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The DEA Has Entered The Chat

Author

Anthony Varrell
September 18, 2024

GM Everyone,

With yesterday’s surprise headline that the DEA acknowledged the legitimacy of the two-step process used in the HHS’s cannabis rescheduling recommendation, it got us thinking back to the OLC memo. The memo is one of the most powerful pieces supporting rescheduling, as it legitimized this new streamlined process while taking a jab at the outdated five-step method used in the past to classify drugs.

Now, with the DEA jumping on board with the two-step approach—and let me remind you, this is the only part of the puzzle we know they agree with—the game has changed. It’s going to be entertaining to watch Smart Approaches to Marijuana (SAM), if they get their day in court, try to argue against a process that both the OLC and DEA have now deemed legitimate.

Good luck “Dr.” Sabet.

Today’s letter can be read in 8 minutes and 18 seconds.

💸 High Impact

The 2 Step Has Been Deemed Legit

For years, cannabis has been the bad boy of the drug world, lumped in with heroin and LSD as a Schedule I substance—no medical use, high potential for abuse, basically, a regulatory black hole. But in a surprising turn of events, the Department of Health and Human Services (HHS) recently recommended rescheduling cannabis, shaking up the status quo. And at the heart of this shift is a two-step process that ultimately deemed cannabis as having legitimate medical value. Let's break it down.

Step 1: HHS Runs the Numbers (and Science)

The first step of HHS's master plan? A no-nonsense review of cannabis’ medical and scientific data. The big guns at the FDA and the National Institute on Drug Abuse (NIDA) took the lead on this. They analyzed clinical studies, poured over research, and even took a peek at international findings to answer one crucial question: Does cannabis actually have any medical value?

Spoiler alert: It does. While cannabis had been lounging in the Schedule I category, a treasure trove of research was stacking up, showing cannabis could treat a variety of conditions—chronic pain, epilepsy, even nausea from chemotherapy. In other words, cannabis wasn’t the problem child it had been made out to be.

HHS evaluated this body of evidence and determined that the plant no longer fit the Schedule I mold. Unlike other drugs in that category, like heroin, cannabis clearly had some skin in the medical game.

Step 2: Time to Talk Rescheduling

With the science squared away, HHS moved to step two: recommending a reschedule. The department packaged up its findings and sent them over to the Drug Enforcement Administration (DEA), which is responsible for the final decision on where substances sit within the Controlled Substances Act (CSA). And what did HHS suggest? A reclassification to Schedule III, which is the home of drugs like ketamine and anabolic steroids—substances with medical uses but still some potential for abuse.

Moving cannabis to Schedule III would officially recognize its medical benefits while keeping enough regulatory guardrails to avoid a free-for-all. Think of it as upgrading cannabis from a criminal to a responsible citizen, albeit one with a bit of a checkered past.

Why This Matters: Dollars and Opportunities

This isn’t just a regulatory tweak—it’s a potential game-changer for the cannabis industry. A Schedule III status opens the floodgates for more medical research, quickly expanding the breadth and depth of the medical applications for the plant. It could also make life easier for patients looking for cannabis-based treatments, while boosting tax revenues.

In short, HHS’s two-step evaluation process is setting the stage for a major shift in the cannabis market. The move to reschedule signals a new era for the industry—one with greater legitimacy, more research, and of course, more profit potential. Now, we just need the DEA to sign off, and we’re looking at a whole new ballgame for cannabis in the U.S.

📈 Dog Walkers

Aurora Look To Enhance Outdoor Cultivars

Aurora Cannabis is pioneering auto-flowering technology for outdoor cultivation, especially in cold, high-latitude areas. Unlike traditional plants, auto-flowering strains bloom without seasonal light changes, boosting efficiency and cutting costs. Aurora’s U.S. patent on this trait could significantly raise yields—up to 100% over older varieties—making them a market leader. With this breakthrough, Aurora is not just growing more cannabis; they’re engineering a higher-margin future, appealing to both science enthusiasts and investors looking for sustainable growth. Expect this to shake up both medical and recreational markets.

The Road To PA AU Legalization Has Begun…..Again

House Bill 2500 could be the key to unlocking adult-use cannabis in Pennsylvania, with the state looking to legalize and regulate the market, creating much-needed tax revenue. As lawmakers return to Harrisburg, this bill aims to bring economic and social justice benefits, including expunging past convictions. However, the bill faces hurdles as Republicans, who traditionally oppose legalization, hold a legislative majority. If passed, Pennsylvania could cash in on the cannabis boom, keeping tax dollars from flowing into neighboring states like New Jersey. Keep your eyes on this developing political chess match.

The New York Crackdown Is Kind Of Working

New York City is in a cannabis conundrum. Despite a crackdown, 2,600 unlicensed cannabis shops still thrive, while only 79 legal dispensaries struggle to compete. The unlicensed shops, which avoid taxes and regulation, are undermining the legal market's growth potential. This puts a damper on the state’s ambitious tax revenue goals, leaving officials scrambling for solutions. The imbalance exposes cracks in the city's regulatory framework, where law enforcement faces an uphill battle to control the illicit market. For investors and policymakers, it’s clear: New York’s legal cannabis industry needs a major overhaul if it's to win this fight.

👾 Number Of The Day

16,900,000 Total Number of Units Sold In Michigan In Last 90 Days.

Data provided by:

🗞️ The News

📺 YouTube

MSOS Monday + NextLeaf CEO Talks Canadian Cannabis Landscape | Trade to Black

What we covered:

✅ On our latest Trade To Black Podcast beginning at 12pm EST. We will discuss the news from over the weekend, where it was reported that Former U.S. President Richard Nixon, despite declaring the war on drugs and rejecting a federal commission’s recommendation to decriminalize marijuana, admitted in a newly unearthed recording that he knew cannabis was not particularly dangerous.

We will also review some of the price action from the MSOs last week with Dan Ahrens from AdvisorShares (NYSEARCA: MSOS) and discuss if he believes that share prices in the cannabis industry will remain flat leading up to the US Federal election scheduled on November 5th, and if we could see increased volume at some point.

Lastly, Emma Andrews from Nextleaf Solutions (CSE: OILS) will join us to discuss the current Canadian cannabis landscape, along with an update on extraction, and what we have learned since the early days of cannabis.