The Biden administration on Thursday officially launched a process to reclassify cannabis as a less dangerous substance, an expected turning point in the decriminalization of marijuana in the United States and the development of an industry. The US Department of Justice has proposed removing cannabis from Category 1 of substances considered at the federal level to be highly addictive and without legal use for medical purposes.
Category 1 is the highest in the nomenclature and includes heroin, LSD and ecstasy. The government is now proposing to list cannabis in category 3, which concerns substances presenting a moderate to low risk of dependence. These include certain codeine medications.
A “monumental” decision
The proposal will be subject to decision by the US Drug Enforcement Agency (DEA). The Biden government’s official move in this matter is not a surprise, as initial information to this effect leaked at the end of April. Recreational and medical use of cannabis is legal in 24 US states. Added to this are several states in which its consumption is only authorized for medical purposes.
But still being classified among the most addictive substances, this hemp derivative remains likely to result in federal prosecution for possessors or sellers. In 1970, under the influence of President Richard Nixon, who declared a “total war on illicit drugs”, the American Congress voted to classify cannabis among the substances considered to be the most addictive.
This measure led to a growing number of arrests, which peaked at nearly 800,000 in 2005. Figures show that people from minorities, particularly African Americans, are disproportionately represented in these arrests. “This decision is monumental,” reacted Thursday the African-American rights organization NAACP on X (formerly Twitter). “Far too many Black Americans have been victims of a system designed to be their downfall. We support the decriminalization of cannabis.”
A reclassification does not necessarily mean legalization, but it would likely reduce the number of arrests at the federal level. “No one should be in prison just for using or possessing marijuana, period,” President Joe Biden said in a video released Thursday.
Investor pool
The change in category would also allow companies cultivating and marketing cannabis to be able to deduct their operating expenses from their tax base, which is prohibited today. This would significantly improve their economic model. The decision announced Thursday “is the biggest victory for the movement to support cannabis reforms to date” in the United States, commented Brady Cobb, of the Florida start-up Sunburn Cannabis.
On Wall Street, the shares of major industry players had the wind in their sails on Thursday. Curaleaf thus increased by 1.07% and Verano Holdings by 0.69%. Several companies have gone public in recent years, but the industry still faces a series of obstacles, including the fact that almost all banks refuse to take them on as clients. They are, in fact, likely to be excluded from a crucial deposit guarantee mechanism if they finance illegal activities.
This increases operating costs for producers and distributors, and often also increases the security concerns of holding large sums of cash. The measure initiated Thursday “will help unlock research into the medical effectiveness of cannabis and bring about real change for legal operators who are struggling under the weight of taxes,” commented Curaleaf CEO Matt Darin in a statement sent to AFP.
The federal government’s change of direction could thus whet the appetite of large pharmaceutical laboratories. “There is a large pool of investors who remain on the sidelines, waiting for the legalization of cannabis,” further argues, Morgan Paxhia, of Poseidon Investment Management. “The finish line is in sight, but the race is not yet won.”