James Romano is shown trimming flowers at the CommCans processing facility in Medway, MA on October 27, 2021. The trimmed flowers are collected in a tray, along with shake, which is the cannabis flower that has broken down naturally through handling. CommCans uses shake in their pre-rolled joints or to make edibles. This image is courtesy of Erin Clark from the Boston Globe.
According to a spokesperson for the Drug Enforcement Agency (DEA), the U.S. Health and Human Services Department has recommended reclassifying marijuana as a lower-risk drug. This recommendation could potentially ease restrictions on the marijuana industry, which has been hindered by its current Schedule I classification under the Controlled Substances Act. Schedule I drugs, including marijuana, are considered to have no accepted medical use and a high potential for abuse. Despite its legalization for recreational use in many states, the federal classification has limited the industry’s growth.
The marijuana industry experienced a surge in sales during the pandemic, but it is now facing a downturn as investors withdraw and capital becomes scarce. Additionally, the industry faces challenges in accessing banking services and trading across state lines, resulting in an oversupply of cannabis in many states and a decrease in prices.
If marijuana is reclassified at the federal level, it could potentially expand the market for this multibillion-dollar industry in the U.S. It would also benefit newly legalized states where marijuana is grown as a cash crop.
The news of the potential reclassification had a positive impact on the stock prices of several cannabis companies, including Canopy Growth, Tilray Brands, and Cronos Group. Investors reacted favorably to the recommendation, according to Bloomberg.
In a letter to DEA officials, the Health and Human Services Department called for marijuana to be reclassified as a Schedule III drug. Schedule III drugs have a moderate to low potential for physical and psychological dependence. The DEA, as the regulatory authority for controlled substances, will now initiate a review of marijuana’s classification.
The lack of federal regulation has created challenges for cannabis businesses in states where recreational sales are legal. These businesses are still unable to access traditional banking services and institutional capital. The Secure and Fair Enforcement Banking Act (SAFE), a congressional bill that aims to lift these restrictions, has passed in the House several times but has not made it through the Senate.
Patrick Rea, managing director at cannabis investment firm Poseidon Garden Ventures, expressed cautious optimism about the potential changes that reclassification could bring to the industry. He believes that moving cannabis off Schedule I is a long overdue decision and hopes that progress will be made towards full legalization and regulation in the legal cannabis industry.
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