On May 16, the Drug Enforcement Administration (“DEA“) published its 92-page notice of proposed rulemaking (“NPRM“) to move marijuana from schedule 1 on the Controlled Substances Act (“CSA”) to schedule 3 (ironically, the proposed rule itself only takes up a couple of paragraphs on the last two pages of the NPRM). On the same day, the DEA released an opinion from the Office of Legal Counsel (within the Department of Justice (“DOJ”), which prepares legal opinions of the U.S. Attorney General “and provides its own written opinions and other advice in response to requests from the Counsel to the President, the various agencies of the Executive Branch, and other components of the Department of Justice”) in response to questions from the U.S. Attorney General’s office about schedule 3 marijuana (the “Opinion”). While the NPRM represents the proposed DEA rule that moves marijuana from schedule 1 to schedule 3, the Opinion is essentially the OLC’s roadmap for fending off legal and administrative challenges to this historic move.

The ‘Why’ Behind Schedule 3 Marijuana in the NPRM According to the DEA

We previously wrote about the August 2023 recommendation to the DEA from the Department of Health and Human Services (“HHS”) to move marijuana from a schedule 1 controlled substance to less restrictive schedule 3. The “Support” and “Background” behind the NPRM from the DEA basically re-visits the HHS’s recommendation with a few notable caveats:

  • Before initiating the NPRM, the scientific and medical findings of the HHS in its schedule 3 marijuana recommendation are binding on the DEA, but once the NPRM is published in the Federal Register, the DEA only needs to give “strong deference” to those findings in that process (which the Opinion backs up);
  • While the HHS determined that schedule 3 is appropriate for marijuana, the “DEA has not yet made a determination as to its views of the appropriate schedule for marijuana”;
  • The U.S. Attorney General and the DEA share the authority to schedule, re-schedule, and de-schedule drugs in the U.S. In this instance though, it’s the U.S. Attorney General exercising its authority to move marijuana to schedule 3;
  • While the DEA must pay “strong deference” to HHS’s medical and scientific findings here, “the DEA believes that factual evidence (including scientific data) and expert opinions, including additional data regarding different forms, formulations, and delivery methods for marijuana, as well as evidence regarding the effects of marijuana at various dosages or concentrations, may be relevant” in the rulemaking process;
  • In the NPRM, the DEA makes its way through the 8-factor test under 21 U.S.C. 811(c) required for drug scheduling as performed by HHS for schedule 3 marijuana. The main take away is that, for most of these factors, the DEA’s position is that it needs more data and information before it can conclude that schedule 3 is the most appropriate for marijuana. This additional data and information will, of course, be brought out in the rulemaking process by various experts and voices of all kinds in hearings and public comments;
  • In regards to the HHS’s finding that schedule 3 is the most appropriate for marijuana (which hinges on marijuana’s (1) abuse potential; (2) currently accepted medical use (“CAMU”); and its (3) the safety or dependence potential), the DEA doesn’t necessarily agree with the HHS’s findings here. Specifically, the DEA seems to indirectly challenge the HHS’s use of only a novel two-part test to determine CAMU rather than using the standard, established five-part test used by the DEA in the past. Most interesting of all is that the OLC in the Opinion concludes that the DEA five-part test is “impermissibly narrow” and that the HHS’s two-part test is satisfactory to determine whether marijuana has a CAMU for the seven medical indications from the HHS recommendation. However, the NPRM makes clear that the U.S. Attorney General agrees with the HHS recommendation lock step (on the back of the OLC Opinion regarding the same) and so the rulemaking will proceed;
  • The NPRM applies to all “marijuana”, including Delta-9 THC that doesn’t constitute hemp as well as marijuana extracts, but not to synthetically-derived marijuana or industrial hemp; and
  • Regarding compliance with international drug treaties, the OLC Opinion concludes that the U.S. can continue to abide its obligations to “control” cannabis accordingly while moving it to schedule 3 (and that none of those treaties actually requires a schedule 1 or 2 placement on the CSA for marijuana anyway). Namely, that the existing legal and regulatory controls for schedule 3 drugs (as overseen by DEA and other federal agencies) will adequately meet or exceed our current treaty obligations. Importantly, the DEA concludes that “Accordingly, concurrent with this rulemaking, DEA will consider the marijuana-specific controls that would be necessary to meet U.S. obligations under the Single Convention and the Convention on Psychotropic Substances in the event that marijuana is rescheduled to schedule III, and, to the extent they are needed if marijuana is rescheduled, will seek to finalize any such regulations as soon as possible.”

What Happens to State-Legal Markets with Schedule 3 Marijuana Now that We have the NPRM?

We also previously wrote about all of the mind-bending outcomes of schedule 3 marijuana, but we now have additional insight from the DEA to a degree. In the NPRM, the DEA writes that,

If marijuana is transferred to schedule III, the regulatory controls applicable to schedule III controlled substances would apply, as appropriate, along with existing marijuana-specific requirements and any additional controls that might be implemented, including those that might be implemented to meet U.S. treaty obligations. The manufacture, distribution, dispensing, and possession of marijuana would also remain subject to applicable criminal prohibitions under the CSA.

The DEA also concludes in the NPRM that “In addition, marijuana would remain subject to applicable provisions of the [Food Drug & Cosmetic Act (“FDCA”)]. For example, under the FDCA, a drug containing a substance within the CSA’s definition of “marijuana” would need [Food and Drug Administration (“FDA”)] approval to be lawfully ‘introduce[d] or deliver[ed] for introduction into interstate commerce,’ unless an [Investigational New Drug (“IND”)] is in effect for that drug . . . To date, although there have been INDs for drugs containing a substance within the CSA’s definition of “marijuana,” no such drugs have been approved by FDA. DOJ is seeking comment on the practical consequences of rescheduling marijuana into schedule III under the relevant statutory frameworks.”

Of course, it’s not news that schedule 3 drugs are regulated and controlled accordingly in the U.S. by existing healthcare and drug development laws and rules. However, many in the marijuana industry believe that neither the DEA nor the FDA nor the DOJ will take any steps to enforce these existing schedule 3 laws and rules against state-legal cannabis companies. The DEA seems to initially take a different tack though in the NPRM, including around honoring existing international drug treaties through sufficient “marijuana controls” under schedule 3. Time will only tell what the DOJ, DEA, and FDA will do here regarding whether we’ll get some federal carve out or Cole Memo 3.0 that exempts state-legal cannabis businesses existing schedule 3 drugs laws and rules. In the short term though, nothing will change for state-legal markets unless state laws and rules also change around schedule 3.

Next Steps for Schedule 3 Marijuana Rulemaking

The publication of the NPRM in the Federal Register automatically kicks off at least a 60-day public notice and comment period, which of course can be extended as needed, and undoubtedly will be given that the DEA wants more information and data around the HHS recommendations in support of the NPRM (so, anticipate a good amount of public hearings around this one). And, of course, nothing is a done deal (including any relief from IRC 280E) until we have a final, published rule in the Federal Register anyway, which admittedly could take months or years despite the politics at play over this monumental legal/regulatory shift. Not to mention, there will likely be lawsuits and administrative challenges to the NPRM and the HHS recommendation in support of the same.

Schedule 3 Marijuana Call to Action–Make Your Voice and Priorities Heard

This upcoming public comment period is a serious opportunity to have a seat at the table as the DEA approaches making its final rule, including for state-licensed marijuana businesses. Certain issues that could and should be addressed in this rulemaking process include the fate of state-legal medical marijuana businesses despite or in conjunction with schedule 3; express approval of (or at least a hands off enforcement approach to) state-legal adult use businesses despite schedule 3; and dealing with synthetically-produced cannabinoids from industrial hemp. In the past, our firm has helped multiple clients draft and submit public comments on and to a variety of federal rulemaking across various agencies, and we’re starting our engines again on this NPRM. The call to action is a simple one–if you want to shape historic marijuana policy post-schedule 1, now is the time to speak up. Otherwise, grab your popcorn as the regulatory circus related to this NPRM plays out in D.C. between all camps in support of or against this schedule 3 move.

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Photo of Hilary Bricken Hilary Bricken

With a passion for organizational growth, Hilary advises clients in the cannabis, healthcare, and life sciences spaces on transactions, regulatory compliance, governance matters, and other corporate needs.

Hilary likes being a dealmaker: she values building collegial relationships with clients and other attorneys, and

With a passion for organizational growth, Hilary advises clients in the cannabis, healthcare, and life sciences spaces on transactions, regulatory compliance, governance matters, and other corporate needs.

Hilary likes being a dealmaker: she values building collegial relationships with clients and other attorneys, and she loves helping clients create value and business opportunities. She also appreciates the in-depth strategies that transactions rely on.

Much of Hilary’s practice is devoted to mergers, acquisitions, and other transactions, as well as to serving as first point of outside counsel for certain clients. She also assists with entity formation and the drafting of various governance documents and asset portfolio management. In addition, Hilary advises clients on industry-specific regulatory compliance.

Hilary’s experience with the cannabis industry dates to 2010, when she began assisting medical cannabis providers with business questions. It was immediately clear to her that this emerging, growing industry had a massive need for corporate counsel, and she has advised cannabis clients—including many major national and international companies—ever since. Her experience includes cannabis licensing; marijuana and industrial hemp regulatory compliance; mergers and acquisitions; corporate and transactional matters, including negotiating management services agreements, fee slotting agreements, cultivation supply agreements, and intellectual property licensing agreements; receiverships; dissolution and wind downs; and financing and debt restructuring. In 2023, Hilary joined Husch Blackwell out of enthusiasm for the firm’s deep bench of innovators in the cannabis and healthcare space.

Hilary also devotes a significant portion of her practice to healthcare clients, including physicians, physician groups, and medical services organizations, and she represents clients regarding the off-label application of controlled substances.

Known for offering a commonsense business approach to legal questions, Hilary never gives legal advice in a vacuum. She provides clients with definitive guidance that has practical applications, adding value and supporting business goals.