The federal government’s review of marijuana’s legal status is facing another delay, leaving cannabis businesses waiting longer for potential tax changes tied to broader rescheduling.
A temporary pause was ordered last Tuesday by Derek Julius, the DEA’s chief administrative judge. The move came after opponents of cannabis reform requested that a recent Government Accountability Office (GAO) report be added to the administrative record before proceedings continue.
Judge Julius has been considering how to advise the DOJ on a White House directive calling for federal cannabis restrictions to be reduced. His decision now appears unlikely before November at the earliest.
The delay has significant financial implications for the cannabis sector. Medical cannabis covered by state licensing has been treated as a Schedule III substance since April. Extending that classification to cannabis more broadly could allow businesses serving recreational consumers to qualify for federal tax treatment currently unavailable to companies handling federally controlled substances.
Hemp companies could also be affected. Some businesses are facing a December 11 deadline under which certain products will no longer meet the federal definition of legal hemp, potentially creating regulatory and tax consequences.
The judge is not bound by a specific timetable, and AG Todd Blanche would not be legally obligated to adopt his recommendation. Legal challenges brought by groups opposing rescheduling have not succeeded so far.
The latest development followed a September 23 GAO report examining federal procedures for placing controlled substances into different schedules. The watchdog reviewed 208 scheduling actions across various drugs and concluded that the FDA and the DEA could strengthen their policies. Among the issues identified were gaps in guidance for staff conducting scheduling evaluations.
Groups opposed to marijuana rescheduling quickly cited those findings. On September 28, Dr. Kenneth Finn, NDAA, and DUID Victim Voices, all participants in the recent hearings, asked the judge to include the report in the case record. They argued that its relevance to the cannabis proceedings should first be assessed.
The judge subsequently issued a temporary stay and directed the DOJ to respond by October 13. He said the request had enough merit to justify waiting for arguments about whether the GAO findings should become part of the record.
The dispute also touches on the scientific standards used during the rescheduling review. Historically, the DEA relied on a five-part framework when determining whether a substance had acceptable medical use. For marijuana, however, the DHHS applied a separate two-part approach in reaching its 2023 conclusion that marijuana met the criteria for rescheduling.
During the hearings held over the summer, FDA officials acknowledged that marijuana would not have qualified for Schedule III under the previous five-part standard.
Opponents of legalization welcomed the pause, stating that the GAO findings reinforced concerns about moving forward before federal agencies address questions surrounding the evaluation process.
Marijuana companies, such as SNDL Inc. (NASDAQ: SNDL), will be following these latest developments that could further delay the process of federally rescheduling marijuana in the U.S.
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