The Department of Health and Human Services is asking the DEA to reclassify cannabis to Schedule III

A Health Department official recommended in a leaked letter that the Drug Enforcement Agency (DEA) reclassify cannabis from a Schedule I drug to a Schedule III drug under the Controlled Substances Act.

HHS Assistant Secretary of Health Rachel Levine sent a letter to DEA Anne Milgram on Aug. 29 recommending the reclassification of cannabis. HHS confirmed Tuesday that a representative submitted its findings to the DEA. “Using the data and the scientific evidence, HHS responded expeditiously to President Biden’s direction to the HHS Secretary [Xavier Becerra] and submitted its planning recommendation for marijuana to the DEA on August 29, 2023,” said an HHS spokesman.

The move was described as “historic” and sent cannabis stocks skyrocketing, but was also called insufficient for ending cannabis prohibition as it would remain a controlled substance, albeit with fewer restrictions.

Last October, President Joe Biden requested that the HHS Secretary and Attorney General conduct a review of the federal classification of cannabis. Cannabis is currently on Schedule I, meaning the DEA considers it a drug “that does not currently accept medical use and has a high potential for abuse.”

The DEA defines a Schedule III substance as “a drug with moderate to low potential for physical and psychological dependence”. The DEA states that the potential for abuse of Schedule III drugs is lower than Schedule I and II drugs—but more habit-forming than Schedule IV (Xanax, Valium) and Schedule V drugs (Robitussin AC ). Examples of Schedule III drugs include pills and drugs containing less than 90 mg of codeine per dosage unit (Tylenol 3), ketamine, anabolic steroids, and testosterone.

It’s important to note that Schedule III cannabis would still be banned federally, although it would open doors for researchers. Some leaders in Congress welcomed the move, while others said it wasn’t enough.

What’s happening now?

NORML reports that the HHS recommendation will now be forwarded to the DEA for its own scientific review. The DEA introduced its own five-factor test to determine whether cannabis should be reclassified, and this differs from the HHS’s criteria. But the DEA found that cannabis failed its five criteria four times.

“It will be very interesting to see how the DEA responds to this recommendation, given the agency’s historical resistance to any possible change in how cannabis is categorized under federal law,” said Paul Armentano, associate director of NORML. “Additionally, for decades, the agency has used its own five-factor criteria to assess cannabis inclusion in the CSA — criteria that the agency declared as not met as recently as 2016. With the agency having the final say on all rescheduling decisions, it is safe to say that this process is far from complete.”

Senate Majority Leader Chuck Schumer (D-NY) said in a statement that HHS had recommended switching cannabis from a Schedule I controlled substance to a Schedule III controlled substance. “HHS did the right thing,” Schumer said. “The DEA should now implement this important step to significantly reduce the damage caused by draconian marijuana laws.”

Is Annex III sufficient?

“This is a step in the right direction, but not enough,” Congressman Earl Blumenauer (D-OR), founder and co-chair of the Congressional Cannabis Caucus, said in a statement. “I hope that more significant reforms will follow. That’s long overdue.”

Cannabis coalitions hailed the move as historic, although it would not fully decriminalize cannabis at the federal level.

“The Biden administration just took a major step towards ending our country’s failed war on cannabis,” said Adam Goers, co-chair of the Coalition for Cannabis Scheduling Reform. “Cannabis has been a Schedule I controlled substance for decades, on a par with heroin and ahead of fentanyl and meth. This was completely unfounded, and we now know that the FDA and the Department of Health and Human Services agree.

“The federal government is now on track to recognize cannabis as a drug, regulated alongside Schedule III drugs like Tylenol with codeine, which have proven medicinal uses and low risk of abuse. Our ultimate goal is the full legalization of cannabis, and we believe that re-regulation is an important step in getting there.

It’s stupid to spend even a penny of federal tax money to criminalize cannabis. I am pleased that @HHSGov @DEAHQ is recommending removing cannabis from Schedule I. HHS recommends listing cannabis on Schedule III.

I urge @DEAHQ to remove cannabis from all lists. https://t.co/p9VXNbtvNU

— Ted Lieu (@tedlieu) August 31, 2023

Cannabis stocks are rising

The news affected the cannabis trade. ETF.com reports that the AdvisorShares Pure US Cannabis ETF is up 21%. Other cannabis-related funds, including FMG Alternative Harvest ETF and Global X Cannabis ETF, gained 10.79% and 7.44%, respectively. Eight cannabis ETFs trade in US markets with total assets under management of $630.76 million.

Publicly traded cannabis companies also surged on the news. Canopy Growth is up 13%, Tilray Brands is up nearly 9%, and Aurora Cannabis is up 6%.