Did the DEA rig the rescheduling process? 👀

OH, DEA
Court docs show DEA may have ‘rigged’ the rescheduling process

Driving the news: The delayed process to reclassify cannabis from Schedule I to Schedule III has been the subject of much hand-wringing among the cannabis community.

The Drug Enforcement Administration-led hearings were supposed to kick off in January, but they’ve been delayed indefinitely. Depending on who you ask, this is either a positive or negative signal.

But many pro-reform parties clearly believed that DEA had no intention of rescheduling, and in fact, stacked the deck for the prohibitionist agenda.

What happened: The DEA rejected participation requests from Colorado and New York officials in support of rescheduling as part of the witness selection process for the hearing, reports MJBizDaily. 

The agency also allegedly assisted almost a dozen anti-cannabis reform groups, like Smart Approaches to Marijuana (SAM), who were selected as witnesses.

This information comes from publicly available court documents after Doctors for Drug Policy Reform (DDPR), a pro-reform group, brought a lawsuit.

What they’re saying: “We’re better off arguing the case where we are now than going forward and having it not work in our favor,” Dr. Bryon Adinoff, the president of DDPR said. 

Back up: A judge delayed the hearings in January, a little over a week before they were set to begin, after a group of industry and pro-reform witnesses, including cannabis firm Village Farms International and Hemp for Victory, filed a motion to reconsider (MTR) over allegations that the DEA coordinated with SAM.

But, but, but: Some on the pro-reform side say they wish the hearings would’ve continued as planned. 

“Counsel for the parties fundamentally misunderstood how this proceeding, this tribunal, and this judge are legally-bound to proceed — and in so doing have potentially set back the entire movement for cannabis reform,” Khurshid Khoja, an attorney who serves on the board of the National Cannabis Industry Association (NCIA), wrote in a January op-ed for Marijuana Moment after the hearings were delayed. 

The NCIA was selected as a witness in the hearings but did not advocate for the stay. 

Why it matters: Rescheduling, if it does happen, would be the largest federal policy shift on cannabis since the Nixon Administration, however incremental — and in many advocates’ view, imperfect it is. 

It would send a strong signal to Wall Street that the industry is legitimate, though many questions remain. It’s unclear how a Schedule III product, sold under state legal dispensaries — which you’d need a prescription to obtain — would be regulated by the federal government.

But it would do away with the 280E tax, which prohibits cannabis companies from deducting regular business expenses, and would reduce the overbearing tax burden that cannabis companies face. It would also be a step forward in normalizing the industry’s relationship with the broader financial system and could make access to capital, both debt and equity, much cheaper for operators.

These are all still hypotheticals. President Trump’s pick for DEA head, Terrance Cole, is a longtime opponent of cannabis reform. It’s unclear if he will continue the rescheduling process, or keep the pause indefinitely.

Either way, the industry is hoping for some signs of life on federal reform. Let’s hope that comes sooner rather than later.  

-JB

Here’s an interesting perspective from LeafLink’s Ben Burstein on the biggest challenge facing the industry: Inventory management. 

Burstein joined us on Cultivated Live on Monday. You can watch it here on our YouTube channel, and give us a follow while you are there.

Maine bill proposes more oversight on state cannabis director 👀

A new bipartisan bill introduced by Maine lawmakers proposes that the state’s Office of Cannabis Policy director be confirmed by the Senate rather than appointed by the Governor directly, reports The Portland Press Herald. John Hudak, the director, has come under fire for his ties to a firm that provides services to the state’s cannabis program. 

Alabama gets on track 🤝

An Alabama Appeals Court ruling last week paves the way for the state’s Medical Cannabis Commission to begin issuing licenses, pending a few issues, reports Alabama.com. Read more. 

San Diego weighs increasing cannabis taxes 🌿

San Diego’s city council met on Monday to discuss whether to raise a citywide tax on cannabis retailers from 8% to 10%, reports KPBS. Some industry representatives say that will push consumers to other, lower-tax jurisdictions and that the city will lose out on much-needed revenue.

Illinois hemp association comes up with policy recommendations 🥊

The Illinois Healthy Alternatives Association, a hemp industry trade group, released a white paper suggesting simple regulations for the industry, including mandatory minimum age of 21 for purchase, lab testing, and standardized label requirements. Illinois lawmakers have weighed bans on the intoxicating hemp industry.

Cannabis real estate firm NewLake Capital Partners reported its fourth quarter and full year results last week:

• For the full year, the company reported $26.1 million in net income on $50.1 million of revenue. 

• For the fourth quarter, the company reported $6 million of net income on $12.5 million.

Cool job alert 🚨

Cannabis banking technology firm Shield Compliance (a Cultivated partner) is hiring a Seattle, Washington based Technical Writer for up to $90,000 per year. Check out the job description.

Big US cannabis firms have seen their sales stay relatively flat since 2022 as investors wait-and-see if the federal government will pursue any sort of meaningful reform. Check out the chart below from Sherwood: 

Driving while high is hard to detect. States are racing to find a good tool | NPR

Fact check: Ohio GOP claims legalizing marijuana increases crime. It doesn’t, legal expert says. | Ohio Capital Journal