Polis urges marijuana rescheduling as DEA considers new classification

Marijuana.Photo bykatherine_hitt via Flickr

Colorado Gov. Jared Polis on Tuesday urged the administration of President Joe Biden to reclassify marijuana as a less-addicting drug, saying such a move would help legal pot companies combat the illicit market and improve public safety.

The letter, which Polis signed along with five other governors, comes as the Drug Enforcement Administration (DEA) is considering moving marijuana from its Schedule 1 classification under the Controlled Substances Act, alongside LSD and heroin, to Schedule III, which includes anabolic steroids and Tylenol with codeine.

If that rescheduling happens, it would allow state-legal marijuana companies to take tax deductions like other businesses. According to cannabis research firm Whitney Economics, marijuana operators last year paid more than $1.8 billion in additional taxes compared with other businesses, with cannabis retailers often paying effective tax rates in excess of 70%.

Those tax rules, under Section 280E of the Internal Revenue Service tax code, make legal cannabis much less competitive against weed sold illegally.

In Colorado, competition from the illegal market combined with legislative limits on medical purchases, inflation eating into personal spending and lower marijuana prices because of a supply glut have contributed to an industry slump in the Centennial State. Also, legal weed in other states has reduced marijuana tourism. Statewide marijuana sales last year fell roughly 20% by dollar value to about $1.8 billion from 2021’s record high of more than $2.2 billion.

The governors also emphasized public safety in their letter.

Supporting state-regulated markets for marijuana—which include age verification, packaging and labeling standards, testing requirements and warning symbols—would lessen reliance on more dangerous drugs such as opioids and would help rein in the sale of high-producing hemp products, they said.

“The untaxed illicit market and intoxicating hemp-derived products share none of those safeguards, but they compete with the state-regulated marketplace—and even threaten to dismantle it,” the governors wrote. “If the state-legal marketplace doesn’t survive, then we will see unsafe products on every street corner.”

Local marijuana advocates expressed appreciation for the governors' letter.

"They are saying what most Americans know to be true," said Truman Bradley, executive director with the Wheat Ridge-based Marijuana Industry Group. "A regulated cannabis market is the only way forward."

This article has been updated to include comments from the Marijuana Industry Group.