Marijuana has a peculiar place in American society. In 2024, 22.3 percent of Americans had used marijuana at least once in the past year. Support for marijuana legalization is at 70 percent. Yet because of President Nixon's War on Drugs, marijuana was classified as a Schedule I drug under the Controlled Substances Act. This is mind-boggling considering that even back in the 1970s, a government report known as the Schafer Commission concluded that cannabis did not constitute a danger to the public. Even so, Nixon went ahead with Schedule I classification anyway. For context, Schedule I is reserved for drugs that have "no current medically accepted use" and high potential for abuse. This put marijuana on the same legal level as heroin and meth. Cocaine is a Schedule II drug, which means from the viewpoint of the Drug Enforcement Administration (DEA), marijuana is worse than cocaine.
Marijuana has retained that scheduling until last week. What happened last week? President Trump rescheduled marijuana to a Schedule III drug. Schedule III drugs are considered to have accepted medical uses while having a low potential for abuse and psychological dependence. I called for rescheduling marijuana a decade ago, but I suppose it is better late than never. Trump's decision has practical ramifications. One positive trend is that the rescheduling can reduce stigmatization of marijuana usage, particularly in terms of recognizing marijuana's legitimate uses.
One of the biggest benefits will be for medical research. Under Schedule I, it was all but impossible to conduct medical research on marijuana due to the research restrictions. Research could only be done under the National Institute on Drug Abuse (NIDA). Approval times were slow and the marijuana allowed was not research-grade. This rescheduling removes the NIDA monopoly on marijuana research. Schedule III does not eliminate research barriers. At the same time, Schedule III drugs do not require separate researcher registration; they also have less stringent laboratory controls and more limited reporting requirements. This means that more careful and precise research with fewer barriers can be conducted. What rescheduling will do is strengthen the evidence base.
I already pointed out how marijuana affects public health in 2023. I bring this up because rescheduling removes the legal fiction that marijuana has no medical use, which by itself will further marijuana legalization because the federal government is recognizing that marijuana is not the boogeyman that it has been made out to be. That would explain why the likes of Heritage Foundation aren't thrilled: because it can no longer be demonized. Schedule III opens the door to marijuana prescriptions. At the same time, it does not allow whole-plant marijuana to be sold. It still needs FDA approval and meet certain requirements on dosing, formulation, and labeling.
Furthermore, rescheduling has tax implications. Under IRS Code Section 280E, businesses trafficking Schedule I or II drugs cannot deduct business expenses from their gross receipts. According to the Reason Foundation, this has resulted in cannabis businesses paying up to four times as much in taxes as a non-cannabis business. Enabling these deductions will provide greater stability to the cannabis industry.
Reason Foundation also points out that banking opportunities will improve for cannabis businesses. The PATRIOT Act has strict anti-laundering provisions for Schedule I and II drugs. Since financial institutions were risk-averse, they ended up being more stringent than even under DOJ regulations in order to not get into trouble. Hopefully, this will ease tensions and open transparency enough that cannabis businesses can open up bank accounts. Prior to rescheduling, cannabis businesses had to be cash-based businesses because they did not have access to financial inclusion. Handling large volumes of cash attracted violent crime. As the Competitive Enterprise Institute points out, greater financial inclusion can remove this temptation.
Although rescheduling is an improvement, it should go without saying that rescheduling does not make marijuana legal. Federal law still conflicts with state legalization laws. This means that possession, distribution, and sale of marijuana remains a crime under federal law. It does not resolve the conflict with state laws that allow for marijuana. Even with rescheduling, there are still barriers to medical research, marijuana prescriptions, and financial inclusion. Removing marijuana from the list of federally controlled substances would be the most prudent approach for federal drug law. At the same time, rescheduling is an example of what next-best policy looks like given political reality. I predicted in 2015 that it would be a long road to marijuana legalization, so I still think this is pretty dope.
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