The U.S. Drug Enforcement Administration has registered medical marijuana dispensaries for the first time, a step that could give participating businesses access to substantial federal tax benefits. The approvals follow the Trump administration's reclassification of state-licensed medical marijuana and begin putting its new registration system into practice.
The Justice Department said Friday, October 30, that more than 900 dispensaries received registrations across Alabama, Florida, Mississippi, South Dakota, Texas, Virginia and West Virginia. It did not immediately name the businesses. Attorney General Todd Blanche said regulated medical cannabis distribution through the shops would expand access to treatment for chronic pain and help protect public safety.
Blanche signed an order in April moving state-licensed medical marijuana into Schedule III, a category subject to less stringent controls than Schedule I. The latter classification covers substances considered to have no medical use and a high potential for abuse, including heroin. The change largely legitimized the medical marijuana programs established in 40 states and created a faster registration process for licensed producers, manufacturers and distributors.
Businesses seeking registration must pass an investigation before approval and meet requirements for security, records, inventory management and other controls on handling controlled substances. A DEA list released Friday showed that nearly 7,000 additional cannabis dispensaries, manufacturers and distributors nationwide had also submitted applications.
Federal registration is expected to bring significant tax advantages to an industry that has faced costly restrictions. State-licensed cannabis businesses historically could not deduct routine expenses such as advertising, rent or labor associated with sales from their federal taxes because their operations involved a federally illegal Schedule I substance. Many businesses have found that restriction financially crippling.
Steph Sherer, founder of Americans for Safe Access, welcomed the approvals, which came shortly before the 30th anniversary of California becoming the first state to legalize medical marijuana. In a written statement, she described federal recognition of the dispensaries as a milestone for patients, calling it “a tremendous victory for patient access.”
The approvals nevertheless leave important regulatory questions unresolved. State oversight of medical marijuana differs substantially from the rules typically applied to businesses handling Schedule III drugs. Some cannabis industry attorneys have pointed out that states have allowed people with certain criminal histories to operate licensed businesses as a way of addressing the effects of the drug war. Whether the DEA will take a similar approach remains uncertain.
Another unresolved issue concerns businesses selling both medical and recreational marijuana, industries that many states have combined. The administration has sought broader rescheduling, but the DEA's treatment of those businesses is unclear. Adult recreational use is authorized in 24 states and Washington, D.C., while eight states allow low-THC cannabis or CBD oil for medical purposes. Idaho and Kansas prohibit marijuana outright. Chris Lindsey, vice president of policy and state advocacy at the American Trade Association for Cannabis and Hemp, welcomed the program's progress while saying the industry is watching to see what registered companies will be required to do.
