An employee at the Good Leaf Dispensary measures out marijuana for a customer on the reservation Mohawks call Akwesasne, Monday, March 14, 2022 in St. Regis, New York.
CNN  — 

A senior official at the US Department of Health and Human Services has called for easing restrictions on marijuana by reclassifying it as a Schedule III substance in a letter to the Drug Enforcement Administration, and the DEA is initiating a review of the drug.

The news was first reported by Bloomberg.

A person familiar with the letter – written by Adm. Rachel Levine, the assistant secretary for health at HHS, to DEA Administrator Anne Milgram – confirmed to CNN on Wednesday that the recommendation contained within it is to reclassify as a Schedule III substance. Marijuana is currently classified as a Schedule I controlled substance, meant for the most dangerous substances, including heroin and LSD.

Last year, President Biden asked HHS Secretary Xavier Becerra and the attorney general to start the administrative process of reviewing how marijuana is scheduled under federal law. The letter with HHS’s recommendation is one step in that overall process.

“Following the data and science, HHS has expeditiously responded to President Biden’s directive to HHS Secretary Becerra and provided its scheduling recommendation for marijuana to the DEA on August 29, 2023. This administrative process was completed in less than 11 months, reflecting this department’s collaboration and leadership to ensure that a comprehensive scientific evaluation be completed and shared expeditiously,” an HHS spokesperson said in an emailed statement Wednesday. HHS Secretary Xavier Becerra posted similar comments on X, formerly known as Twitter.

Next, the DEA will have the final authority to make any changes to marijuana’s scheduling, and it will go through a rulemaking process that includes a period for the public to provide comments before any scheduling action is finalized.

Separately, a DEA spokesperson confirmed to CNN in an emailed statement that the agency had received the HHS letter and is initiating its review.

“We can confirm DEA received a letter from the Department of Health and Human Services providing its findings and recommendation on marijuana scheduling, pursuant to President Biden’s request for a review. As part of this process, HHS conducted a scientific and medical evaluation for consideration by DEA,” the statement said. “DEA has the final authority to schedule or reschedule a drug under the Controlled Substances Act. DEA will now initiate its review.”

Rescheduling marijuana potentially would open up more avenues for research, allow cannabis businesses to bank more freely and openly, and have firms no longer subject to a 40-year-old tax code that disallows credits and deductions from income generated by sales of Schedule I and II substances.

“It’s a positive development; I’m not sure if it’s a right answer,” said Colorado-based attorney Rachel Gillette, a Holland & Hart partner who has practiced cannabis law since 2010. “My concern would be how does it get regulated from a federal perspective, and how does the federal regulation interact with or interfere with what states have already developed.”

The industry as well as some members of Congress have been pushing for cannabis to be “descheduled,” as opposed to being rescheduled and remaining federally illegal.

Twenty-three states have legalized cannabis for adult recreational use, and 38 states allow medical use of cannabis products, according to data from the National Conference of State Legislatures. Since the first adult-use cannabis sale took place in 2014 in Colorado, cannabis has blossomed into a multibillion-dollar industry that has attracted the attention of multinational companies across sectors such as alcohol, agriculture, pharmaceutical and tobacco.

However, recently, the industry has been on a downswing because of factors such as overproduction, depressed prices, taxation and competition from the illicit market.

“If we can actually legalize cannabis federally, that really changes the perspective of an entire multibillion-dollar industry that is struggling right now to survive and thrive,” Gillette said.

The recommendation to reschedule marijuana to Schedule III – but not deschedule it completely – came as no surprise to Howard Sklamberg, a partner at Arnold & Porter and former deputy commissioner for global regulatory operations and policy at the FDA.

“Descheduling would mean that HHS and FDA would be deciding there was no abuse potential, which would be a very big step for HHS and FDA to take and one that also would have ramifications for its general controlled substance program,” Sklamberg said Wednesday.

“Then, in terms of choosing Schedule III, that’s not surprising either, given that Schedule III is not that big of a leap for the agencies to take under the current law, and I think it’s quite supportable under the law and regulations as they exist,” he said. “Schedule III also has tax implications that will be helpful for the industry. That’s obviously not part of the FDA’s mandate, but that’s a reality.”

Rescheduling cannabis to Schedule III most likely will not have direct effects on the vast majority of the public, as it would still be considered an illegal substance under federal law, said Andrew Freedman, a partner at Forbes Tate and executive director of the Coalition for Cannabis Policy, Education and Regulation.

“This won’t have an immediate, or even a very significant, impact for how people currently use cannabis in the United States,” Freedman said.

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“There’s a recognition from the federal government here that they have treated cannabis in a way that doesn’t really make a lot of sense, especially when you bring it into comparison with a lot of other substances,” he said. “But also this particular mechanism of how it’s changing policy doesn’t really impact the way people are actually using cannabis.”

Descheduling cannabis altogether would ultimately make it legal on the federal level, but that would require much more than an HHS recommendation, Freedman said.

“If HHS simply descheduled it right now, there’d be no regulatory system for it. There’d be no rules of the road,” Freedman said, such as rules around how legal cannabis would be taxed, packaged, labeled, advertised and marketed.

“All of that can’t happen unless there’s congressional action on it,” he said. “To have an impact on state-regulated markets today, it would really take an act of Congress.”