Joe Biden announces key step toward easing weed regulations. What it means in California

The Biden administration took a critical step in reclassifying marijuana as a lower-risk drug, the president announced Thursday, inching closer to removing it from a federal category that considers it more dangerous than fentanyl.

“This is monumental,” President Joe Biden said in a video post on social media platform X. “Today my administration took a major step to reclassify marijuana from a Schedule I to a Schedule III drug. It’s an important move towards reversing longstanding inequities.”

Dropping weed from a Schedule I to a Schedule III drug would not make it federally legal. But it would allow certain federal tax deductions for California’s legal businesses struggling with the burden of hefty state taxes, open up research opportunities and lead to some criminal justice relief, experts have said.

Late last month, the U.S. attorney general circulated a proposal to change marijuana’s scheduling. Today’s action puts the reclassification of weed on a clearer timetable, ranging from several months to a year.

Dispensers of Schedule I and Schedule II drugs cannot claim federal tax deductions because of a federal code, Section 280E.

If weed is Schedule III, putting it among less-heavily regulated controlled substances like ketamine and anabolic steroids, legal California pot companies can seek tax breaks for basic operating costs — payroll, utilities, rent, office supplies and more needs — that other businesses can.

That relief is needed in California, pot experts said.

California levies a 15% excise sales taxes on legal weed, paid by consumers and remitted by retailers, and local governments can impose further taxes. Taxes, which went into effect in 2018 after the state legalized recreational pot through a 2016 voter-approved ballot initiative, have ended many licensed businesses, Cody Stross, CEO of marijuana company Northern Emeralds in Humboldt County, said in an interview late last month.

Many legal California marijuana businesses haven’t renewed their cultivation licenses, haven’t paid taxes or closed their doors since the taxes went into effect, said Stross, who also serves on the board of the National Cannabis Industry Association. It’s easier to sell on the illicit market in California, further squeezing legal dispensaries.

Experts say effects of reclassifying marijuana would be felt mostly outside of California, which is one of 24 states where weed is legal for recreational use and one of 38 where it is legal for medical use.

Schedule III drugs are easier to study, meaning that eventually pot research could be conducted with fewer restrictions. There would eventually be some criminal justice relief, said Luke Scarmazzo, the last known California person who was held in federal prison on cannabis charges.

People facing federal cannabis offenses could use a medical necessity defense if applicable in court, he said in an interview earlier this month. And mandatory minimums, the standards that guide judges during sentencing, could be lower, he said.

Federal progress

On Thursday, the U.S. Justice Department, which oversees the U.S. Drug Enforcement Agency, submitted a notice of proposed rulemaking to the Office of the Federal Register, the official journal of the government containing agency rules, proposals and public notices.

The notice of proposed rulemaking, an official document that explains the agency’s plan, will publish in the Federal Register. This opens up 60 days for public comment. After, the DEA administrator can assign an administrative law judge to consider evidence and make a scheduling recommendation.

Finally, the DOJ makes the scheduling determination and publishes the rule in the Federal Register.

The agency could decide not to lower marijuana’s federal classification. But given the administration’s push toward reclassification, that’s unlikely.

“Today’s announcement builds on the work we’ve already done to pardon a record number of federal offenses for simple possession of marijuana,” Biden said. “It adds to the action we’ve taken to lift barriers to housing, employment, small business loans, and so more for tens of thousands of Americans.”

“Look folks, no one should be in jail for merely using or possessing marijuana,” he added. “Period.”

Illicit sellers of marijuana would still be subject to federal penalties if the drug is Schedule III.

Still, the federal government rarely charges cannabis users and sellers whose actions are legal under state laws.

Pot is currently a Schedule I drug, the most tightly regulated group of controlled substances that includes heroin, LSD and MDMA. Schedule I drugs are those considered to have no accepted medical use and have high abuse potential. Schedule III drugs allow for some medical uses.

“Currently marijuana is classified on the same level as heroin and more dangerous as fentanyl. We are finally changing that,” Vice President Kamala Harris said in her on video posted to X on Thursday. “We are on the road to getting it done.”

In 2022, Biden asked the DOJ and the Department of Health and Human Services to review weed’s scheduling.

“Far too many lives have been upended because of a failed approach to marijuana and I’m committed to righting those wrongs,” Biden said. “You have my word on it.”