Michigan Cannabis Regulatory Agency Asks for Clearer Guidance on Changes

The Michigan Cannabis Regulatory Agency on Monday outlined how the Drug Enforcement Administration’s (DEA) plan to reclassify marijuana from a Schedule I drug to a Schedule III drug could benefit Michigan consumers and cannabis businesses, from potentially allowing companies to file for bankruptcy to offering consumers products that meet uniform safety standards.

But the agency said guidance from the federal government is key to understanding how to proceed if marijuana is reclassified as a Schedule III drug.

“Reclassifying marijuana from Schedule I to Schedule III could have profound effects on both the medical and adult-use markets, potentially changing the way those markets operate and are perceived, but it would not provide any benefits — and could potentially wreak havoc on existing Michigan programs — without clear guidance from all areas of the federal government explaining the implications of the reclassification,” the CRA commentary reads. It was filed during a public comment period that is part of the DEA’s plan to reclassify marijuana under the Controlled Substances Act.

President Joe Biden has called for a review of how marijuana is classified under federal law in October 2022. Last year, the Department of Health and Human Services recommended changing it to Schedule III. The Justice Department then conducted its own analysis and reached the same conclusion.

The proposed plan by the DEA, part of the Justice Department, does not legalize marijuana federally, but changing it from a Schedule I drug — considered highly dangerous, addictive and with no medical use — to a Schedule III drug — such as Tylenol with codeine and ketamine — would mean it could be legally prescribed as a medicine.

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The CRA contribution listed several situations in which the reclassification could impact Michigan’s cannabis industry and its consumers. Some of the key situations are below:

Impact on Michigan’s Medical Marijuana Program: Example, Restocking

The CRA found that Michigan, like more than 35 other states, has a mature medical marijuana program that likely does not meet the requirements for Schedule III drugs. For example, prescriptions for Schedule III substances can typically be refilled up to five times in a six-month period, but there are currently no such limits for medical marijuana patients in Michigan.

“If marijuana is reclassified, it is important for the federal government to clarify how the requirements for a Schedule III drug will apply to marijuana,” the CRA said.

Banking and taxes

The CRA said rescheduling marijuana could make it easier for marijuana companies to work with federally regulated financial institutions. Many financial institutions refuse to provide services to marijuana companies for fear of violating federal law.

Marijuana businesses could also take advantage of tax deductions and exemptions available to businesses in other industries. If marijuana is rezoned, Section 280E — the Internal Revenue Code, which prohibits taxpayers involved in the sale of certain controlled substances from deducting typical business expenses related to those activities — likely would not apply to those businesses.

Bankruptcy protection

Marijuana companies cannot file for bankruptcy because marijuana is illegal under federal law, and these companies and their lenders are not eligible for federal bankruptcy protection.

“The rescheduling would be a significant step toward allowing marijuana businesses to access bankruptcy protection and relief under federal law,” the CRA said.

Product safety

The CRA said if marijuana is reclassified, comprehensive federal regulations could be established for the cultivation, processing, testing and distribution of medicinal and recreational marijuana products.

“This would ensure that all marijuana products meet uniform safety and quality standards regardless of where they are produced or sold,” the agency said. “Such standards could include limits on pesticides, solvents, inactive ingredients, microbes, metals, dosage amounts and potency limits.”

Transportation and Interstate Commerce

Marijuana cannot be transported across state lines, even if both states have legalized marijuana. The CRA said that if marijuana is moved, it could “potentially enable legal interstate commerce of marijuana products between states where marijuana is legal.”

To read the full text of Michigan’s CRA comment, go to Regulations.gov/docket/DEA-2024-0059 and search for Michigan’s Cannabis Regulatory Agency.

The comment period ended Monday. The proposal will be reviewed by an administrative judge, and then the DEA will ultimately publish a final version of the rule.

Contact Adrienne Roberts: [email protected]