Strain is mounting between the halls of power in the White House and the Drug Enforcement Administration (DEA) as the discussion on marijuana rescheduling simmers with tension. According to a recent Wall Street Journal exposé, DEA insiders are digging in their heels, challenging cannabis’ supposed medicinal advantages and citing its alleged susceptibility to abuse.
This stance directly clashes with the Department of Health and Human Services’ (HHS) extensive dossier released in January, affirming that cannabis indeed possesses acknowledged therapeutic value within the United States and carries a lower abuse potential than substances listed in Schedules I and II.
Apart from casting shadows of doubt on the scientific documentation submitted by the HHS, the DEA is particularly apprehensive about the escalating potency of THC, the psychoactive element in marijuana. Observers and stakeholders within the marijuana space are questioning the motives underlying these anonymous insinuations, notably since the DEA has refrained from openly contesting the recommendation. Administrator Anne Milgram vows a comprehensive evaluation integrating the entirety of available research.
While the final call on marijuana rescheduling rests with the DEA, the Congressional Research Service anticipates the agency will mirror the HHS’s lead based on historical norms, notwithstanding the DEA’s staunch assertions that it reserves the singular prerogative to determine marijuana’s rescheduling.
Although reclassification won’t equate to federal marijuana legalization, it could herald substantial benefits for the cannabis sector. Businesses would potentially be in a position to reclaim federal tax deductions that are presently off-limits under IRS code 280E. Furthermore, the move could pave the way for expanded scientific exploration into marijuana’s therapeutic efficacy.
The Wall Street Journal report also underscored a legal complication looming over the rescheduling process. Allegedly, the HHS has sought counsel from the Department of Justice’s Office of Legal Counsel (OLC) regarding potential international entanglements. Opponents of reform argue that reassigning marijuana’s classification might transgress international agreements.
Subsequently, shares in the cannabis market felt the tremors following the sobering Wall Street Journal revelations.
AdvisorShares Pure US Cannabis MSOS saw a dip during trading hours, eventually stabilizing at $7.84 in after-hours trading.
Shares of Curaleaf Holdings Inc CURLF, the foremost U.S. cannabis firm by revenue, wavered before settling at $4.24 after hours.
Green Thumb Industries Inc GTBIF, Verano Holdings Corp VRNOF, and Trulieve Cannabis Corp TCNNF pulled back by 4% to 6% before stabilizing.
In a Morningstar research note on Monday morning, Alliance Global Partners analyst Aaron Grey noted a high probability of the DEA adopting the rescheduling proposal despite apprehensions raised in the Wall Street Journal, given the plethora of studies backing the HHS’s justification for moving cannabis to a less restrictive category.
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