WASHINGTON — The U.S. Drug Enforcement Administration is recommending cannabis be reclassified as less risky, people familiar with the matter said — a move that could help the legal marijuana industry benefit from tax breaks.

Several steps remain before marijuana can be taken off Schedule I, where it’s listed with the world’s most dangerous drugs like heroin, and put on Schedule III, which is for less risky drugs with a medical use, said the people, who asked not to be named because the information hasn’t yet been made public. This would ease access to cannabis for patients and researchers studying its medical applications without decriminalizing it. The production, distribution and possession of marijuana for recreational purposes would remain illegal under federal law.

The effort, which could still collapse, comes almost 30 years after California legalized medical marijuana. More than half the U.S. population is now able to buy pot under a state-by-state patchwork of voter-driven laws.

“This is historic because the federal government is finally acknowledging that it has misclassified one of the most popular drugs for many years,” said David Pozen, a professor at Columbia University’s Law School and the author of a recent book on drug policy, in a phone interview.

Shares of cannabis-related companies surged Tuesday, with Curaleaf Holdings Inc. rising 25% in US trading and Green Thumb Industries Inc. jumping 22%. Meanwhile, the MJ PurePlay 100 Index, which tracks 95 global stocks exposed to the cannabis industry, climbed 22%, its biggest one-day gain since October 2022.

A majority of Americans believe marijuana should be decriminalized for recreational or medical use, a policy that President Joe Biden said he would pursue while in office but that still lacks widespread support in Congress. Biden’s favorability has waned among key voting blocs that favor legalization, including young voters and Black Americans.

More than a year ago, Biden pardoned federal and D.C. marijuana offenses in an effort to resolve the irony that companies are now selling a product that people are still imprisoned for possessing — and with Black Americans representing a disproportionate percentage of those arrested. Pardons have been ongoing.

The process could be upended if Biden loses this year’s election to Donald Trump, whose campaign didn’t immediately respond to a request for comment. Republicans have generally opposed rescheduling or decriminalizing marijuana.

“We need to be reducing the number of people that use drugs and not increasing that number” Republican House Majority Leader Steve Scalise said in an interview. “We shouldn’t be making matters worse.”

The move comes as Congress weighs potential changes to open the door for lenders to more easily offer banking services to marijuana companies. While Democrats have eyed adding it to a Federal Aviation Administration reauthorization bill, Republican Senate Minority Leader Mitch McConnell remains opposed to it, according to a spokesman. Several other senior Senate Republicans cast doubt Tuesday on it being included, including Steve Daines of Montana, one of the bill’s sponsors.

...continued

©2024 Bloomberg L.P. Visit bloomberg.com. Distributed by Tribune Content Agency, LLC.