Why cannabis rescheduling will happen sooner, rather than later

Beacon Securities analyst Russell Stanley said comments from a leading U.S. cannabis regulatory expert reinforce confidence that federal marijuana rescheduling could be completed sooner rather than later.

In a Jan. 6 industry update, Stanley said Beacon attended a webinar hosted by the American Trade Association for Cannabis & Hemp (ATACH), featuring Shane Pennington, a partner at Blank Rome LLP who is widely followed on U.S. cannabis law, and Priyanka Sharma, co-CEO of CBD producer Kazmira.

Stanley said Pennington struck an optimistic tone on the path forward following President Donald Trump’s Dec. 18 executive order directing Attorney General Pam Bondi to “complete” the rulemaking process to move cannabis from Schedule I to Schedule III under the Controlled Substances Act “in the most expeditious manner.”

Pennington further said historical precedent suggests the final rule is unlikely to be classified as a “major” rule requiring congressional review, reducing another potential source of delay.

Pennington said the Attorney General has the authority to cancel the currently stalled administrative law judge hearing, which is tied up by an interlocutory appeal. Doing so would render the appeal moot and allow the Department of Justice to issue a final rule that could take effect 30 days after publication.

“(Mr. Pennington) noted that the EO specifically said ‘complete the rulemaking process, which he interprets as meaning that the Department of Justice is likely working with the existing draft of the rule, rather than planning to restart the process,” Stanley said.

Pennington added that if there is no public update by mid-February, criticism over delays could actually be constructive, as it would imply the process has not been reset and that a final rule is “in the oven” and nearing release. He said it is possible that preparatory work, including drafting responses to prior public comments, is already underway.

Stanley said Pennington also downplayed the risk of legal challenges significantly delaying implementation. While opponents could seek a court-ordered stay, Pennington estimated the odds at 10% or less, later suggesting mid-single digits, citing the high bar required to demonstrate irreparable harm and a strong likelihood of success on the merits.

“He described these (hurdles) as ‘Mount Everest’-sized challenges for opponents,” Stanley said.

Pennington further said historical precedent suggests the final rule is unlikely to be classified as a “major” rule requiring congressional review, reducing another potential source of delay.

“While there is still work to do to complete the process, Mr. Pennington’s views indicate that the process could be completed reasonably soon, given the odds of delay look very low,” Stanley said, adding that the webinar reinforced Beacon’s view that rescheduling could be completed in the near term.

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