Legal cannabis operators in Washington state, a billion-dollar market, are weathering familiar struggles of oversupply, restrictive local rules and heavy taxes.
But now there’s another headache peculiar to the Evergreen State, according to a memo from the state cannabis regulators: Historic federal medical cannabis rescheduling likely does not apply to Washington cannabis operators.
The final rule reclassified medical cannabis as a Schedule 3 drug and set up a process for medical operators to register with the DEA. However, the rule left adult-use cannabis in Schedule 1 of the federal Controlled Substances Act.
And that means most Washington operators are likely still subject to Internal Revenue Code Section 280E, according to an analysis of the U.S. Justice Department’s April 23 final rule released Monday by the Washington state Liquor and Cannabis Board (LCB).
Why doesn’t federal marijuana rescheduling apply in Washington?
“A key element of this rescheduling action is that it applies strictly to ‘medical marijuana,’” the LCB memo reads. “Based on our analysis, federal rescheduling in its current form does not appear to apply to Washington’s cannabis licensees due to the statutory framework predominantly regulating recreational cannabis.”
That’s because Washington “does not license medical cannabis producers, processors, or retailers,” as the memo pointed out.
Instead, cannabis businesses are licensed via “a single recreational market.”
Within that, cannabis producers and sellers can manufacture and sell state Department of Health-compliant products “to all adult patients and designated providers,” noted the LCB.
The memo cautioned that that “may not be our final interpretation,” with the outcome of both legal challenges as well as U.S. Drug Enforcement Administration hearings potentially affecting the state of play.
What other states have exceptions to marijuana rescheduling?
That single-tier system sets Washington apart from other states with adult-use cannabis.
In California, for example, operators can still obtain medical permits. And state regulators recently moved to allow adult-use operators to add a medical designation.
However, Washington’s analysis may also spell complications for cannabis operators in New York.
There, nearly all licensees that have entered the market since adult-use legalization in 2021 are classified as adult-use and not medical.
The final rule is expected to be discussed during DEA hearings scheduled to begin June 29.
