The Legal Implications of Rescheduling Cannabis

By: Hannah Fergus

Edited by: Alanna Liu and Anna Dellit

The Biden administration’s decision to reclassify cannabis from a Schedule I to Schedule III substance under the Controlled Substance Act (CSA) marks a historic shift in drug policy with wide-ranging legal and regulatory implications. As a Schedule I substance, cannabis and its use are subject to severe legal restrictions and regulations, with no recognized medical use and severe criminal penalties. Reclassifying the substance would acknowledge its medical benefits, reduce legal penalties, and provide tax advantages for cannabis businesses. However, rescheduling would also create new conflicts between federal and state laws, especially in states where cannabis is legal for recreational use or where certain frameworks like state-run medical programs and interstate commerce function independently of federal laws.  Without broader federal cannabis reform, legal uncertainties will persist and leave state and federal policies at odds.

Understanding the Legal Shift: Schedule I to Schedule III

Schedule I substances are defined by the CSA as having a high potential for abuse, no accepted medicinal use, and a lack of accepted safety when used under medical supervision. [1] Cannabis has been classified as a Schedule I substance since the CSA was passed in 1970, despite growing medical and scientific evidence supporting its therapeutic benefits.  Schedule III substances, including ketamine, anabolic steroids, and testosterone, are recognized for their medical use and are subject to fewer legal restrictions than Schedule I substances. [2]

Rescheduling cannabis to a Schedule III substance would carry several important ramifications.

• Medical Recognition: The rescheduling would formally legalize cannabis for medical use, allowing patients to use it for therapeutic benefits including for cancer patients going through chemotherapy in helping with pain, nausea, and increasing their appetites. [3]  

• Reduced Criminal Penalties: The penalty for possession of a Schedule I or II drug is more than double that of possession of a Schedule III drug. [4]  Rescheduling cannabis would mean that the punishment for a small amount of marajuana wouldn’t be the same as a small amount of cocaine or heroin.

• Tax Benefits: Businesses selling marijuana in states where it is legal wouldn’t be prevented from taking tax deductions as they are now under IRS Code Section 280E. [5] 

Despite these benefits, rescheduling cannabis does not mean that it will be legal in every state, and there will still be significant legal conflicts between federal and state laws.

Conflicts with State Laws

Although cannabis remains federally illegal, many states have laws that legalize it for medicinal and/or recreational use.  These states often simply operate under the assumption that federal authorities will not aggressively enforce the CSA against compliant state-regulated businesses. Statements at the federal level further reinforced this assumption, including the Cole Memorandum, which states that federal attorneys shouldn’t pursue convictions for cannabis offenses in states where it was recreationally legalized. [6]  Rescheduling cannabis to Schedule III further complicates this legal unbalance without resolving the current issues in enforcement.

1. State-Legal Recreational Cannabis Markets

One major issue that would arise from the rescheduling is that recreational cannabis would still remain illegal under federal law.  Nearly every state allows some form of access to cannabis, and 24 states allow full access to adults and for medical use. [7]  These states still have complex systems to regulate the sale, taxation, and distribution of cannabis, but the reclassification would mean that cannabis is still a federally controlled prescription drug.  

For example, Colorado’s 64th Amendment allows the use of marijuana for anyone 21 and over and that its taxation and regulation is the same as for alcohol. [8]  Similarly, California’s Proposition 64 law allows the use of marijuana for all those over the age of 21 and even reduces punishments for marijuana related offenses for minors, governed by the Bureau of Cannabis Control. [9]  The rescheduling would mean that the production and distribution of cannabis could be subject to FDA and Drug Enforcement Administration (DEA) oversight, which would not align with these state programs.  The federal government would have to decide whether or not to pursue consequences for businesses operations outside of FDA regulations.

2. Existing State Medical Cannabis Programs

Rescheduling would also disrupt state programs that allow medicinal cannabis use that have long histories of operating independently of FDA approval.  These states often have their own programs that regulate medical cannabis, which allows physicians to recommend rather than prescribe cannabis to patients of any age.  These programs function under the assumption that cannabis isn’t included in the scope of traditional pharmaceutical regulation.  

Enacted in March 2021, New York’s Marihuana Regulation and Taxation Act (MRTA) has improved the Medical Cannabis Program by expanding the number of conditions that qualify and increasing the dispensing limits and types of products allowed to be used as medical treatment. [10] Similarly, Florida’s Second Amendment establishes clear and well-defined frameworks for doctors to use when prescribing medical marijuana. [11]  The reclassification would mean that cannabis would fall under FDA prescription drug regulations, meaning it would have to go through the official FDA development and approval process. [12]  State medical cannabis programs could be directly violating federal law, and doctors would be unable to simply recommend rather than officially prescribe the use of cannabis.  It would have to be formally prescribed, hurting patients who rely on products solely sold in dispensaries.

3. Interstate Commerce and Transport Issues

Rescheduling could further complicate state cannabis commerce and supply chains.  Many states have laws that allow cannabis businesses to operate within state lines but prohibit interstate cannabis transport due to federal prohibition.  If the DEA reclassifies cannabis as Schedule III, federal rules governing pharmaceutical distribution may apply.  For example, Oregan passed Senate Bill 582 saying the state may enter into an agreement with another state to transport cannabis across state lines to conduct business in both states. [13] However, under a Schedule III framework, only DEA-licensed entities may distribute controlled substances, which would interfere with state laws such as Oregon’s Senate Bill and may prevent the state’s control over transportation with other states.

Conclusion

While rescheduling cannabis from Schedule I to Schedule III is an important step toward federal reform, it does not fully resolve the legal conflicts between state and federal law. The reclassification may lead to increased medical benefits, tax relief for businesses, and a shift in criminal enforcement priorities. However, it also introduces new challenges, particularly for recreational markets, state medical programs, and interstate commerce regulations.  Ultimately, unless Congress enacts broader cannabis reform—such as descheduling entirely or implementing a federal-state regulatory framework—legal uncertainties will persist.

Notes:

1. Controlled Substances Act, 21 U.S.C. § 812 

2. “Drug Scheduling.” United States Drug Enforcement Administration. DEA, July 10, 2018. https://www.dea.gov/drug-information/drug-scheduling 

3. Muhammad Hossain and Han Chae. “Medical Cannabis: From Research Breakthroughs To Shifting Public Perceptions and Ensuring Safe Use.” National Library of Medicine. 13, no. 4 (2024). https://pmc.ncbi.nlm.nih.gov/articles/PMC11617882/

4. “Laws Governing Drug Use.” Drexel University. Drexel University. ​​https://drexel.edu/studentlife/community-standards/code-of-conduct/drug-free-schools-and-community-act/drug-use 

5. “IRS: Marijuana Remains a Schedule I controlled substance; Internal Revenue Code Section 280 E still applies.” IRS. IRS, June 28, 2024. https://www.irs.gov/newsroom/irs-marijuana-remains-a-schedule-i-controlled-substance-internal-revenue-code-section-280e-still-applies#:~:text=Section%20280E%20disallows%20all%20deductions,the%20federal%20Controlled%20Substances%20Act. 

6. Cole Memorandum, U.S. Department of Justice (2013). https://www.justice.gov/iso/opa/resources/3052013829132756857467.pdf 

7. “Map Monday: Nearly Every State Redefining Cannabis Access.” National Conference of State Legislatures. NCLS, Dec 11, 2023. ​​https://www.ncsl.org/resources/map-monday-nearly-every-state-redefining-cannabis-access 

8. Colorado Constitution, Art. XVIII, Sec. 16

9. California Proposition 64 (2016), Business and Professions Code §§ 26000-26231.2

10. “NYS Medical Cannabis Program.” Office of Cannabis Management, New York State Department of Health. https://cannabis.ny.gov/medical-cannabis 

11. Florida Constitution, Art. X, Sec. 29; Fla. Stat. § 381.986

12. “Development & Approval Process: Drugs.” U.S. Food and Drug Administration, FDA, August 8, 2022. https://www.fda.gov/drugs/development-approval-process-drugs 

13. Oregon Senate Bill 582 (2019)

Bibliography:

California Proposition 64 (2016), Business and Professions Code §§ 26000-26231.2

Cole Memorandum, U.S. Department of Justice (2013). https://www.justice.gov/iso/opa/resources/3052013829132756857467.pdf 

Colorado Constitution, Art. XVIII, Sec. 16

Controlled Substances Act, 21 U.S.C. § 812 

“Development & Approval Process: Drugs.” U.S. Food and Drug Administration, FDA, August 8, 2022. https://www.fda.gov/drugs/development-approval-process-drugs 

“Drug Scheduling.” United States Drug Enforcement Administration. DEA, July 10, 2018. https://www.dea.gov/drug-information/drug-scheduling 

Florida Constitution, Art. X, Sec. 29; Fla. Stat. § 381.986

Hossain, Muhammad  and Chae, Han. “Medical Cannabis: From Research Breakthroughs To Shifting Public Perceptions and Ensuring Safe Use.” National Library of Medicine. 13, no. 4 (2024). https://pmc.ncbi.nlm.nih.gov/articles/PMC11617882/

“IRS: Marijuana Remains a Schedule I controlled substance; Internal Revenue Code Section 280 E still applies.” IRS. IRS, June 28, 2024. https://www.irs.gov/newsroom/irs-marijuana-remains-a-schedule-i-controlled-substance-internal-revenue-code-section-280e-still-applies#:~:text=Section%20280E%20disallows%20all%20deductions,the%20federal%20Controlled%20Substances%20Act. 

“Laws Governing Drug Use.” Drexel University. Drexel University. ​​https://drexel.edu/studentlife/community-standards/code-of-conduct/drug-free-schools-and-community-act/drug-use 

“Map Monday: Nearly Every State Redefining Cannabis Access.” National Conference of State Legislatures. NCLS, Dec 11, 2023. ​​https://www.ncsl.org/resources/map-monday-nearly-every-state-redefining-cannabis-access 

“NYS Medical Cannabis Program.” Office of Cannabis Management, New York State Department of Health. https://cannabis.ny.gov/medical-cannabis 

Oregon Senate Bill 582 (2019)