Freeing the Medical-Cannabis Industry From 280E Immediately Without Rescheduling

Tell your governor ... and the President

HHS’s schedule III recommendation is a huge deal for several reasons. It marks the first time the United States federal government has formally recognized that cannabis has a “currently accepted medical use in treatment in the United States” as that term is used in 21 U.S.C. 812(b)(1)(B). And because HHS’s views on scientific and medical issues are generally binding on DEA in the scheduling context,¹ it greatly increases the odds that cannabis ultimately will end up in schedule III. But the significance of HHS’s recommendation doesn’t end there, nor is it even limited to its bearing on the scheduling question. As I’ll explain, HHS’s recommendation could be the key to delivering 280E relief to the entire medical-cannabis industry even if DEA ultimately refuses to move cannabis to schedule III.

You see, Congress, when drafting the Controlled Substances Act, had the foresight to provide an escape valve from the statute’s otherwise rigid and closed system of drug controls. In 21 U.S.C. 822(d), it provided that “[t]he Attorney General may, by regulation, waive the requirement for registration of certain manufacturers, distributors, or dispensers if he finds it consistent with the public health and safety.” Since then, the Attorney General has delegated his authority in that regard to DEA.² That’s important because the CSA’s DEA-registration requirements are the heart and soul of federal cannabis prohibition. To handle cannabis without violating federal law, you need a certificate of registration from DEA. And because cannabis is a schedule I substance, it’s impossible to get one for any purpose except for government-approved research and related activities. But according to section 822(d), DEA can waive those requirements by regulation any time it finds doings “consistent with the public health and safety.”

What does HHS’s schedule III recommendation have to do with all this, you ask? Well, now that HHS has concluded that cannabis has a currently accepted medical use, it becomes a lot more difficult for DEA—an agency already forbidden by Rohrbacher-Farr from spending appropriated funds to enforce the CSA’s requirements in a way that would interfere with activity made legal under state medical marijuana laws—to argue that any rational basis remains for extending the threat of prohibition to the doctors, patients, and companies essential to state-legal medical cannabis operations. Think about it: Could DEA seriously argue that “public health and safety” require it to maintain the authority to enforce the CSA’s restrictions against medical marijuana markets when (1) Rohrbacher-Farr bars it from enforcing against them anyway and (2) HHS has authoritatively recognized that those markets are delivering a substance with a currently accepted medical use to patients across the country?

One of our longtime readers, Carl Olsen, unsuccessfully sought such a waiver from DEA years ago, but that was before HHS’s historic recommendation formally recognizing cannabis’s currently accepted medical use. I think the time has come for the governors of medical cannabis states (and the federal lawmakers who support them) to push DEA to use section 822(d) to exempt the state medical cannabis regimes from the CSA’s antiquated, prohibitionist scheme once and for all. If DEA granted such a waiver, then the state medical-marijuana industries would be free and clear of section 280E. After all, that provision applies only to trafficking in schedule I or II substances.³ With a section 822(d) waiver from DEA, medical cannabis operations would no longer violate the CSA and would thus no longer qualify as trafficking in cannabis—even if DEA refuses to remove cannabis from schedule I.

Here’s how this could work. Section 822(d) permits DEA to grant such a waiver “by rule,” so anyone seeking one would need to draft a proposed rule and submit it to DEA. Imagine if the governors of every medical cannabis state joined forces with the members of Congress from those states to champion a petition or series of petitions requesting such an exemption from DEA. To deny it, DEA would have to show that maintaining the CSA’s criminal penalties is necessary to protect “public health and safety”—a showing that strikes me as fairly difficult to make today given the combination of Rohrbacher-Farr and HHS’s recognition of cannabis’s currently accepted medical use.

Agree with me that this should be done immediately? Tell your governor … and the President. Let’s get it done.

1. See 21 U.S.C. 811(b) (“The recommendations of the Secretary to the Attorney General shall be binding on the Attorney General as to such scientific and medical matters, and if the Secretary recommends that a drug or other substance not be controlled, the Attorney General shall not control the drug or other substance.”).

2. See 28 CFR 0.100(b).

3. See 26 U.S.C. 280E (“No deduction or credit shall be allowed for any amount paid or incurred during the taxable year in carrying on any trade or business if such trade or business (or the activities which comprise such trade or business) consists of trafficking in controlled substances (within the meaning of schedule I and II of the Controlled Substances Act) which is prohibited by Federal law or the law of any State in which such trade or business is conducted.”) (emph. added).