January 31, 2023

Volume XIII, Number 31

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January 31, 2023

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January 30, 2023

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Editors’ Roundtable: A New Biden Doctrine?

Welcome to the third installment of the Editors’ Roundtable, in which our editors – Whitt Steineker, Jay Wright, Hunter Robinson, and Slates Veazey – discuss cannabis issues in the news and take a stab at where the cannabis industry is going in the future.

Whitt Steineker (WS): Well look at President Joe Biden dropping in from the clouds earlier this month and making two historic announcements, which he described as steps to “end” the federal government’s “failed approach” to marijuana. First, he is issuing mass pardons for federal convictions of simple marijuana possession and has encouraged governors to do the same for state-level marijuana offenses. Second, President Biden ordered Secretary of Health and Human Services Xavier Becerra “to initiate the administrative process to review expeditiously how marijuana is scheduled under federal law.”

Warning: In the spirit of the McLaughlin Group, I’m going to ask you each for your opinion on what this all means and then probably tell you that you’re wrong.

First, what do you make of the pardons for marijuana possessions?

Slates Veazey (SV): On the surface, the pardons look and sound like a major development. And, don’t get me wrong, this is a major step forward.  But, from a pure numbers perspective, these pardons will not impact many, if any, who are currently incarcerated. According to an October 15, 2022, Marshall Project article no person is currently in federal custody for simple possession of marijuana. That means, nobody will be freed from prison as a result of the Biden pardons.

The only significant impact of the pardon directive will be seen if states across the country follow suit. As I appreciate it, the states that would pardon local simple pot possessions have already taken action on this front. Those that haven’t are not expected to do so. So, incarcerated folks “busted down on Bourbon street” for violating Louisiana marijuana laws, for example, shouldn’t expect to “get back truckin’ on” any time soon.

Jay Wright (JW): Slates captured my thoughts exactly. Though the headline sounds like a big deal, reports indicate that no one will be freed from prison since simple marijuana possession cases are overwhelmingly prosecuted by states, while the federal government targets larger-scale drug manufacturers and traffickers to which the pardons do not apply. I suspect a handful of states will take similar actions, though most likely after the upcoming elections.

WS:  I think this is an extremely complicated policy question. On the one hand, I think it sends a message to the progressive base that the administration may be serious about remedying decades of a war on drugs that many believe has disproportionally impacted minority groups.

On the other hand, it seems underinclusive because many, if not, most incarcerated individuals with marijuana charges are not incarcerated for simple marijuana possession as opposed to other related charges.

More importantly, however, I think this is a poison pill for conservatives who may be inclined to support some type of marijuana reform. This type of policy is exactly the type of thing that has torpedoed other marijuana legislation (e.g., the MORE Act) in the past few years.

Ok, so what do you think of the directive to review marijuana’s scheduling under federal law? Let’s start with this (with as close to a “yes” or “no” answer as possible and with the understanding I’ll allow further explanation below): Do you think there will be any rescheduling or de-scheduling? And can one of you please explain the difference?

JW:  The DEA has established a five-tier schedule to categorize drugs based on their acceptable medical use and potential for abuse or dependency.  Schedule I sits at the high end of the scale, and the DEA views Schedule I drugs as having no currently accepted medical use and a high potential for abuse. Marijuana is currently a Schedule I drug along with heroin, LSD, peyote and other drugs. The question, then, is whether the DEA “re-schedules” marijuana, or moves it to a less restrictive tier, or “de-schedules” it entirely. Either approach would make marijuana federally “legal,” so the question would be how difficult is it to access. If the federal government moved it to Schedule II, for example, it would still be subject to intense federal regulatory oversight similar to prescription opioids. Should it drop further down the schedules, it would be more generally available the way other commonly prescribed drugs and over-the-counter medications are today.

I view re-scheduling as the more likely approach in the near term.

SV: I suspect we see rescheduling before de-scheduling. De-scheduling would remove cannabis from the schedule of drugs that are listed in the Controlled Substances Act all together and essentially allow it to be sold like most other products are sold. Under this scenario, states would by and large be the regulatory czars of the cannabis industry inside their borders. 

Rescheduling to a lower tier of the CSA – i.e., a schedule of drugs that is deemed less addictive – would, on the other hand, most certainly push cannabis under the guise of FDA and other federal regulations. A likely result of rescheduling, I suppose, would be a significant increase in start-up and operational costs of cannabis businesses. This would very much favor MSOs and be to the detriment of local, smaller establishments. 

HR: Rescheduling could be fatal to most state-legal cannabis companies. As Slates points out, this would bring cannabis within the FDA’s purview. And that means cannabis products would need to go through the FDA’s new drug approval process. Navigating that process costs, on average, well above $1 billion dollars per product (i.e., a “new drug”).

That is not the model on which state-legal cannabis companies have been operating. And I cannot imagine the federal government finally taking what appears to be a step towards cannabis reform, only to eliminate the thousands of state-legal cannabis companies to which the federal government has taken a hands-off approach for years. 

With that said, moving straight to de-scheduling does seem like a big leap for the federal government. But it makes sense. It essentially maintains the status quo from a pragmatic perspective (i.e., each state regulates cannabis as they see fit), but would remove many of the impediments that come from cannabis being illegal at the federal level, like the triggers for anti-money laundering laws (which currently keeps many banks on the cannabis-banking sidelines) and the application of 280E (which causes cannabis to pay effective federal tax rates that are multiples above what a non-cannabis company pays), and the inability to move cannabis across state lines. 

Without these impediments, current cannabis companies could prosper, and the new access to capital could allow many new ones to enter the market. That seems like a great result for a first step towards reform to me.

WS: Nice job with the “yes” or “no” part, guys. This is why people hate lawyers. Well, one of the reasons. For what it’s worth, I think the real winner in rescheduling would be any pharmaceutical company that was willing to get into the medical cannabis market. They know how to navigate the drug approval process, and they have the money and know-how to research and develop new products.

WS: So, if you had to wager an amount of money that was significant to you, would you bet that there would be a rescheduling or de-scheduling of marijuana before January 20, 2025?

JW: Yes, I think we will see marijuana re-scheduled by then.

SV: I would bet there will be action by January 20, 2025, and lean towards rescheduling. I don’t think the federal government will be ready by then to relinquish control over a drug it has categorized by the CSA as one of the most dangerous drugs on the streets for over 50 years.

WS: How much of this is political and how much of this is a meaningful effort by the Biden administration to advance cannabis reform?

HR: It can be both. In my mind, the timing makes clear this is a political move. The Biden administration could have and should have done this sooner.  But I do think it is meaningful, too, and will result in some action before the Biden administration concludes.

SV: What other than politics motivates politicians’ actions? In seriousness, the timing of this announcement favors this being largely a political move.  However, if you told me Schumer, Booker and Wyden were behind the scenes on this, I wouldn’t be shocked. And, if that’s accurate, I do believe there is some meaningful effort to advance cannabis reform.

JW: It’s certainly an about-face by the Biden administration, which, to date, had not strongly expressed any intent to take meaningful steps on marijuana reform despite Congressional action to do something. I agree with Slates that the timing makes this seem like a political calculation, but it’s nice to see the administration advancing policies that have become mainstream positions among American voters.

© 2023 Bradley Arant Boult Cummings LLPNational Law Review, Volume XII, Number 304
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About this Author

Whitt Steineker Cannabis Attorney Bradley Birmingham
Partner

Whitt Steineker has devoted his legal career to representing companies that provide a wide range of goods and services. He provides clients of all types with litigation counsel, transactional advice, and practical strategies for growth. Whitt advises clients of all sizes—from multinational corporations to local businesses—in transactional and litigation matters in jurisdictions across the country and around the world.

As co-chair of Bradley’s Cannabis Industry team, Whitt represents clients on a wide range of cannabis issues. In addition to...

205-521-8401
James W. Wright Jr. Attorney Banking Financial Services Bradley Arant Boult Cummings Birmingham
Partner

Jay Wright is a partner in the firm’s Banking and Financial Services and Litigation practice groups. Jay has earned his Accredited Mortgage Professional (AMP) designation through the Mortgage Bankers Association (MBA), and is one of a small number of lawyers who have achieved this status.

Jay’s practice focuses on financial services litigation and regulation, and he is actively involved in lawsuits and disputes across the country representing companies involved in a wide array of state and federal law claims. His representation includes general...

205-521-8924
J. Hunter Robinson Commercial Litigation Bradley Arant Boult Cummings LLP
Associate

Hunter Robinson represents clients in commercial litigation and compliance-related matters across the country. His litigation practice focuses on representing financial institutions in lender-liability, title, and business disputes, including class actions. Hunter represents mortgage servicers and lenders in suits arising from repurchase demands, and defends those entities in litigation involving alleged violations of the Truth in Lending Act (TILA), Fair Debt Collection Practices Act (FDCPA), Real Estate Settlement Procedures Act (RESPA), and the Fair Credit Reporting...

615-252-2328
Slates Veazey Construction Litigation Attorney Bradley Law Firm
Partner

Slates Veazey represents clients in all types of litigation, with a particular emphasis on construction and insurance coverage disputes. Slates’ construction practice involves representing owners and general contractors in a variety of issues and projects, both public and private. Slates, who is licensed in both Texas and Mississippi, has experience managing construction disputes across the United States, including Alabama, Florida, Georgia, Mississippi, and Texas. This experience includes prosecuting and defending delay, extra work, impact, and inefficiency claims on public and private...

601.592.9925
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