The National Conference of State Legislatures (NCSL) is grateful for this opportunity to comment on the Drug Enforcement Agency's proposal to move cannabis from Schedule I to Schedule III of the Controlled Substances Act (Docket No. DEA-1362; A.G. Order No. 5931-2024).
I. Introduction
NCSL is a bipartisan organization created by state legislators and legislative staff in 1975. It serves the legislatures of our 50 states, commonwealths, territories and Washington, D.C.1 NCSL represents the interests of state legislatures in federal policymaking, especially in support of state sovereignty and state flexibility and protection from unfunded federal mandates and unwarranted federal preemption. Each state's legislature, including legislators and legislative staff, is a member of NCSL and the collective will of the states drives our policy positions.
II. Cannabis and Federalism
Federalism is an integral part of the relationship between states and the federal government, and is especially true with cannabis policy. Just as the droughts of California require different solutions than the flooding in Florida, states require flexibility in policy choices regarding how to address cannabis legalization and regulation that reflects the goals of their communities. NCSL maintains that federal cannabis policy should lay a foundation or "floor" upon which states can build policies that work best to improve the public safety, health and economic development of their communities.2 Forty-seven states, Washington, D.C., the Northern Mariana Islands, the U.S. Virgin Islands, Guam and Puerto Rico have moved forward with some form of cannabis legalization and regulation. A federal cannabis regulatory framework must respect these state and territorial decisions addressing the creation of legal markets for recreational and medical cannabis products. NCSL urges the administration to consult with states as it creates a new federal regulatory framework, and to respect those states with existing cannabis markets.
While NCSL commends the administration on the decision to reschedule cannabis to Schedule III of the Controlled Substances Act, this is only the first step toward cementing nationwide cannabis reform. NCSL maintains that cannabis should be removed completely from the CSA, explicitly allowing states to set their own cannabis policies without federal interference. States have proven to be the laboratories of democracy, and since California legalized medical cannabis in 1996, state legislatures have nimbly established and maintained robust medical and recreational cannabis markets with minimal negative externalities. Further, state-regulated cannabis markets have helped curb the illicit market by replacing untested and adulterated products with tested, well-labeled, safe cannabis products.3 States have been able to direct cannabis sales tax revenue into underfunded areas such as education and drug rehabilitation programs.4 Descheduling cannabis completely will ensure these state efforts will not be wasted.
III. State Concerns on Effects of Schedule III Designation
NCSL has identified several policy areas where federal guidance and clarification is needed for states to make appropriate policy decisions in anticipation of cannabis transitioning to a Schedule III substance.
Banking and Financial Services
Under federal law, cannabis businesses in states that have legalized the sale of cannabis are unable to utilize the country's banking system, forcing them to operate as primarily cash-only entities. This reliance on cash makes cannabis businesses prime targets for theft, burglary, armed robbery and other property crimes.5 NCSL has called on Congress to pass the SAFER Banking Act to solve this problem. How will rescheduling cannabis affect the ability of cannabis businesses to access banking and financial services?
Tax Revenue
The Internal Revenue Code prohibits businesses from deducting costs related to the sale of Schedule I or Schedule II substances. Under Section 280E, cannabis businesses are unable to deduct business expenditures, which places them at a great disadvantage in comparison with other industries and has contributed to the failure of many state-licensed cannabis businesses. With the high costs of compliance with cannabis regulations and maintaining licensure, the inability for cannabis businesses to utilize business deductions incentivizes participation in the illicit market. Will rescheduling cannabis allow growers and dispensaries to access business tax benefits?
Cannabis Research
Under current federal law, cannabis research is severely limited. State-sanctioned research facilities are not permitted to share tested cannabis samples with facilities in other states. Large research institutions are deeply limited in their ability to legally obtain cannabis products for research while complying with federal grant requirements.6 NCSL has a longstanding policy advocating for the ability of state-sanctioned research entities to access cannabis "in the quantity, quality and type necessary to research the health effects of cannabis use and that adequate funding sources are made available to support cannabis and cannabinoid research that explores the health benefits and risks of cannabis use." Will rescheduling cannabis address current restrictions on cannabis research?
IV. Conclusion
NCSL thanks the DEA for the opportunity to share comments on behalf of the nation's state legislatures. The organization urges the DEA to accept the Department of Health and Human Service's recommendation to reschedule cannabis from Schedule I to Schedule 3 of the CSA as a first step in federal cannabis policy reform. In the future, NCSL hopes to see the federal government uphold the nation's founding principles of federalism and consider removing cannabis from the CSA entirely. NCSL welcomes any opportunity to continue the dialogue on cannabis policy reform. Please do not hesitate to reach out to staff members Nicole Ezeh and Susan Frederick.
Sincerely,
Tim Storey
Chief Executive Officer
National Conference of State Legislatures