Issue 60: What's Up With This Schedule III Thing?
I have a conversation with myself about the big federal news. Plus, Mass. CCC Executive Director Shawn Collins tells me he did NOT resign.
If there’s one thing that everyone in the cannabis space can agree on, it’s this: It’s been a very weird month or so.
But when the going gets weird, the weird turn pro. Please consider a paid subscription to help me continue my work.
In this issue, I try to answer some burning questions about that big Schedule III announcement. I also recap how traditional media’s declining cannabis coverage allowed this humble weed blogger to confirm a fairly sizable news scoop. Finally, I give a little attention to two sports-related news bites.
What’s Up With This Schedule III News?
I Do My Best To Answer Some Burning Questions About The Big News
In case you haven’t heard by now, it was announced this week that the Department of Health & Human Services is sending a recommendation to the Drug Enforcement Administration to move cannabis from Schedule I to Schedule III.
Desperate for any good news around federal cannabis reform, this announcement sent big cannabis companies and traditional media outlets into a frenzy, but now that a few days have passed, people are beginning to ask if this news is worth the hype. Let’s investigate with a Q&A:
Is this a big deal?
This seems like the easiest question, but obviously it’s all subjective. It’s fair to call this potential change the biggest moment in modern federal cannabis history, but only because we’ve been waiting decades for even the slightest change in tune from the feds.
It seems to be absolutely absurd to me to claim that this news is President Biden “effectively declaring an end to Nixon’s failed war on cannabis,” but that’s exactly what the U.S. Cannabis Council is claiming.
Regardless of how “big” this news is, it’s clear that something being big news and something being good news are two very different things.
Will this lead to a Big Pharma takeover of the industry?
I don’t think you’re going to wake up some day to find out that your local dispensary has suddenly been taken over by CVS. It’s important to remember that existing state-legal cannabis companies are already ignoring the Schedule I status of the drug. They’ll probably continue to ignore its status as a Schedule III substance, with little chance of federal interference.
Some people are concerned that rescheduling will lead to a crackdown on state legal cannabis businesses who aren’t following the new federal rules that would be implemented by a move to Schedule III, but I think those fears are a bit overblown. Biden is making this move to create the perception that he’s cool with cannabis reform. A bunch of raids or other federal interference with state-legal businesses would be a political disaster for him (or any future president).
So nothing bad will happen to the industry if they move cannabis to Schedule III?
I wouldn’t go that far. There’s still a lot of unknowns here, and it’s impossible to know how exactly this will play out. There are some concerns that the FDA’s involvement in cannabis will only make things more confusing. Considering how unprecedented this situation is, it would be naive to definitively say that it’s not going to harm existing cannabis businesses in some way.
Will the DEA play ball with Biden?
Probably. The DEA owes its entire existence to the War on Drugs, so it would be fair to think that they might try to throw a wrench into this process by either taking their sweet time to review HHS’s findings – or just flat out rejecting them. However, we must remember that the DEA is part of a federal executive department and Biden is the one who asked for this review to happen in the first place. Even though this isn’t really how the government is supposed to work, it’s probably safe to say that his administration will lean on the DEA to give the desired outcome.
It’s also important to note that the DEA has never overruled a HHS recommendation when it comes to rescheduling.
So how does this impact 280-E?
If you view this potential upcoming rescheduling solely through the lens of 280-E, it’s a good thing. This tax provision only applies to companies that are illegally selling Schedule I or II substances, so cannabis companies shouldn’t have to worry about 280-E anymore.
Will MSOs try to claim they don’t actually owe any of their old 280-E related tax debt now?
This may seem like a far-fetched argument, but it’s fair to claim that the federal government moving cannabis from Schedule I to III is them admitting that it was wrong to make it a Schedule I drug in the first place. After all, it’s not like anything has magically changed about the cannabis plant since 2016 when the DEA/HHS last did a review. So if that’s the case, you can bet that big cannabis companies will at least try to argue that existing 280-E debt should be wiped clean. I’m not going to pretend that I can predict whether or not this will be a winning argument, but I would not be totally shocked if some MSOs band up to throw this argument at the legal wall and see if it sticks.
Will cannabis companies be able to be listed on the NYSE and NASDAQ now?
I’m clearly out of my element on this topic, but I don’t see any way that this move to Schedule III would result in state-legal cannabis companies being able to trade on American exchanges, as they will still be breaking federal law. From NASDAQ’s own rules:
In determining whether to initially list a company or continue a company's listing when it changes its business activities, Nasdaq does not make subjective or value judgements about the business the company operates. However, Nasdaq cannot initially list or continue the listing of a company whose current or planned activities are in violation of U.S. federal law or the law in a jurisdiction where the company operates.
It’s possible that Nasdaq and NYSE could re-consider these policies to create a carve-out for state-legal cannabis companies, but I’m skeptical that they’ll be able to do such a thing.
Does this move comply with international drug treaties?
Probably not, but the real question is if anyone will care. A few other countries have already flaunted the UN’s Single Convention on Narcotic Drugs by legalizing cannabis — with zero repercussions. I also must point that the current argument from the United States that the federal government don’t have control over the decision made by states to legalize cannabis is flimsy, so you could easily argue that we’re already out of compliance.
However, there are still some unknowns here. The last rejection of rescheduling cited international treaty obligations, saying that UN rules made it so the U.S. had to keep cannabis at either Schedule I or II. It’s unclear how the DEA is going to suddenly argue that those same treaties don’t matter anymore, even though it’s onlya few years later.
The stickier situation is what the Attorney General will do in regards to the treaty requirements. From Foley Hoag:
The issue is that the Controlled Substances Act itself (which is a statute) binds the Attorney General to follow that treaty. In other words, it’s not just the treaty that applies, but U.S. law incorporating the terms of the treaty. The Controlled Substances Act requires the Attorney General to place drugs “under the schedule he deems most appropriate to carry out [the United States’ treaty] obligations,” regardless of the Act’s listing criteria or any HHS recommendation. Compounding the issue is a decision of the United States Circuit Court of Appeals for the District of Columbia from 1971 finding that “several requirements imposed by the Single Convention would not be met if cannabis and cannabis resin were placed in CSA Schedule III, IV or V.” There is a healthy legal debate about what the Attorney General’s treaty obligations are with regard to rescheduling cannabis, but this is surely a tricky issue.
Will this cause a ripple effect of these policy changes?
This is obviously hard to quantify. It’s possible that all the headlines about this move will inspire governments both here and abroad to re-examine their own policies, but this move by itself won’t do anything to make it easier for states (or other countries) to legalize.
When does actual change start happening?
Sometime between next week and never.
To be slightly more specific, assuming the DEA is indeed playing ball and there are no surprises during this process, we could see a decision from them within 90 days.
The most likely scenario seems to be that we’ll get news of a final decision around this time next year, although there’s way too many variables to truly make an accurate prediction.
Does this mean we’ll never see cannabis completely de-scheduled?
Never say never, but it’s hard to imagine a scenario where Biden asks for another rescheduling review.
Even if Biden gets another term (cue the Bo Burnham song), I just don’t see him taking another whack at this. I also don’t see any of the various Batman villains that are currently running for the Republican ticket doing it either.
That being said, Congress also has the authority to re-schedule. It’s hard to imagine that happening (or really anything ever happening) with this current batch of congresspeople, but we’ll see how things look after 2024.
What are cannabis-related organizations saying?
MSO-backed trade organizations have come out in favor of this potential move, while criminal justice focused groups have largely decried it.
Disclosure: Burn After Reading Media is a Parabola Partner.
Mass. CCC Executive Director: “I Didn’t Resign”
Speaking At Cannabis Symposium, Collins Clarifies That He’s Still In Charge
Massachusetts Cannabis Control Commission Executive Director Shawn Collins took part in a Q&A session at the inaugural North East Regional Cannabis Symposium held at the DCU Center in Worcester on Thursday.
After the Q&A session, Collins spoke with the media, offering his thoughts for the first time since the July 28th meeting where CCC Chair Shannon O’Brien abruptly claimed that Collins told her that he would be resigning.
Here’s what he said when I asked him about his alleged resignation and if CCC Chair O’Brien’s depiction of their conversation about his future was accurate:
“Yeah, I’d prefer not to really weigh in to that. I’m working, I’m here. The rest of it is a private conversation and I’m going to leave it private. Outside of that, I’m grateful to have a happy, healthy family and grateful to have a good job.”
Responding to a question from Talking Joint Memo’s Chris Faraone that asked if his absence had impacted the work that the CCC just did to finalize draft regulations, Collins clarified that he did not take family leave:
“I didn’t take leave. If I took some time off, it was time off.”
When O’Brien made her announcement about Collins’ alleged resignation back in July, multiple outlets either published his resignation as fact or put out headlines that strongly suggested his departure was already a done deal.
TJM was the only other news outlet present at the event, and as of press time, no outlets have clarified their previous reporting or picked up on this new development in the story.
What Else He Said
Speaking during the NERCS Q&A session, Collins also chimed in on the recent Schedule III news:
I’m sitting here telling you – and this is from my perspective – getting rid of 280E? Wonderful. At the same time, I don’t hear a lot of discussion on Capitol Hill about mom and pop drug companies. If [Schedule III] is where cannabis is going to be going, it undermines the very statutory – and I would say, this is going to sound fluffy – spiritual mission we have in this industry to acknowledge that the War on Drugs [has been] an abject failure.
He went on to say that he had some anxiety that the move to Schedule III would undermine the CCC’s ability to allow for small businesses to thrive in the space.
I’ll share some further takeaways from NERCs next week, as this event allowed to me gain some unique insights into the thoughts and concerns of cannabis workers.
Two Cannabis/Sports News Bites
Here’s a few sports-related news bites for you:
Highsman CEO Hits The Showers
Eric Hammond, the Co-Founder and CEO of Ricky William’s Highsman brand, announced on LinkedIn yesterday that he is stepping down from his role.
This news comes a few weeks after TILT Holdings announced they were dropping the brand from their line-up as a cost saving manner. Despite being dropped by TILT, Highsman has apparently audibled to working with a number of other cultivation partners.
-
Famous Cannabis Consuming Red Sox Pitcher Faces Health Scare in Worcester
Bill “Spaceman” Lee, a former pitcher for the Red Sox best known for his colorful personality and cannabis use, is recovering in a Worcester-area hospital after collapsing on the field while on his way to throw out the first pitch at a Worcester Red Sox game.
Lee, now 76, has experienced these types of health scares before; earlier in the year, he collapsed in the Savannah Bananas’ bullpen while warming up to make a relief appearance for the club. (Lee has continued to play baseball on a regular basis since his professional retirement in 1982. About a decade ago, I saw him outside of Fenway with a full uniform on and bat in hand, seemingly ready to take the field at a moment’s notice.)
The Spaceman played for the Red Sox from 1969 to 1978. He was a crafty left-handed pitcher, but his arm was never the same after he was jumped by a few Yankees during a violent on-field brawl in 1976.
Lee was once fined by the MLB after confessing to the media that he consumed cannabis. He later clarified that he only sprinkled it in his morning pancakes, stating a belief that it made him impervious to the bus fumes while jogging to Fenway Park. He was also one of the first former professional athletes to grace the pages of High Times. I wish him a speedy recovery.
A Message From Our Friends At Trella:
Committed caregiver or farmer? Part of the "overgrow and share" movement? 🌿 Dive into Trella's Grow More With Less Program. Boost yields with our plant-training system. Sliding scale available, but first: apply! Elevate your grow and community impact! Apply Now!
New England
CONNECTICUT LAUNCHES SOCIAL EQUITY LOANS FOR MARIJUANA BUSINESS PROPERTIES (MJBizDaily)
The program was announced this week by Connecticut’s Social Equity Council (SEC), which leads social equity initiatives within Connecticut’s adult-use marijuana market.
The Canna-Business Revolving Loan Fund program offers fixed-rate loans at prime plus 3%, with a 1.5% discount on the interest rate “for applicants that enroll and complete the SEC accelerator program,” according to a news release.
ANALYSIS: It’s probably a good thing that several of these state-level loan programs are launching in various states at around the same time. This will put less pressure on any one program to be a complete success. It will also allow states to test out a few different methods of distributing funds. As soon as we have a few states that have finalized their rules, I’ll see if I can put something together that compares and contrasts the differences in these programs.
Rest of U.S / National
Cannabis Insider editor breaks down ‘soul crushing’ blow to state’s industry (LTE] (Cannabis Insider)
Trish: In a letter from the CAURD Coalition, Jayson Tantalo says if this lawsuit is not resolved quickly, the entire cannabis industry in the state could collapse. Do you think that’s an exaggeration? What are the real implications of this dragging out?
Brad: To be honest, I think the industry has already collapsed. That’s not to say it can’t somehow be built back up again, but the reality is that investors are fleeing New York State due to how poorly this rollout is going, farmers are growing desperate and considering leaving the industry, ancillary businesses – such as law firms, consultancy groups, real estate agencies, etc. – are struggling and taking on secondary clients, and medical cannabis companies are cutting staff and hours of operation…
ANALYSIS: This whole piece is worth a read. Debating over whether or not the NY industry has “collapsed” or not is literally a matter of semantics, but it seems fair to be ringing the alarm bells at this point.
MARIJUANA ODOR BOTHERS MARIA SAKKARI DURING HER LOSS IN THE US OPEN’S FIRST ROUND (Associated Press)
But Sakkari said it didn’t cause any problems while competing in what became her third straight first-round exit in a Grand Slam tournament.
“Sometimes you smell food, sometimes you smell cigarettes, sometimes you smell weed,” Sakkari said. “I mean, it’s something we cannot control, because we’re in an open space. There’s a park behind. People can do whatever they want.”
ANALYSIS: I thought this was going to be another salty tennis pro blaming the smell of weed for their poor performance, so I’m glad to see Sakkari didn’t take the bait here. It’s unclear to me if she even actually said that she was “bothered” by the smell.
THE FUTILE RESISTANCE TO THE CHEROKEE’S LIKELY LEGALIZING OF MARIJUANA [OPINION] (Josh Glawson | The Carolina Journal)
In his op-ed, published in Carolina Journal and elsewhere, US Congressman Chuck Edwards, who represents the area, worried that western North Carolina could see more drug use and negative impacts from this move by the Cherokee. The mountains of our state, including places like Asheville, is already known as a region where the hippies roam. So, it makes sense that there will be high demand for marijuana in that region.
ANALYSIS: I’ve neglected to bring this story up the last few weeks, but it’s incredibly slimy that white man continue to try to trample on the right of tribes to govern themselves.
International
🇺🇸/🇨🇦 ACCESS TO CANNABIS STORES VARIES WIDELY ACROSS US AND CANADA (Andrew Long | MJBizDaily)
Consider two states with approximately the same populations: Rhode Island and Montana.
Both states have about 1.1 million people.
Rhode Island, however, has only one adult-use retail cannabis store per 100,000 residents, based on March data.
By contrast, cannabis consumers in Montana have 37 recreational stores to shop from per 100,000 residents.
ANALYSIS: Here’s a story that's somehow local, national, and international. I did not have Rhode Island having a lower dispensary density than Minnesota. All the more evidence that the current dispensaries there have a massive advantage over future competitors, which are still years away from being a reality.
🇯🇲 SILO WELLNESS BUYS NUGL IN DEAL VALUED AT C$43 MILLION (Debra Borchardt | Green Market Report)
Silo Wellness, Inc. (CSE: SILO) (OTCQB: SILFF) is buying NUGL Inc. (OTC Pink: NUGL) in a deal valued at C$43 million. Last month Silo announced it was partnering with Jamaica-based Kaya Group, which is owned by Nugl. Nugl and Kaya merged in April 2022 to form a multifaceted cannabis lifestyle company.
The company operates three Kaya Herb House retail locations and a Gap Café wellness center, which would partner well with Silo’s expertise in managing psilocybin wellness retreats in Jamaica’s legal psilocybin market. At the time of that announcement, Silo acquired just over 25 million shares of Nugl. Now the company has decided to buy the remaining shares.
ANALYSIS: Silo and NUGL (owner of Jamaica’s Kaya Herb House dispensaries, one of which I visited last year) have already been working together, but this deal officially brings the two companies together. This news seems to be a further sign that Jamaica’s emerging medical cannabis / psychedelic wellness industry is being dominated by international interests.
Player Piano by Kurt Vonnegut Jr.
I’ve always wanted to dive into Vonnegut’s work, but Slaughterhouse Five sounded just a bit too out there for me, so I decided to check out his first novel. It did not disappoint.
Player Piano is a riveting depiction of a future society destroyed by automation. Despite being over 70 years old, this book felt more relevant than ever. Check it out.
As much as the Vonnegut Estate deserves the money, you can find a free pdf of the book by googling “Player Piano Vonnegut.”
People keep telling me this newsletter has reach, but I’ll believe it when I finally convince one of you to adopt a cat. This week it’s Fajita, who is available at Worcester ARL.
