The US Department of Justice announced a significant shift in federal cannabis policy, moving to loosen restrictions on certain cannabis products while advancing a broader effort to reclassify the drug under federal law.
The action does not legalize cannabis nationwide. But it marks one of the most consequential federal moves in decades. It could reshape how the industry operates, particularly in states like Maryland that already allow medical and adult-use sales.
As previously covered on Conduit Street, federal health officials recommended in 2023 that cannabis move from Schedule I to Schedule III under the Controlled Substances Act. The Department of Justice now appears to be acting on that recommendation, while also accelerating a broader review of cannabis’s classification.
Under current law, cannabis remains a Schedule I substance, a category reserved for drugs with a high potential for abuse and no accepted medical use. The DOJ’s latest action would begin shifting certain products into a less restrictive category and initiate a formal process to reconsider that classification more broadly.
For state-legal markets, the implications are substantial.
One of the most immediate impacts would come through federal tax policy. Section 280E of the Internal Revenue Code prevents businesses tied to Schedule I or II substances from deducting ordinary business expenses. That provision continues to create a significant financial burden for licensed cannabis operators, including those in Maryland.
A change in federal classification could ease those restrictions, allowing cannabis businesses to operate more like other industries from a tax standpoint.
The shift also opens the door for expanded medical research. Federal restrictions have long limited the ability to study cannabis at scale. Moving the drug into a lower classification would allow more institutions to conduct research and could support the development of cannabis-based treatments.
The Department of Justice also indicated it will begin formal proceedings later this year to gather evidence and expert input on broader rescheduling. That process will determine whether cannabis remains restricted or moves into a different classification across all uses.
The timing reflects growing tension between federal policy and state law. Nearly every state now allows some form of legal cannabis use, and roughly half permit adult-use sales. At the same time, cannabis remains illegal under federal law, creating ongoing challenges for regulation, taxation, and financial access.
For counties, the change does not alter current responsibilities under Maryland law. Local governments will continue to manage zoning, enforcement, and public health considerations tied to cannabis operations.
But a shift in federal policy could affect the broader market. Changes in tax treatment, research access, and capital availability could drive industry growth, which, in turn, affects local land use, licensing activity, and revenue expectations.
The Justice Department’s move signals a shift, but the outcome is not final. The formal rescheduling process will determine where federal policy ultimately lands.
Stay tuned to Conduit Street for updates as the federal process moves forward.
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