Three-Minute Legal Talks: Reclassifying Cannabis as a Schedule III Substance

President Richard Nixon signed the Controlled Substances Act into law on October 27, 1970. This legislation broke down controlled substances into five levels, known as schedules, with substances such as heroin, LSD and cannabis listed under Schedule I. These substances are considered the most dangerous to use, providing no therapeutic effects but having the highest potential for abuse.

In May 2024, the Biden administration signaled a potential change in cannabis’s classification from Schedule I to Schedule III. When this transition is complete, cannabis will be considered alongside other substances such as ketamine and codeine.

In three minutes, Karen Boxx, professor of law at the University of Washington School of Law, explains how cannabis’s Schedule III classification could affect businesses, researchers, the medical industry and recreational users.

Read the Transcript

Karen Boxx (KB): My name is Karen Boxx and I'm a professor at the University of Washington School of Law.

Three-Minute Legal Talks (TMLT): Which schedule is cannabis currently classified under, and which schedule is it proposed to move to?

KB: It’s currently scheduled as a Schedule I controlled substance under the Controlled Substances Act, which is the highest, most dangerous — heroin is on Schedule I — and those drugs are considered to be, to have no therapeutic effect. Schedule III drugs include things like codeine, and those are considered to have some therapeutic effect but are still controlled substances.

TMLT: Will the reclassification have any impact on cannabis businesses?

KB: Currently, under the Internal Revenue Code, cannabis businesses cannot deduct their ordinary business expenses before they're paying their federal income taxes. So, that's things like rent, payroll, that ordinary businesses are able to deduct before they figure out what taxes they owe. Cannabis businesses cannot deduct those expenses because it's a Schedule I. Under the Internal Revenue Code section 280E, those deductions are disallowed. But moving it to Schedule III would allow them to deduct those expenses.

TMLT: Will reclassification to Schedule III have any effect on the legality of its recreational use?

KB: No. So, it's still a controlled substance. So, the retail stores that are currently in operation in states where cannabis has been legal for recreational purposes would still be illegal under federal law.

TMLT: How could this change affect medical cannabis?

KB: Hopefully, it will increase the ability to do research to find medical applications and to confirm medical applications for cannabis. Classifying it as Schedule III would mean pharmaceutical companies could get involved and probably will get involved doing research to create products that could be prescribed by doctors, but that's going to take a while in terms of doing the research, getting the approvals, etc.

TMLT: Are there any other arenas where this change might have an effect?

KB: Not a direct effect, but it may have some peripheral effect on attitudes about cannabis. So, we may see Congress more willing to pass the SAFER Banking Act, which would assist banks in being able to do business with cannabis businesses, which is still very much needed. It may affect the sentencing guidelines for criminal prosecutions of people who are operating outside of the state legal systems, although again, that's just pure speculation. So, again, it remains to be seen.