
The Fight Over Cannabis Rescheduling: Progress, Setbacks, and the Battle Ahead
For decades, the Drug Enforcement Administration (DEA) has relied on a rigid five-part test to determine whether a drug has a “currently accepted medical use” under the Controlled Substances Act (CSA). This framework, first articulated in a 1992 Federal Register notice (57 FR 10499), established five strict criteria that cannabis advocates have long argued were designed to prevent rescheduling rather than assess medical legitimacy. The five factors required that a drug’s chemistry be known and reproducible, that there be adequate safety studies, that well-controlled studies prove efficacy, that the drug be accepted by qualified experts, and that the scientific evidence be widely available. This narrow interpretation has been a major obstacle in every attempt to remove cannabis from Schedule I of the CSA.
That changed with an April 11, 2024, opinion from the Department of Justice’s Office of Legal Counsel (OLC). The OLC determined that the DEA’s five-part test was “impermissibly narrow” and instead endorsed a two-part inquiry developed by the Department of Health and Human Services (HHS). This opinion was released to the public on May 16, 2024, alongside Attorney General Merrick Garland’s notice of proposed rulemaking to reschedule cannabis to Schedule III (DOJ, 2024). The two-part test presents a far more flexible approach: first, it asks whether a drug has widespread current medical use among licensed healthcare providers; second, it assesses whether there is credible scientific support for at least one of its medical applications. Crucially, this standard does not require FDA approval, removing one of the biggest roadblocks that had prevented cannabis from being recognized as medicine under federal law.
Applying the two-part inquiry to cannabis makes it clear why HHS recommended rescheduling. The widespread use of cannabis for medical purposes is undeniable. Thirty-eight states, three U.S. territories, and Washington, D.C. have legalized medical cannabis programs, with millions of patients obtaining recommendations from licensed healthcare providers. State medical boards regulate its use, and its medical applications are increasingly accepted in professional healthcare settings. The second prong of the inquiry—credible scientific support—has also been met. A growing body of peer-reviewed research supports cannabis’s effectiveness in treating conditions such as chronic pain, chemotherapy-induced nausea, epilepsy, and multiple sclerosis. In 2017, the National Academies of Sciences, Engineering, and Medicine (NASEM) reviewed the literature and concluded that substantial evidence supports cannabis’s medical efficacy (NASEM, 2017). Furthermore, the FDA has already approved cannabis-derived medications like Epidiolex, which contains CBD and is used to treat epilepsy, as well as synthetic THC such as dronabinol and nabilone for nausea and weight loss in patients undergoing chemotherapy or suffering from AIDS-related wasting syndrome.
This shift in policy, specifically moving away from the DEA’s five-part test in favor of the more accurate and inclusive two-part test recommended by HHS, has significant tax implications for the cannabis industry. Section 280E of the Internal Revenue Code disallows deductions for ordinary business expenses for businesses trafficking in controlled substances that fit “the meaning” of a Schedule I or II drug under the Controlled Substances Act—not simply because they are classified as such. Therefore, given the determination offered by the OLC, there is a strong argument that 280E never truly applied to cannabis, as it never actually met the legal definition of a Schedule I or II drug. This interpretation challenges the longstanding tax burdens placed on cannabis businesses and raises further questions about the enforcement of 280E moving forward.
But the battle is not over. With the new administration, there has been a new wave of attempts by Congress to stifle rescheduling. One such effort is a measure introduced by Rep. Andrew Clyde (R-GA), which seeks to strip the U.S. attorney general’s authority to facilitate drug scheduling decisions and block the use of a revised scientific review standard for “currently accepted medical use” that underpinned the recent cannabis rescheduling proposal. Clyde’s amendment, attached to a bill focused on fentanyl, would require that scheduling decisions be made solely by the DEA administrator, preventing delegation of this authority to any other Department of Justice official. However, it is noteworthy that Rep. Clyde has since withdrawn this amendment, though the potential for similar legislative efforts remains. Additionally, the amendment would mandate that any determination of a drug’s medical value adhere to the restrictive five-part test originally used to deny rescheduling in 1992—effectively undermining the legal rationale for moving cannabis to Schedule III.
Beyond rescheduling battles, cannabis businesses face another looming threat: congressional changes to tax policy. Last week, Sen. James Lankford (R-OK) introduced a bill aimed at ensuring that cannabis businesses remain ineligible for federal tax deductions, even if cannabis is rescheduled to a lower tier under the Controlled Substances Act. The measure, co-sponsored by Sen. Pete Ricketts (R-NE), would explicitly prevent cannabis businesses from deducting ordinary business expenses, a benefit normally afforded to other industries. “Marijuana doesn’t make our families stronger, our streets safer, or our workplaces more productive. Businesses who sell federally illegal drugs—including marijuana businesses—shouldn’t get federal tax breaks,” Lankford stated in a press release. The bill directly targets the potential tax relief that cannabis businesses might receive under Schedule III, reinforcing the punitive nature of current federal cannabis policy.
However, as Jed Green of Oklahomans for Responsible Cannabis Action pointed out, much of what Lankford’s bill seeks to achieve is already in place through Section 280E of the tax code. “What that means is that some growers can deduct taxes. However, your dispensaries, any advertising, budtenders, none of that can be deducted,” Green explained. “So, he’s kind of beating a dead horse and is against the tide here, which there are 22 other states that have allowed this.”
As of January 2025, the DEA’s rescheduling process has encountered significant delays. A hearing scheduled for January 21, 2025, was postponed pending the resolution of an appeal filed by a party in the proceedings. This postponement has indefinitely delayed the rescheduling process, with the DEA and involved parties required to provide a joint status update every 90 days until the matter is resolved. Compounding these delays, the appointment of Terrance C. Cole as the new acting administrator of the DEA has raised concerns among cannabis advocates due to his long-standing opposition to cannabis reform.. These developments have cast uncertainty over the future of federal cannabis rescheduling efforts. However, as the battle over federal cannabis policy is far from over. However, for the first time in decades, the legal framework is shifting in a way that favors medical cannabis access rather than obstructing it. The days of the DEA using an impermissibly narrow test to block rescheduling may finally be coming to an end—but new legislative threats continue to emerge, reminding us that the fight for fair cannabis policy is far from finished.
References
• Marijuana Moment (2025). GOP Congressman Withdraws Amendment Aimed At Undermining Marijuana Rescheduling Process. Retrieved from marijuanamoment.net
• Marijuana Moment (2025). DEA Cannabis Rescheduling Hearing Postponed Amid Leadership Transition. Retrieved from marijuanamoment.net
• Department of Justice (2024). Questions Related to Potential Rescheduling of Marijuana. Retrieved from justice.gov
• National Academies of Sciences, Engineering, and Medicine (2017). The Health Effects of Cannabis and Cannabinoids: The Current State of Evidence and Recommendations for Research. Washington, DC: The National Academies Press. Retrieved from NCBI
• Federal Register (1992). Denial of Petition to Reschedule Marijuana (57 FR 10499). Retrieved from federalregister.gov