U.S. health officials want to loosen marijuana restrictions. Here's what it means


A worker sets up Florist Farms cannabis products on the first day of legal recreational marijuana sales at the Housing Works Cannabis Co. in New York, on Thursday, Dec. 29, 2022.

Jeenah Moon | Bloomberg | Getty Images

This week, the Department of Health and Human Services asked the Drug Enforcement Agency to consider easing restrictions on marijuana upon a review of its classification under the Controlled Substances Act.

It could be a significant catalyst for an industry hemmed in by federal regulations even as legalization picks up on the state level.

Marijuana stocks were higher Wednesday on the news. 01 They all jumped again Thursday.Since the 1970s, marijuana has been listed alongside heroin and LSD as Schedule I drugs, or substances that authorities say have no accepted medical use and a high potential for abuse. The The recommendation, however, will not de-schedule marijuana.Cultivation, production and sales would still be in violation of federal law. Marijuana is legal in 39 states medically and 23 states recreationally.What’s next for marijuana policy?As part of the recommendation process, HHS conducted a scientific and medical evaluation that will help authorities come to a final decision on the matter.A decision is likely to come before the 2024 presidential election, Roth MKM analyst Scott Fortune wrote in a Thursday note to clients.“Historically, the DEA has never gone against a scheduling recommendation from the HHS,” Fortune added.

The DEA will consider marijuana’s reclassification under three criteria: Its potential for abuse, its potential for medical use, and the extent to which its unsafe or addictive.

Regulators have previously used the second criterion to uphold marijuana’s Schedule I classification, but doing so now may prove difficult, said Fortune, with medical marijuana programs existing in nearly 40 states across the nation.

Once the DEA comes to it decision, it will submit its own recommendation in the form of a proposal to the attorney general, who will then make his final ruling.

What does it mean for the weed industry?

If marijuana moves down to a Schedule III substance, this will effectively ease a number of restrictions holding the sector back.

The biggest boon will come in the form of new tax opportunities. The The Schedule III drugs still present a risk for banking institutions so long as federal laws remain unchanged.

A bill called the Secure and Fair Enforcement Banking Act, or SAFE, will remove this burden and is making its way through Congress.

Is federal pot legalization on the horizon?

Senate Majority Leader Chuck Schumer, D-New York, said while this is an important step forward for the industry, the end goal is ending federal prohibition.

“HHS has done the right thing and DEA should now quickly follow through on this important step to greatly reduce the harm caused by draconian marijuana laws,” Schumer said in a statement Thursday

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Industry executives echoed Schumer’s feelings.

“Federal cannabis reform is long overdue, and today’s news brings us closer to the Biden administration declaring an end to the U.S. government’s failed war on cannabis,” said David Goubert, CEO of multi-state dispensary operator Ayr Wellness.