For the second year running, the $32.1 billion U.S. cannabis industry will head into the Labor Day holiday weekend on the heels of a major milestone in the Biden administration’s effort to reschedule marijuana.
Instead of celebration, however, anger and a minor sell-off of cannabis stocks followed Monday’s announcement that an administrative law judge won’t hear the Justice Department’s proposal to recategorize marijuana to Schedule 3 of the Controlled Substances Act until December.
A year ago, the industry headed into the Labor Day holiday weekend celebrating “the biggest thing ever” to happen with cannabis reform when federal health regulators recommended that marijuana be classified as medicine.
But this year, U.S. Drug Enforcement Administration chief Anne Milgram’s notice in the Federal Register of a planned Dec. 2 hearing means it’s all but certain marijuana won’t be rescheduled until 2025.
Marijuana tax relief on hold
As a result, plant-touching cannabis companies will have to wait a few more months for federal tax relief.
That potentially upends several major multistate operators’ plans to claim business expenses the IRS says are still due under Section 280E of the Internal Revenue Code.
“It is incredibly disappointing to see the DEA drag their feet on an issue which has been a clear White House priority,” U.S. Rep. Earl Blumenauer, an Oregon Democrat and the co-chair of the Congressional Cannabis Caucus, said in a Tuesday statement.
But other observers were more circumspect.
“This is not a surprise,” said Shawn Hauser, a partner at Denver-based law firm Vicente and chair of the practice’s cannabinoid and hemp division.
“There was a very significant chance” of an administrative law judge hearing, she said.
Yet Blumenauer’s frustration echoed similar sentiments among major marijuana industry players on Monday and Tuesday.
“Breaking news: the DEA hates weed,” Ben Kovler, the CEO of Chicago-based multistate operator Green Thumb Industries, posted to social media on Monday night.
Cannabis stocks take a hit
Cannabis investors reacted accordingly.
Shares in Green Thumb dipped more than 8.5% on the news of the Dec. 2 hearing, from $10.69 at the close of markets Monday to about $9.76 on Tuesday afternoon.
Similar drops hit fellow marijuana MSOs:
- Curaleaf Holdings, down 12% to $2.80.
- Trulieve Cannabis Corp., down 5% to $9.09.
- Verano Holdings Corp., down 13.5% to $3.33.
Meanwhile, outspoken cannabis advocates and some business leaders took to social media to vent frustrations – at President Joe Biden, at Milgram and at each other – as hopes of preelection rescheduling vanished.
Speculation swirled that Republican presidential nominee Donald Trump could unwind the rescheduling process as a rebuke to Biden.
Those reports competed with rumors that, with the Democrats’ hopes of retaining the White House improving with Vice President Kamala Harris as the nominee, the party is less in need of a drastic act to win back disaffected progressives and young voters.
But, for now, such theories have no factual basis.
“You can Rorschach this any way you want,” said one D.C. lobbyist, who requested anonymity to speak freely, “but there isn’t a sign that anybody I know has seen that there was some political maneuvering going on.”
‘We know what next step is’
Instead, lawyers, lobbyists and some cannabis executives told MJBizDaily on Tuesday that the scheduled hearing shouldn’t have come as a shock.
If anything, it means the rescheduling process Biden launched with an October 2022 executive order is still on track.
“We hoped it would be speedier, we were hoping for before the (November presidential election), but at least we have a date now, and we know what the next step is,” said Bryan Barash, vice president of external affairs at Oregon-based cannabis sales software platform Dutchie.
“But you know, I think throughout most of this process, we’ve been pleasantly surprised at the speed – and it’s beaten expectations.”
Publication of a final rule follows the hearing by an administrative law judge, though the Administrative Procedure Act does not give a specific time frame.
Barring a lengthy delay in court – some observers noted that legal challenges are likely – the Dec. 2 hearing means a final rule is still possible before Biden leaves office on Inauguration Day, Jan. 25.
That is what Blumenauer, the longtime congressional champion, is banking on.
“While I would have preferred to see rescheduling finalized before the election, we still have every reason to believe that it will happen before President Biden leaves office,” Blumenauer said.
“I also have every hope that because of our work together, soon-to-be President (Kamala) Harris will take further steps to rationalize cannabis policy and end the failed war on drugs.”
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Interested parties
What’s still unclear is who will participate in the hearing.
As the marijuana industry marshals administrative law experts to argue on its behalf, most observers agree they’ll likely square off against familiar foes such as Smart Approaches to Marijuana.
Observers stressed Tuesday that while marijuana operators might be justifiably frustrated that the cannabis plant is still federally prohibited, the rescheduling process is proceeding as the law requires – and much more quickly than some other tweaks to federal law.
“It’s usually a nine-year process,” Hauser said.
“Biden said it would move expeditiously, and it has.”
Rather than be upset over the wait, Hauser added, the cannabis industry should be looking forward to arguing its case before a DEA that agrees on at least one point: The current status quo should change.
“People should be focused on preparing to support a historic hearing,” she said.
“There are volumes of science and medicine that support the medical use and remarkably low abuse potential of cannabis.”
Chris Roberts can be reached at chris.roberts@mjbizdaily.com