The Coming Garland Memo on Schedule III Cannabis.

After the wave of experts that shot from the hip regarding the meaning of sliding cannabis down from Schedule I to III under the Controlled Substances Act (CSA), the most compelling thing I saw about it did not come from any lawyers. Nope, Bill Levers or Beard Bros social post that just had a provision of the CSA regarding what the Attorney General can do for a Schedule III drug - it got me thinking about the forthcoming Garland Memo that will be used as a political football to get another 4 years of a democrat administration.

DEA will have to listen to HHS telling it to move Cannabis to Schedule III, probably.

The Attorney General delegated to the DEA the ability to list drugs on a schedule, but HHS told it to change it and they fortunately get to set the science as HHS' recommendations are binding on the DEA for scientific and medical matters. So despite not trusting the DEA, the odds are that a change in the scheduling is almost certain. This change will trigger a rule making process from the DEA that could take well past the 2024 election - so vote Blue because republican administrations have derailed cannabis legalization in Virginia, South Dakota and way, way back in Arizona in 1996. Administrations matter in the industry.

While the DEA rulemaking can take a long time, after the rescheduling, the Attorney General Garland could issue a memo to provide a stop gap on the federal cannabis policy that exempts the whole industry from registering with the Attorney General (DEA). The Garland Memo could exempt the whole industry from registering for either manufacturing or distributing the new schedule III substance.

Registration Requirements to make or distribute Schedule III controlled substances.

Section 823 of the CSA under sub-sections (e) and (f) cover registration of manufacturing and distribution of controlled substances in schedules III, IV, and V.

Here's what the CSA provides:

(e)Manufacturers of controlled substances in schedule III, IV, or V The Attorney General shall register an applicant to manufacture controlled substances in schedule III, IV, or V, unless he determines that the issuance of such registration is inconsistent with the public interest. In determining the public interest, the following factors shall be considered:

(1) maintenance of effective controls against diversion of particular controlled substances and any controlled substance in schedule III, IV, or V compounded therefrom into other than legitimate medical, scientific, or industrial channels;

(2) compliance with applicable State and local law;

(3) promotion of technical advances in the art of manufacturing these substances and the development of new substances;

(4) prior conviction record of applicant under Federal or State laws relating to the manufacture, distribution, or dispensing of such substances;

(5) past experience in the manufacture, distribution, and dispensing of controlled substances, and the existence in the establishment of effective controls against diversion; and

(6) such other factors as may be relevant to and consistent with the public health and safety.

The Attorney General could write a memo and exempts the entire industry from registering with the DEA for the six reasons provided. The entire industry starts from licenses - we win them all the time at Collateral Base . These licenses are in compliance with applicable state and local laws. The application and regulations of each state (except CA and OK) provide effective controls against diversion of the substances. The states control the police power to protect the health and safety of the public.

Attorney General Garland could easily conclude that a state licensed operator does not need to be registered with the DEA as it is inconsistent with the public interest based upon the elements enabling their exemption. This would provide a safe harbor for the tens of thousands of licensed businesses across the country that are all currently operating as unregistered Schedule I manufacturers and distributors, without really any repercussions unless they are operating outside the bounds of their state issued license.

If the entire industry is not registered already at Schedule I, why exempt them at Schedule III?

Not that I like to end on moot points, but out of everything that I saw on the movement from Schedule I to III for the plant that pays our bills I saw an opening for the entire industry to be exempted from registering and therefore in federal compliance for the first time .... well, ever.

The Garland Memo could bring banking, stock listing, credit cards, and basically legality.

If the Garland Memo exempts all state licensed operators from registering with DEA, then many of the crimes that prevent banking go away. That exemption would be a defense to the crimes of manufacturing and distributing a Schedule III substance without registering with the Attorney General.

The feds are going to have to figure out how to bring the industry out of the numerous crimes that happen with each transaction that tens of millions of Americans make at state legal dispensaries each year. The Garland Memo exempting the industry from registering until the DEA rulemaking provides a framework for federal regulations of an industry already medically legal in 38 states and our nation's capital, plus 23 (OH can be 24) completely legal states.

Does Schedule III mean I do not have to make the Dispensary a c-corp?

We'll answer that one in next week's episode of getting a dispensary open in Illinois.

Until then, join us over on Cannabis Legalization News - we have better stuff on our youtube channel, but we broadcast the podcast on here as well.