Marijuana Moment: Congressional Report Explains Implications—And Limitations—Of Trump’s Marijuana Rescheduling Move For Users And Industry

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Congressional researchers are laying out the scope and limitations of the Trump administration’s marijuana rescheduling action—explaining that while certified patients who possess medical cannabis from state-licensed dispensaries now have certain protections, the industry as a whole isn’t “immediately” considered to be in “full compliance” with federal law, particularly as it concerns recreational products.

In a report published by the Congressional Research Service (CRS) last week, analysts described the parameters of the recent final order issued by the Justice Department that moved medical marijuana from Schedule I to Schedule III of the Controlled Substances Act (CSA) and scheduled a hearing for later this summer to consider broader rescheduling.

CRS emphasized that the order “does not immediately bring the state-legal marijuana industry into compliance with federal law, but it appears to make it possible for some entities handling medical marijuana to come into compliance with the CSA.”

By placing medical cannabis in Schedule III, the federal government is acknowledging that the plant and its constituents hold currently accepted medical value that can be used for therapeutic purposes. That “opens the possibility that manufacturers, distributors, dispensers, and end users of covered marijuana products may be able to comply with the CSA,” the report said.

Additionally, DOJ’s order specifically directed the Drug Enforcement Administration (DEA) to create “expedited procedures to register holders of state medical marijuana licenses and to approve early applications within six months.”

To the end, DEA last week launched an online form that allows state-legal medical cannabis businesses to apply for federal protections.

However, the CSA generally stipulates that controlled substances that are available as prescription drugs “may only be dispensed via a valid prescription,” and “marijuana is not” a pharmaceutical controlled substance by that standard, CRS explained. The rescheduling order does, however, permit the dispensing of medical marijuana with a doctor’s certification under state programs “as long as the certifications satisfy certain requirements.”

“Thus, the order appears to authorize end users to possess marijuana for medical use without a CSA-compliant prescription,” the congressional report said. As it concerns non-end users participating in the state-legal cannabis industry, however, “the final order may make it possible for them to comply with the CSA, but may not bring them into full compliance with federal law.”

That said, outside of the CSA, the Federal Food, Drug, and Cosmetic (FD&C) Act makes clear that it’s “unlawful to introduce an unapproved drug into interstate commerce.” And while the Food and Drug Administration (FDA) has approved certain cannabis-derived drugs such as Epidiolex, “marijuana itself is not an FDA-approved drug.”

That means certain legal liabilities, including possible criminal penalties, could still come into play for marijuana businesses regardless of the scheduling change under the CSA.

That’s especially true as it concerns recreational marijuana, CRS said, which was excluded from the immediate policy change under the DOJ order—and it would still be the case even if broader rescheduling takes place following hearings later this year.

“With respect to the manufacture, distribution, and possession of recreational marijuana, even if marijuana were completely moved to Schedule III, such activities would remain illegal under federal law and potentially subject to federal prosecution regardless of their status under state law,” CRS said.

The congressional analysis also briefly discusses a longstanding appropriations rider that’s prevented DOJ from using its funds to interfere in the implementation of state-legal medical marijuana laws. It said that rescheduling cannabis “does not directly alter the medical marijuana appropriations rider, but may render it redundant for state-legal medical marijuana businesses that register with DEA.”

“To the extent those businesses now comply with the CSA, they do not need the rider to shield them from prosecution,” it said.

Further, as congressional researchers noted in prior reports before the rescheduling action was finalized, certain “criminal penalties for CSA violations depend on the schedule in which a substance is classified.”

“To the extent marijuana is moved to Schedule III, applicable penalties for some offenses would be reduced. However, CSA penalties that apply to marijuana specifically, such as the quantity-based mandatory minimum sentences discussed above, would not change as a result of rescheduling. The CSA does not require DEA to set annual production quotas for Schedule III controlled substances, but the final order states that DEA will continue to apply quota requirements to marijuana as required by the Single Convention.”

Although there are notable limitations to the rescheduling move, CRS highlighted two key impacts that advocates and stakeholders have long awaited as different administrations reviewed the classification of marijuana under federal law: Reduced research barriers and the ability of state-licensed cannabis businesses to take federal tax deductions under an Internal Revenue Service (IRS) code known as 280E.

“With respect to research, CSA registration requirements for Schedule III controlled substances are generally less stringent than the requirements for Schedule I controlled substances,” the report says, adding that legislation enacted under the Biden administration “created specialized procedures for DEA approval of marijuana research and manufacture of marijuana for research purposes.”

“Substance-specific registration requirements continue to apply to marijuana following rescheduling, which might limit the impact of rescheduling on marijuana research,” it said. “However, the final order appears to seek to facilitate marijuana research by allowing researchers to use state-legal marijuana rather than relying on existing DEA-registered sources.”

Concerning 280E, CRS said: “Because the provision applies only to activities involving substances in Schedule I or II, to the extent marijuana is moved from Schedule I to Schedule III, marijuana businesses can deduct business expenses on federal tax filings. Other collateral legal consequences may continue to attach to marijuana-related activities to the extent they violate the CSA or other federal laws.”

The U.S. Department of the Treasury and Internal Revenue Service (IRS) recently said they plan to issue new tax guidance for the marijuana industry following the rescheduling announcement.

At the same time that stakeholders have celebrated the rescheduling action, the White House has separately given certain mixed signals about marijuana in the weeks since.

For example, the White House Office of National Drug Control Policy (ONDCP) released a new National Drug Control Strategy on Monday that raises alarm about “high-potency” marijuana and expresses concerns that international cartels and crime groups “exploit” state cannabis legalization laws.

It also discussed the forthcoming federal recriminalization of hemp THC products that is scheduled for later this year under a law signed by President Donald Trump.

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While the president recently called on Congress to take action to alter the hemp cannabinoid ban language he signed into law in order to allow continued sales of full-spectrum CBD products, it’s not clear how far he wants to scale back the scope of the scheduled federal restrictions and what kinds of revised THC rules and limitations he would prefer to sign into law.

ONDCP Director Sara Carter Bailey has previously voiced support for medical cannabis, while stating that she doesn’t have a “problem” with legalization, even if she might not personally agree with the policy.

White House Press Secretary Karoline Leavitt said that the administration is moving forward with marijuana rescheduling because cannabis reform is “overwhelmingly popular” with voters and because doing so will help people who need access to the drug for medical purposes.

During a press event in the Oval Office, Trump spoke about the medical benefits of marijuana.

“A lot of people are suffering from big problems, which this seems to be the best answer,” he said. “They’re very happy about it. So the rescheduling is starting, and that’s a big thing, rescheduling.”

The president noted that his administration’s actions on cannabis rescheduling came after his friend Howard Kessler told him about how he used medical marijuana.

“He had some medical difficulties, and he came upon this by accident, in a way,” he said. “He had to go through a lot of different medications, and he said this was the one that was much better than anything else. And so he experienced that. He didn’t benefit by it, other than from the standpoint that he lives a much better life now.”

“So hopefully you don’t need it,” Trump said. “But if you do need it, I hear it’s the best of all the alternatives.”

Days earlier, Trump had complained that federal officials were “slow-walking” following through on his cannabis rescheduling order.

Photo courtesy of Chris Wallis // Side Pocket Images.

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