The Drug Enforcement Administration (DEA) on Thursday revealed a long-awaited final rule aimed at expanding the number of authorized growers of marijuana to be used in scientific research.
In a notice set to be formally published in the Federal Register on Friday, the agency said it made “minor modifications” from the initial proposed rule on licensing cannabis manufacturers it released in March.
DEA responded to numerous public comments it received since then, breaking them down into eight categories: application process and criteria; quality of marijuana; federal agency obligations pertaining to cannabis controls; the meaning of ‘medical cannabis;’ security costs and requirements applicable to the manufacture of marijuana; harvest; cost, pricing and fees of marijuana for DEA registrants and comments outside of the agency’s scope.
The release of these finalized regulations comes as both the House and Senate have recently passed bills to promote marijuana research. The goal of those pieces of legislation is similarly to streamline the process for researchers and expand access to cannabis for studies while mandating the DEA license additional growers by specific deadlines.
The House legislation contains a key provision that would allow scientists to access cannabis from state-legal dispensaries so that they can study products that are actually being used by consumers in commercial markets. In DEA’s new filing, the agency pushed back against public comments that suggested researchers be able to obtain dispensary marijuana.
Overall, DEA has maintained throughout the rulemaking process for licensing additional growers that it will have sole ownership over any marijuana that’s cultivated for research purposes.
That’s a fundamental change from current policy. As it stands, a single facility at the University of Mississippi is authorized to grow cannabis through a contract with the National Institute on Drug Abuse, and DEA does not maintain ownership over its products.
But DEA now asserts that in order to comply with international law, it must institute a practice of “taking possession of marihuana crops after harvest and maintaining the exclusive right of importing, exporting, wholesale trading, and maintaining stocks of marihuana and its resin.”
That’s based on an interpretation of the Single Convention by the Justice Department’s Office of Legal Counsel, which determined in April that DEA has been violating the international treaty by managing the cannabis program in coordination with two other agencies when it needs to be the sole agency.
Here’s an overview of some of the most notable responses and regulatory amendments in the new DEA filing:
-Many commenters argued that DEA should not disqualify applicants who’ve grown marijuana in compliance with state law. The agency responded that it is statutorily bound to consider instances where an applicant violated federal law—something that all state-legal marijuana cultivation businesses do—and it would continue to do so. “While the DEA Administrator has discretion to weigh the statutory factors and any one factor need not be dispositive, an applicant’s prior compliance with Federal law is a relevant consideration when determining whether to grant an application for registration,” the notice states.
-Relatedly, the agency responded to comments pushing it to factor in an applicant’s ability to produce “high quality” marijuana and their past experience cultivating the plant. It simply said that applicants are judged based on public interest and compliance with international treaties. “Under those factors, DEA will consider the applicant’s ‘past experience in the manufacture of controlled substances’ and its ‘promotion of technical advances in the art of manufacturing these substances.’”
-DEA also said it would not be allowing researchers to obtain marijuana products from state-legal cannabis businesses. It cited international treaty obligations and federal statutes, as well as public safety considerations. The agency also said that extending that access is “unnecessary” since it will be expanding the number of DEA-registered manufacturers.
-Since DEA first announced in 2016 that it would be expanding the number of marijuana cultivators, it received more than 30 applications but has yet to act on them. (This has led to several lawsuits, with scientists pushing the courts to mandate that the agency respond.) DEA said in the final rule that it would be prioritizing those applications before moving on to review new ones.
-The agency rejected pushback on the proposed rule’s provisions that specifically exempt it from liability for marijuana that’s damaged or destroyed under its possession. But DEA stressed that it only handles cannabis for a short time and it will maintain the statute of non-liability in order to “avoid costly and unnecessary disputes.”
-There were comments challenging DEA’s interpretation of international policies and what they mean as far as restrictions on cannabis research are concerned. The agency said it “acknowledges some may disagree with these legal conclusions, but DEA is bound by the law as [the Justice Department] and DEA understand it.” It said that questions about whether international treaties or the Controlled Substances Act controls of marijuana should be amended or abandoned “are beyond the scope of this rulemaking and DEA’s authority.”
-One of the allegations DEA has faced since announcing its intent to expand manufacturing facilities in 2016 is that it used a “secret” internal Justice Department memo to justify delaying additional application approvals. The agency said that DOJ reviewed its 2016 statement and concluded that rules would need to be changed in order to make those approvals. It “has acted as expeditiously as possible to amend its policies,” the notice states.
-Several commenters made the argument that DEA should relinquish control of the marijuana growers program and give that responsibility to an agency such as the U.S. Department of Health and Human Services, National Institutes of Health, Food and Drug Administration or U.S. Department of Agriculture. The agency said it works in concert with those other government entities and would continue to do so, but it is statutorily obligated to maintain sole control.
-DEA said it would not be taking special steps to “ensure diversity and inclusion of minority applicants.” The agency said it “gives all applicants equal treatment regardless of the gender, race, socioeconomic status, or disabled status of the applicant.”
-DEA said that multiple factors mean that it cannot significantly streamline the process of approving applications to become cannabis manufacturers for studies, despite the multiple requests it received. However, it did pledge to provide notice that an application was received within 90 days of its accepted filing.
While the final rule clears up some uncertainty about the DEA’s perspective on advancing marijuana research as Congress moves forward with its own plans, advocates have already taken issue with several of the agency’s responses to the comments.
“Time and time again, the DEA has proven itself full of empty promises when it comes to the issue of facilitating clinical cannabis research in the United States,” Paul Armentano, deputy director of NORML, told Marijuana Moment. “This history of inaction is why Congress needs to enact legislative reforms.”
He added that the bill recently passed by the House would end “the DEA’s longstanding fiefdom” by allowing scientists to study cannabis products available in state-licensed dispensaries, whereas the agency’s new proposal shows it is “not willing to make the sort of substantive changes necessary to provide U.S. scientists with the tools they need to adequately do their job.”
Without a clear directive from Congress, Armentano said, “there is little reason to believe that the DEA will ever act in a manner that will facilitate the changes necessary to put science first and politics second.”
Corey Cox, a senior associate attorney at Vincente Sederberg LLP, shares that perspective.
“My primary takeaway from this is it just really emphasizes the importance of pursuing legislative reforms through Congress—that the existing framework of the [Controlled Substances Act], as interpreted and implemented by the DEA, is really incompatible with the types of reforms that many stakeholders seem to be seeking through this rulemaking process,” he said.
“I think for members of Congress that are maybe on the fence, this really shows that the existing statutory framework—the CSA, the DEA’s interpretation of the CSA, the rules they promulgated pursuant to that act—are really incompatible with some of the goals and objectives Congress seems to be pursuing through these research bills,” he said.
This story has been updated to include additional details and commentary on the final rule.
Read the DEA final rule on expanding marijuana research below:
Top IRS Official Says Marijuana Banking Reform Would Help Feds ‘Get Paid’
The Internal Revenue Service (IRS) would like to get paid—and it’d help if the marijuana industry had access to banks like companies in other legal markets, an official with the federal department said. She also talked about unique issues related to federal tax deductions for cannabis businesses.
At an event hosted by UCLA’s Annual Tax Controversy Institute on Thursday, IRS’s Cassidy Collins talked about the “special type of collection challenge” that the agency faces when it comes to working with cannabis businesses while the product remains federally illegal.
While IRS isn’t taking a stand on federal marijuana policy, Collins said that the status quo leaves many cannabis businesses operating on a cash-only basis, creating complications for the agency, in part by making it harder for banks to “pay us.”
“The reason why [the marijuana industry is] cash intensive is twofold,” she said. “Number one, a lot of customers don’t want a paper trail showing that they’re buying marijuana, and number two, the hesitancy of banks to allow marijuana businesses to even bank with them.”
Of course, the reason why many financial institutions remain hesitant to take on cannabis companies as clients is because the plant is a strictly controlled substance under federal law.
“There’s been a number of legislative bills that have been introduced—and I am definitely not expressing any opinion personally or on behalf of the IRS about any pending or proposed legislation,” Collins, who is a senior counsel in the IRS Office of Chief Counsel, said. “But it is interesting to note that, if the law changed so that the marijuana businesses could have banks, that would make the IRS’s job to collect [taxes] a lot easier. As part of collection, we want the money. That’s our end goal there.”
A major part of what makes cannabis businesses unique is that they don’t qualify for traditional tax credits under an IRS code known as 280E. That policy “prohibits them from claiming deductions for business expenses because they’re technically being involved in drug trafficking,” Collins explained at the event, from which small excerpts of her comments were reported by Bloomberg.
There are some options available to lessen the burden on marijuana firms, however. At the end of the day, “IRS will work with marijuana companies because, again, we want to get paid,” Collins said.
One of the ways the agency works with marijuana business operators is to have them visit designated IRS “tax assistance centers” that accept cash payments in excess of $50,000. But the official warned businesses to “be prepared to be there for a little while” as the center checks—and double checks—the amount of cash being submitted.
“Revenue officers will assist the marijuana companies in paying us,” she said.
IRS officials could also help cannabis firms by having officials accompany them “to the bank in order to try to help the taxpayer secure a cashier’s payment to pay the IRS, as well as using money orders,” she said, adding that “our revenue officers are are wanting to work with the marijuana companies to help assist them to pay us.”
“When the revenue officers are there in person with the taxpayer, that could potentially help increase the likelihood that the bank will cooperate and help the taxpayer transition into a cashier’s check,” she continued. “And that has been a trend since this first became legal [at the state level], that more and more banks are allowing cannabis companies to bank with them.”
In a report published earlier this year, congressional researchers examined tax policies and restrictions for the marijuana industry—and how those could change if any number of federal reform bills are enacted.
IRS, for its part, said last month that it expects the cannabis market to continue to grow, and it offered some tips to businesses on staying compliant with taxes while the plant remains federally prohibited.
As it stands, banks and credit unions are operating under 2014 guidance from the Financial Crimes Enforcement Network (FinCEN) that lays out reporting requirements for those that choose to service the marijuana industry.
Leaders in both chambers of Congress are working on legalization bills to end federal marijuana prohibition. But stakeholders are hopeful that, in the interim, legislators will enact modest marijuana banking reform. Legislation to protect financial institutions from being penalized for working with cannabis businesses passed the House for the fifth time last month.
Rodney Hood, a board member of the National Credit Union Administration, wrote in a Marijuana Moment op-ed this month that legalization is an inevitability—and it makes the most sense for government agencies to get ahead of the policy change to resolve banking complications.
IRS separately hosted a forum in August dedicated to tax policy for marijuana businesses and cryptocurrency.
Earlier this year, IRS Commissioner Charles Rettig told Congress that the agency would “prefer” for state-legal marijuana businesses to be able to pay taxes electronically, as the current largely cash-based system under federal cannabis prohibition is onerous and presents risks to workers.
Former Treasury Secretary Steven Mnuchin said in 2019 that he’d like to see Congress approve legislation resolving the cannabis banking issue and he pointed to the fact that IRS has had to build “cash rooms” to deposit taxes from those businesses as an example of the problem.
IRS released updated guidance on tax policy for the marijuana industry last year, including instructions on how cannabis businesses that don’t have access to bank accounts can pay their tax bills using large amounts of cash.
The update appears to be responsive to a Treasury Department internal watchdog report that was released earlier in the year. The department’s inspector general for tax administration had criticized IRS for failing to adequately advise taxpayers in the marijuana industry about compliance with federal tax laws. And it directed the agency to “develop and publicize guidance specific to the marijuana industry.”
Luxembourg Set To Become First European Country To Legalize Marijuana Following Government Recommendation
Luxembourg is poised to become the first European country to legalize marijuana, with key government agencies putting forward a plan to allow the possession and cultivation of cannabis for personal use.
The ministers of justice and homeland security on Friday unveiled the proposal, which will still require a vote in the Parliament but is expected to pass. It’s part of a broader package of reform measures the agencies are recommending.
Under the marijuana measure, adults 18 and older could grow up to four plants. However, under the non-commercial model that is being proposed, possessing more than three grams in public would still be a civil offense, carrying a fine of €25-500 ($29-581). Currently, the maximum fine for possession is €2,500 ($2,908).
In terms of access, adults would be able to buy and trade cannabis seeds for their home garden.
Justice Minister Sam Tamson said the government felt it “had to act” and characterized the home cultivation policy change as a first step, The Guardian reported.
👉🏻élaboration du projet de loi usage privé du #cannabis : jusqu’à 4 plantes à domicile & décorrectionnalisation <3g
👉🏻renforcement de la prévention & de l’accompagnement
👉🏻⬆️des moyens de la police
👉🏻élaboration d’un projet de production/vente #Luxembourg pic.twitter.com/8yre0Udt8J
— Sam Tanson (@SamTanson) October 22, 2021
“The idea is that a consumer is not in an illegal situation if he consumes cannabis and that we don’t support the whole illegal chain from production to transportation to selling where there is a lot of misery attached,” he said. “We want to do everything we can to get more and more away from the illegal black market.”
While limited in scope, the reform would make Luxembourg the first country in Europe to legalize the production and possession of marijuana for recreational use. Cannabis has been widely decriminalized in certain countries in the continent, but it has remained criminalized by statute.
Government sources in Luxembourg told The Guardian that plans are in the works to develop a program where the state regulates the production and distribution of marijuana. Tamson said they are working to resolve “international constraints” before taking that step, however, referring to United Nations treaty obligations that multiple U.S. states and other countries like Canada and Uruguay have openly flouted.
The measures include:
🟢 Regulation of cannabis use and cultivation: adults will be able to legally cultivate up to four cannabis plants for their own use, provided the cultivation is happening at their place of residence.
— European Greens (@europeangreens) October 22, 2021
For now, the country is focusing on legalization within a home setting. Parliament is expected to vote on the proposal in early 2022, and the ruling parties are friendly to the reform.
This has been a long time coming, as a coalition of major parties of Luxembourg agreed in 2018 to enact legislation allowing “the exemption from punishment or even legalization” of cannabis.
Meanwhile in the U.S., congressional lawmakers are working to advance legalization legislation. A key House committee recently approved a bill to end marijuana prohibition, and Senate leadership is finalizing a separate reform proposal.
In Mexico, a top Senator said this week that lawmakers could advance legislation to regulate marijuana in the coming weeks. The Supreme Court has already ruled that adults cannot be criminalized over possession or cultivation, but there’s currently no program in place to provide access.
Photo courtesy of Mike Latimer.
New Bipartisan Marijuana Research Bill In Congress Would Let Scientists Study Dispensary Products
A bipartisan group of federal lawmakers introduced a bill on Thursday to remove barriers to conducting research on marijuana, including by allowing scientists to access cannabis from state-legal dispensaries.
The Medical Marijuana Research Act, filed by the unlikely duo of pro-legalization Rep. Earl Blumenauer (D-OR) and prohibitionist Rep. Andy Harris (R-MD), would streamline the process for researchers to apply and get approved to study cannabis and set clear deadlines on federal agencies to act on their applications.
“Congress is hopelessly behind the American people on cannabis, and the quality of our research shows why that is an urgent problem,” Blumenauer told Marijuana Moment. “Despite the fact that 99 percent of Americans live in a state that has legalized some form of cannabis, federal law is still hamstringing researchers’ ability to study the full range of health benefits offered by cannabis, and to learn more about the products readily available to consumers.”
“It’s outrageous that we are outsourcing leadership in that research to Israel, the United Kingdom, Canada, and others. It’s time to change the system,” he said.
Late last year, the House approved an identical version of the cannabis science legislation. Days later, the Senate passed a similar bill but nothing ended up getting to the president’s desk by the end of the last Congress. Earlier this year, a bipartisan group of senators refiled their marijuana research measure for the current 117th Congress.
Meanwhile, lawmakers are also advancing a separate strategy to open up dispensary cannabis to researchers. Large-scale infrastructure legislation that has passed both chambers in differing forms and which is pending final action contains provisions aimed at allowing researchers to study the actual marijuana that consumers are purchasing from state-legal businesses instead of having to use only government-grown cannabis.
The new bill filed this week by Blumenauer and Harris, along with six other original cosponsors, would also make it easier for scientists to modify their research protocols without having to seek federal approval.
Marijuana Moment is already tracking more than 1,200 cannabis, psychedelics and drug policy bills in state legislatures and Congress this year. Patreon supporters pledging at least $25/month get access to our interactive maps, charts and hearing calendar so they don’t miss any developments.
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It would additionally mandate that the Drug Enforcement Administration (DEA) license more growers and make it so there would be no limit on the number of additional entities that can be registered to cultivate marijuana for research purposes. It would also require the U.S. Department of Health and Human Services (HHS) to submit a report to Congress within five years after enactment to overview the results of federal cannabis studies and recommend whether they warrant marijuana’s rescheduling under federal law.
“The cannabis laws in this country are broken, including our laws that govern cannabis research,” Blumenauer said in remarks in the Congressional Record. “Because cannabis is a Schedule I substance, researchers must jump through hoops and comply with onerous requirements just to do basic research on the medical potential of the plant.”
The new legislation will “both streamline the often-duplicative licensure process for researchers seeking to conduct cannabis research and facilitate access to an increased supply of higher quality medical grade cannabis for research purposes,” he said, adding that expanded studies will help make sure “Americans have adequate access to potentially transformative medicines and treatments.”
For half a century, researchers have only been able to study marijuana grown at a single federally approved facility at the University of Mississippi, but they have complained that it is difficult to obtain the product and that it is of low quality. Indeed, one study showed that the government cannabis is more similar to hemp than to the marijuana that consumers actually use in the real world.
There’s been bipartisan agreement that DEA has inhibited cannabis research by being slow to follow through on approving additional marijuana manufacturers beyond the Mississippi operation, despite earlier pledges to do so.
In May, the agency finally said it was ready to begin licensing new cannabis cultivators. Last week, DEA proposed a large increase in the amount of marijuana—and psychedelics such as psilocybin, LSD, MDMA and mescaline—that it wants produced in the U.S. for research purposes next year.
Under the new House bill, the agency would be forced to start approving additional cultivation applications for study purposes within one year of the legislation’s enactment.
HHS and the attorney general would be required under the bill to create a process for marijuana manufacturers and distributors to supply researchers with cannabis from dispensaries. They would have one year after enactment to develop that procedure, and would have to start meeting to work on it within 60 days of the bill’s passage.
In general, the legislation would also establish a simplified registration process for researchers interested in studying cannabis, in part by reducing approval wait times, minimizing costly security requirements and eliminating additional layers of protocol review.
Read the full text of the new marijuana research bill below: