Medical Marijuana

Subscribe to Medical Marijuana via RSS

While the cannabis industry is closely following the recently published notice of proposed rulemaking from the Department of Justice (“DOJ”) and the Drug Enforcement Administration (“DEA”), which will move cannabis from a Schedule 1 controlled substance to a Schedule 3 controlled substance under the Controlled Substance Act (“CSA”), a very important federal cannabis litigation matter is making its way through federal court. That case is Canna Provisions, Inc., Gyasi Sellers, Wisacre Farm, Inc., and Verano Holdings Corp.v. Merrick Garland, case no. 23-cv-30113. Filed in October of last year, the Canna Provisions case is more important than ever in the context of rescheduling (in my opinion) and this post serves as an update on what’s happening in court.

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.

Due to federal illegality, the cannabis industry has long been plagued by federal agencies taking a variety of different enforcement approaches to cannabis businesses. From the U.S. Patent and Trademark Office to the National Labor Relations Board to the Bureau of Reclamation, the cannabis industry has not really received consistent treatment across the board. All that to say that a new threat has entered the chat–cannabis qui tam actions. Not many people know what a “qui tam” action is. And with good reason as it’s fairly antiquated and an obscure means through which the federal government (potentially) seeks financial recovery from individuals and businesses that defraud it. In addition to the “gotchas” of IRC 280E and banking, cannabis qui tam actions are now on the table.

If you’re in house counsel at any company, you’re likely looking to cut down on the day to day, high volume minutia posed by a variety of commercial agreements and transactions that come your way time and again. Doubly so in the cannabis industry given the fact that you have bigger fish to fry with labor and employment issues, day to day operational issues, fundraising and finding more capital, and dealing with the precarious legal environment created by the current federal law conflict (even with possible rescheduling on the horizon). To alleviate some of that in house stress, general counsels should be considering instituting cannabis corporate playbooks (or alternative language libraries) to make the company’s contracting process more turnkey, predictable, and efficient while cutting down on risk.

Between LinkedIn, Twitter, the media, and diehard marijuana investors, there is more noise and froth in the industry about a marijuana reschedule than I’ve seen since Washington and Colorado legalized it back in 2012. When speculation about the Feds starts to explode in the industry, I usually ignore most of it as fairly useless hearsay backed by a lot of hope, negativity, and/or hypotheticals.

This time, the tea leaves surround the number one question in the industry, will there be a 2024 marijuana reschedule from the Drug Enforcement Administration (DEA) on the back of the Department of Health and Human Services (HHS) schedule III recommendation? Namely, is a marijuana reschedule imminent that could change the entire course of success for the industry?

In October 2022, President Biden asked the Department of Health and Human Services (HHS) and the Attorney General to review how marijuana is scheduled under federal law. In August 2023, the HHS marijuana recommendation went to the Drug Enforcement Administration (DEA). In October 2023, HHS released a heavily redacted copy of its recommendation to DEA. And until last Friday, no one outside of Bloomberg News and choice government insiders had seen the totality of the HHS marijuana recommendation. However, thanks to a Freedom of Information Act legal battle by lawyer Matt Zorn, the public can now see all 252 pages of (and related to) HHS’s marijuana recommendation to DEA.

I split my time between Los Angeles and Milwaukee these days (I’m eligible to practice law in Wisconsin), and I often find myself working from my firm’s Milwaukee office depending on the month. Wisconsin is an incredibly interesting state when it comes to marijuana in that it is surrounded by states that have both adult use and medical cannabis legal regimes while it has nothing. Wisconsin’s state government is mainly controlled by Republicans who are anti-cannabis legalization. However, they seem to be alright with the concept of Wisconsin medical marijuana. It will be limited though and if the Republicans’ proposal goes through as presented (we don’t have an actual bill yet), Wisconsin will have state-run dispensaries with state-employed pharmacists.