it here

We’ll also have Joe Rossi of Park Strategies, one of the foremost cannabis lobbyists in Albany, on Cultivated Live at 10 AM ET to chat about what went wrong with New York’s cannabis rollout and where we go from here. Watch that here

If that wasn’t enough, we’ll also be watching the industry trade group US Cannabis Council’s webinar on rescheduling at noon. Register here

Busy day! 

Let’s get to it. 

-JB & JR

This newsletter is 1,353 words or about a 9-minute read. 

💡What’s the big deal?

DEA head didn’t sign off on rescheduling. Does it matter?

What happened: Anne Milgram, the head of the Drug Enforcement Administration, didn’t sign off on reclassifying cannabis as a less dangerous Schedule III drug, the Associated Press reports

Why it matters: Whether that matters for the prospects of actual rescheduling is an open question, depending on who you ask. 

Those against relaxing cannabis laws would point to Milgram’s, and by extension the broader DEA’s, reticence and suggest that rescheduling is driven more by President Joe Biden’s domestic political considerations in a hotly-contested election year, versus a legit scientific process.

Those for legalization — and perhaps, most legal experts — would say that the DEA’s stance has little bearing on the process, given that Attorney General Merrick Garland (Milgram’s boss) already signed off. And, the Department of Justice’s Office of Legal Council (OLC) wrote a 36-page memo justifying the legal basis for that decision. 

It’s not surprising that an agency specifically set up to enforce drug laws would have a tough time wrapping their heads around a push for less enforcement. It’d be unfair to say DEA’s rank-and-file aren’t acting in good faith — but in some respects, they’re glorified police officers, not scientists. 

What they’re saying: I’d encourage you to read Columbia Law professor David Pozen’s take. He’s an expert on this stuff:

“The big news is that OLC sided with HHS rather than DEA on the relevant legal standard and that Attorney General Merrick Garland—former prosecutor and federal judge, lawyer’s lawyer par excellence, and just about the least likely countercultural icon one could imagine—then effectively overruled DEA and withdrew its scheduling authority with respect to marijuana,” Pozen writes.  

Counterpoint: Gil Kerlikowske, a former director of the Office of National Drug Control Policy, slammed rescheduling on a recent podcast, and said the process was driven by big cannabis corporations searching for so-far elusive profits.

““This is all Big Cannabis,” he said. “This isn’t people my age that are just old hippies that want to open up a pot shop somewhere. This is a huge business like Big Tobacco. Absolutely.”

Our take: Charges that rescheduling is driven by a political process are correct, insofar as there is finally the political will to make a difficult, but necessary change to how the federal government treats cannabis. But that doesn’t mean there isn’t a legitimate scientific basis for this change, either. 

The agency that first recommended this change, the Department of Health and Human Services, is driven by careful scientific analysis. The DEA’s only job here is to enforce the law as written. 

Ultimately, I’m swayed by the OLC argument that the DEA relies on a flawed process to determine how to classify drugs, and that forcing the DEA’s hand to make a policy change that a large majority of Americans want could actually be a good use of the President’s bully pulpit. 

It’s the drug scheduling process that is flawed, not Biden’s insistence that the US should relax laws. 

As to Kerlikowske’s assertion, he’s certainly correct in that rescheduling would benefit big cannabis companies. But I don’t believe that’s Biden’s overriding desire in rescheduling. 

However, Biden, and the DOJ, could make a stronger argument against this notion by pushing for much broader legalization than simple rescheduling — which, as we’ve said before, does little-to-nothing for criminal justice reform. 

The final word: Rescheduling seems to be happening, whether or not the DEA is on board. Milgram’s signature matters less in this case than Garland’s. But the kerfuffle reveals both that this has been a political fight — and that the Biden Administration wants this bad enough to piss off the DEA.

Maybe that’s a good thing? 

And more: The DEA’s proposed rule to move cannabis to Schedule III hit the federal register today, starting the 62-day public comment period ending in July. Make your voice heard.


💬 Quote of the day

“Schedule III, even when final, will not lead the New York Stock Exchange or Nasdaq to list U.S. plant-touching companies. Those companies will continue to be violating the Controlled Substance Act,” Eric Berlin, a partner at Denton’s, told Green Market report

To back up, some investors hope that by changing cannabis to Schedule III, companies that sell cannabis in the US will magically be able to “uplist” to major domestic exchanges. This uplisting, investors say, will unlock tons of much-needed capital for the ailing sector and give shareholders handsome paydays.

But not so fast. Berlin is one of the foremost cannabis lawyers, and regularly deals with the big exchanges. In his legal view, Schedule III won’t provide exchange regulators with enough clarity — they’ll have to wait for guidance from the DOJ.

Quick hits

A dispensary on Martha’s Vineyard is suing the Massachusetts Cannabis Control Commission, alleging that the agency’s ban on transporting cannabis to the island from the mainland is “arbitrary,” reports The Vineyard Gazette. The state maintains that the waters between the island and the mainland are federally controlled, so all cannabis sold on Martha’s Vineyard needs to be grown on the island. 

California cannabis company Glass House Brands withdrew its lawsuit against rival company Catalyst, reports WeedWeek. Catalyst’s CEO alleged that Glass House was selling cannabis to the illicit market. Glass House sued for defamation, but withdrew after it said Catalyst’s financial situation would preclude the company from paying damages. 

A new House version of the Farm Bill no longer splits the definition of hemp in two, as a version released last week did. The previous version distinguished between industrial hemp and hemp produced for the purpose of extracting intoxicating cannabinoids. So much for that. 

One of the first winners of a coveted New York cannabis license says they don’t plan to use it, citing “uncertainties in the market,” reports New York Upstate

Military veterans will now be included as social equity applicants in Minnesota in a change to the state’s law, reports Minnesota Reformer. Veterans sued New York’s government over the same issue, and the result was an injunction that stifled the industry’s growth for months. 

Seventy-six percent of Thailand voters say they want cannabis to be rescheduled as a medical-only drug, per a study conducted by a Thai government agency. Thailand legalized cannabis in 2022, but the country’s leadership wants to make recreational consumption illegal again.  

Cannabis legalization in Canada led to an uptick in hospitalizations among elderly people — especially after edibles were legalized, according to a new study. While the overall numbers are small, the authors say that more precise information about dosing by age could be a useful policy intervention.

📊 Chart of the day

The legal cannabis industry in the US is now a larger industry by sales than beef — and just smaller than the Mother’s Day industrial complex, per a chart from MJ Biz Daily’s factbook. (Which begs the question: if you buy your mom weed on Mother’s Day, which category does that fall into?)

📰 What we’re reading

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