With any new year, there is an opportunity to be hopeful. With a new administration taking office and recent changes to the international scheduling of cannabis — as well a focus by the federal government, including both Congress and the DEA, on improving access to cannabis for research — the marijuana industry has good reason to look forward to 2021.
In general, 2020 brought about changes to federal law that demonstrate gradual progress toward making the regulatory environment more favorable for the cannabis industry. The DEA issued a proposed rule that would allow, for the first time, the registration of additional cultivators of cannabis for research. And, just days after DEA finalized that rule, the U.S. Senate passed the Cannabidiol and Marihuana Research Expansion Act, which, if enacted, would make the regulatory environment even more favorable for researchers, cultivators for research and companies that are developing cannabis-derived drug products and their synthetic equivalents. Although it has yet to be enacted, the Senate’s willingness to pass such laws may provide a glimmer of hope for more progressive federal cannabis policy in 2021.
In 2020, several states also enacted adult-use marijuana laws. While the implementation of these laws will take time, businesses that intend to operate in the adult-use space will surely benefit from the opportunities created by these laws. Some are predicting that New Jersey’s adult-use program will generate close to $1 billion in revenue in the next three years, and that other East Coast states, including New York, may not be far behind in adopting similar programs.
There can be no question that the continued classification of marijuana as a Schedule I controlled substance remains the largest impediment to the success of many cannabis businesses. That classification not only creates a risk of federal prosecution, it imposes crippling financial and tax limitations on these businesses. Although 2020 did not bring a change to this classification, recent changes in the international control of cannabis and new leadership at the U.S. Department of Health and Human Services (HHS) may open the door for at least an administrative down-scheduling of marijuana by the DEA.
The DEA has previously found that it is required to place marijuana in Schedule I or II due to the United States’ international treaty obligations. At the time, both cannabis and cannabis resin were controlled internationally in Schedule IV (the most restrictive schedule) of the 1961 Single Convention on Narcotic Drugs. However, in December 2020, the United Nations Commission for Narcotic Drugs voted to remove cannabis from its Schedule IV status, placing it in the less restrictive Schedule I. While marijuana remains subject to all of the controls of the Single Convention, there is no longer a requirement that the United States “prohibit the production, manufacture, export and import of, trade in, possession or use of any such drug except for amounts which may be necessary for medical and scientific research only, including clinical trials therewith to be conducted under or subject to the direct supervision and control of the [United States].” In theory, this change could allow for a more favorable scheduling classification for marijuana.
Also, if Xavier Becerra, President Joe Biden’s nominee for HHS secretary, is confirmed, some are predicting this could lead to a change in the Food and Drug Administration’s scientific and medical evaluation and a recommendation to place marijuana in a lower Controlled Substances Act schedule. Becerra is California’s attorney general.
Before transferring marijuana off Schedule I, the DEA must request a scientific and medical evaluation from the HHS secretary (the FDA acts as the lead agency within HHS in carrying out the secretary’s scheduling responsibilities under the Controlled Substances Act, with the concurrence of the National Institute on Drug Abuse).
Another important issue to watch in 2021 will be whether there is any change in the FDA’s regulation of CBD as an ingredient in conventional foods and dietary supplements. While many CBD companies were hopeful for movement on this issue in 2020, not much occurred. However, the Federal Trade Commission (FTC) did ramp up its enforcement actions against companies that allegedly made unsubstantiated claims about CBD products being useful for the treatment of serious diseases or conditions. On December 17, 2020, the FTC announced settlements with six sellers of CBD products for allegedly making claims about their products’ ability to treat serious health conditions, including cancer, heart disease, Alzheimer’s disease and others. The settlements require the payment of fines ranging from $20,000 to $85,000 and the entry of administrative orders that bar the companies from engaging in similar deceptive advertising in the future.
These settlements, which are part of the FTC’s Operation CBDeceit, provide even more reason for companies marketing CBD products to conduct a close review of their advertising and marketing materials.