May 1, 2024 - Economy

Biden gives cannabis industry a badly needed win

Illustration of the United States seal holding a marijuana leaf instead of an olive branch.

Illustration: Maura Losch/Axios

The U.S. Drug Enforcement Agency is recommending that cannabis be reclassified as a Schedule III drug, which would codify that it has medicinal value and is less dangerous than its current Schedule I designation, Axios has confirmed.

Why it matters: The U.S. cannabis industry needed a win, just days after one of its best-known companies, MedMen, filed for bankruptcy protection.

  • Venture capital investment in cannabis companies has fallen sharply in the past couple of years, totaling just $550 million in 2023 after hitting $3 billion in 2019 and $2.7 billion in 2021, according to PitchBook.
  • Publicly traded stocks also have slumped. Curaleaf shares, for example, opened yesterday down 70% from their 2021 highs.

The big picture: Rescheduling would allow cannabis companies to deduct business expenses on their taxes, which would particularly help dispensaries that typically operate on very tight margins.

  • It also would eliminate restrictions on cannabis research, and could create legal protections for medical marijuana users who've run afoul of housing or employment rules.

Look ahead: There also are industry hopes that this would be the first step toward allowing interstate trade of cannabis, given that the market has struggled with oversupply in certain states.

  • But that could only be accomplished by subsequent approval by the U.S. Food and Drug Administration, and even that might be limited to particular cannabis strains or products.

Caveats: DEA rescheduling would not result in national legalization or pharmacy sales.

  • Nor would it permit federally chartered financial institutions to do business with cannabis companies, although Congress might view the move as important enough to finally approve a cannabis-specific banking bill known as The SAFER Act.

The bottom line: The road to national legalization has been long, and remains far on the horizon. But this is a significant pitstop on the way.

Go deeper