The National Cannabis Roundtable Discusses Historic Recommendation to Reschedule Cannabis The team from the National Cannabis Roundtable (NCR) joins the Karson Humiston to discuss the recent historic recommendation to reschedule cannabis from Schedule 1 to Schedule 3. The episode begins with an overview of the background and context of the recommendation, including the previous speculation about the HHS recommendation and the release of hundreds of pages of documents confirming the recommendation.
The National Cannabis Roundtable Discusses Historic Recommendation to Reschedule Cannabis
The team from the National Cannabis Roundtable (NCR) joins the Karson Humiston to discuss the recent historic recommendation to reschedule cannabis from Schedule 1 to Schedule 3. The episode begins with an overview of the background and context of the recommendation, including the previous speculation about the HHS recommendation and the release of hundreds of pages of documents confirming the recommendation.
The NCR team, consisting of Saphira Galoob, Erin Moffet, and David Mangone, provides insights into the significance of the recommendation and its potential impact on the cannabis industry. They explain that the recommendation is a major milestone as it marks the first time a government entity has officially confirmed the need to move cannabis to Schedule 3. They emphasize that this recommendation aligns with the existing state programs and the growing acceptance of cannabis as a medical treatment.
The discussion delves into the process of rescheduling cannabis, highlighting the eight-factor analysis conducted by the Health and Human Services (HHS) and the role of the DEA in implementing the recommendation. The team addresses concerns about potential negative reactions from the DEA and the impact on DEA funding. They explain that while there may be some opposition, the robust scientific analysis and the support from other federal agencies, such as the National Institute of Drug Abuse (NIDA), provide a strong foundation for the recommendation.
The team also addresses questions about the timing of the DEA's response and the potential enforcement of the illicit market. They explain that the timing is uncertain, but the process is progressing steadily, and the DEA's response is expected to align with the HHS recommendation. Regarding enforcement, they clarify that the DEA's focus is primarily on illicit grows and that the rescheduling would not change the current restrictions on state-legal cannabis businesses.
The episode concludes with a discussion about the future of the cannabis industry and the investment landscape. The team encourages investors to consider the long-term potential of the industry and the progress being made in terms of federal reform. They acknowledge the challenges and uncertainties but emphasize the historic nature of the current developments and the opportunities for growth and success in the industry.
Overall, the episode provides a comprehensive analysis of the recent recommendation to reschedule cannabis and offers insights into the potential implications for the cannabis industry. The NCR team's expertise and knowledge contribute to a nuanced and informative discussion that will be valuable for industry professionals, investors, and anyone interested in the evolving landscape of cannabis policy.
https://nationalcannabisroundtable.org/
00:00:14 - Introduction to the Podcast
00:00:25 - National Cannabis Roundtable Guests
00:00:57 - HHS Recommendation on Cannabis Scheduling
00:02:03 - Why Not Deschedule Cannabis?
00:03:41 - Release of Documents Under FOIA
00:05:07 - No Confirmation on DEA's Stance Yet
00:05:58 - Historical Precedent for DEA Recommendations
00:08:36 - Attorney General's Position on Cannabis Enforcement
00:12:06 - HHS's Analysis and Schedule III Criteria
00:13:04 - Significance of HHS's Acknowledgment of Medical Use
00:16:16 - Audience Questions: DEA's Timeline and Public Comment Period
00:22:16 - DEA Funding and Enforcement Post-Scheduling Change
00:26:55 - Public Discourse Impact on DEA Reaction
00:31:10 - Investment Considerations in the Cannabis Industry
00:37:11 - DEA's Potential Reaction to Public Discourse and Illicit Market Enforcement
00:40:09 - DEA Funding Concerns and Illicit Market Enforcement Post-Scheduling Change
00:42:51 - DEA's Reaction to Public Discourse on Cannabis Scheduling
00:48:12 - Investment Strategy in the Current Cannabis Industry Climate
00:52:54 - How to Get in Touch with NCR and Closing Remarks
Quotes:
"Hey everybody and welcome back to another episode of the Proud to Work in Cannabis podcast." - 00:00:14-00:00:24
"This is exciting because a lot of the work that we've been doing is starting to really start to pay off." - 00:00:35-00:00:46
"So on Friday, the U.S. government released hundreds of pages of documents related to its ongoing review of cannabis status under federal law." - 00:01:07-00:01:18
"This is really a big deal because this is the first time that a government entity has come out and confirmed that we want to move cannabis from Schedule 1 to Schedule 3." - 00:01:29-00:01:39
"The fact that we did get confirmation from Health and Human Services that a Schedule III was a recommendation is not only historic and outstanding, but it really was what the criteria would have allowed us to get to." - 00:03:10-00:03:20
"The release of the documentation was actually the result of a request under something called the Freedom of Information Act or FOIA." - 00:03:41-00:03:52
"The largest health agency in the U.S., globally recognized, has determined a medical significance, its currently accepted medical use of cannabis, and gone through its analysis in our favor." - 00:05:17-00:05:28
"I can't imagine a scenario where this would be different. Of course, there is a possibility, and in fact, this document even makes note of this on the first page." - 00:07:57-00:08:07
"It is pretty illogical to think that his position would change now that there is this acknowledgment by another federal agency." - 00:09:24-00:09:34
"This is unprecedented, where you have such an established regulated industry for something that is scheduled in this way, that then is trying to move, move down." - 00:13:15-00:13:25
Karson Humiston: Hey everybody and welcome back to another episode of the Proud to Work in Cannabis podcast. We're coming off of a very big, long holiday weekend with some exciting news that dropped on Friday. Here with me today I have the folks from NCR, the National Cannabis Roundtable, who They join us on our podcast a lot to give us all of the policy updates. This is exciting because a lot of the work that we've been doing is starting to really start to pay off, and so I'm joined by Safira, Aaron, and David from NCR. Before we get into it, for folks listening, just wanted to give a little bit of background and context. If you listen to this podcast or you follow the industry, you know that at the end of the summer, we heard that the HHS had made a recommendation to move cannabis from Schedule 1 to Schedule 3. Now, that had not been confirmed. It was just something that we had heard, but the government never came out and said, yes, we're confirming this. So on Friday, the U.S. government released hundreds of pages of documents related to its ongoing review of cannabis status under federal law. And with this, they officially confirmed for the first time that health officials have recommended the DEA to place cannabis in Schedule 3 from Schedule 1. So this is really a big deal because this is the first time that a government entity has come out and confirmed that we want to move cannabis from Schedule 1 to Schedule 3. So we're going to break it all down, what this means for the industry, what's next. And I'm going to actually turn it over to Safira to help us moderate this conversation. So Safira, thank you so much for coming back here. Great to see you.
Saphira: Great to see you. Great to be with you. And a happy new year is in order for you and your guests and a very happy new year based on the information and release of these documents. You know, I think it's really important that we start with particularly for folks in the cannabis industry who are starting this conversation to say, you know, why wouldn't we just deschedule cannabis? And I know that there's been I mentioned on prior podcasts and other experts in the the who've been kind of following and helping inform this process that actually started more than a year ago from President Biden, that the ability to change the scheduling in cannabis, Carson and guests, is driven by a very specific and defined process under statute, under the Controlled Substances Act. And it starts with the Health and Human Services. And that criteria is an eight factor analysis, a scientific analysis. And so before we get folks kind of irritated that a Schedule 3 is the recommendation, let me just say that getting to a descheduling would not have been possible under the criteria that Health and Human Services needed to follow and comply with. So the fact that we did get confirmation from Health and Human Services that a Schedule III was a recommendation is not only historic and outstanding, but it really was what the criteria would have allowed us to get to. So folks that would have hoped for rescheduling, that's not what the criteria would have permitted under a drug rescheduling analysis. So I'm going to start with that, Carson. I also would like to say that before David and Erin can jump in and get to the nitty gritty of what we learned in that 250 pages, we were a bit, I don't think we were surprised about this language coming out, but it did not, the release of the documentation was actually the result of a request under something called the Freedom of Information Act or FOIA. And so when HHS transmitted its original communication and did so basically with one letter saying, our work is done, DEA, DOJ, now it's your job, that initiated a request from industry and several stakeholders in industry requested documentation under the Freedom of Information Act. And there was, I would use the word dispute or litigation or basically back and forth between government lawyers and individuals who requested these documents under the Freedom of Information Act, which ultimately resulted in what we saw on Friday. So it's very important for our audience to know that, and we'll talk about this at the end of the call, but the HHS, we knew HHS had completed its work. Now we know the work they completed, but this is very much a from HHS's point of view. We still do not know, under any certainty or any specificity when DOJ will complete its work. and what its conclusions will be. So I just want to make sure everybody knows this is not an ultimate conclusion that we are scheduling. And this does not give us any indication of where DOJ and specifically DEA are going to land on the recommendation. But this is so significant because for the first time, the largest health agency in the U.S., globally recognized, has determined a medical significance, its currently accepted medical use of cannabis, and gone through its analysis in our favor. So I'm just going to pause there. Before we get into the nitty-gritty, Carson, is there anything else your audience, you think, may want to know in framing before we jump into the documents?
Karson Humiston: Well, I think we should jump into the documents. I mean, I think the question that everybody's going to ask is, OK, so we're not sure if the DOJ and the DEA will land on the recommendation. Is there other examples in history that we know of where a recommendation has been made like this and the DOJ, DEA goes in another direction? I think at the end of the day, most people that don't want to get into the nuance and just want to turn this podcast off after five minutes want to know, Is this happening? When's it happening? And how can I get out of the really hard financial position in the industry that I'm in? So I don't know if you can answer that without getting into the documents.
Saphira: No, absolutely. In fact, I'm going to let David Mangone, who is the Director of Policy and been working on these very, very closely since the whole process initiated, start with the question, David, that Carson asked about precedent and then the why, which I think the documents do help support. Go ahead, David.
David: Sure, and thank you for having me and the team on, but as far as precedent goes, have not been able to find a single instance since the passes of the Controlled Substances Act in 1970, where the DEA rejected a recommendation based on the scientific and medical findings from HHS. DEA has rejected a handful of recommendations based on other factors, mainly diversion control, but as far as the scientific findings, And, you know, I think as we'll get into in this conversation, the DEA is really viewed as an enforcement agency. They're not viewed as the scientific arbiter of a lot of these research studies that are contained in this document. You know, I think as we talk about where cannabis is relative to other drugs that are scheduled, which is throughout this document, particularly including with references to heroin and with references to cocaine, in the way that this document frames cannabis relative to those two substances in particular, as well as alcohol, really makes a compelling case that this is ultimately going to be accepted. The DEA has typically just check the box in terms of following the HHS science and putting out scheduling recommendations. I can't imagine a scenario where this would be different. Of course, there is a possibility, and in fact, this document even makes note of this on the first page. There's a footnote that says, we acknowledge that the DEA, acting on behalf of the Attorney General, Can it ultimately implement any changes in the federal control status of marijuana? So this document acknowledges right from the get-go that there's another agency that plays a part in this overall process. But again, that being said, a Schedule III recommendation looks exceptionally likely as though it will be accepted by the DEA. Otherwise, it would be a pretty historic break in process.
Karson Humiston: Yeah, thank you for that. And one follow up question there. You mentioned on the first page, they talk about the Attorney General. Can you give the listeners some context on what we know about where their stance falls?
David: Sure. And so we have a number of public hearings from Attorney General Garland, many before congressional testimony, where he has basically said that for the Department of Justice, enforcement of state legal marijuana policies is not a priority for them. This is very consistent with the Obama Justice Department, which we saw the birth of the Cole Memorandum from, you know, and so It appears, you know, at least from Attorney General Garland's perspective, who is, again, sort of the top boss of both DOJ and DEA, this is not something that he wants to use department resources for. And, you know, he made a lot of those comments when cannabis was still firmly listed as Schedule I. We hadn't seen this recommendation yet. It is pretty illogical to think that his position would change now that there is this acknowledgment by another federal agency. that there is medical value, that the abuse potential is lower than was previously thought, it doesn't make a whole lot of sense that Attorney General Garland would now start trying to close down doors of dispensaries or other cannabis businesses upon this change. I do think that as part of the process, Once the DEA issues its ultimate decision on scheduling, there are other pieces of work that the Justice Department will need to do. You know, something that Schedule 3 really doesn't address, especially with this document from HHS, is how that impacts criminal justice reform, how that impacts things like mandatory minimum sentences, how that impacts those who are currently incarcerated. So that's going to be a piece that the Department of Justice will need to weigh in on with the scheduling change and what that means for that part of the equation. So I expect at minimum we will see some, you know, policy documents or another sort of guidance memo from the Department of Justice dealing with those specific areas or something that expounds upon the priorities listed in the call memo that relate to the prosecutorial discretion of U.S. district attorneys. Obviously with a move to one to three, there is an acknowledgment that there are more harmful substances that exist in sort of the drug enforcement universe. I anticipate that with this move that Attorney General Garland will say, look, we now have the basis of this recommendation. We haven't been involved in these state programs. There's going to be areas where we do need to be involved in, A change of one to three isn't going to start ramping up enforcement from our view under this Justice Department.
Karson Humiston: So if you're listening right now and you wanna and you're just going in for the quick hit, it sounds like it would be. it would be an extreme outlier if the DEA and DOJ does not follow this recommendation. But now we're going to get into the nuance, because this is historic. How many times in our life are we going to see an industry going through a moment in time like this? And I'm personally super interested. So now is when we get nuanced. Let's talk about the documents. Who can I turn it to, to kind of take us through?
Saphira: I'm going to frame it. I'm going to frame where we are. Yeah, frame it. So the way the documents are structured is, The HHS presented its kind of thorough analysis under the eight factors, and then it asked the question about whether or not it qualifies for Schedule III, which would be currently accepted medical use and a low abuse potential. And for cannabis, which has been so ubiquitous in 38 states for medical and and, you know, more than half the country for adult use, it's really important to understand and to see and to have witnessed how HHS looked to the existence of state programs to build its case. So Aaron's going to talk a little bit about Schedule 3 and how the documents give us this really important base in government policy that reflects what we have seen in the reality of our industry developing and what that means kind of on a macro level for the future of drug reform. Erin, take it away.
Erin: Thanks, Safira. And thanks, Carson, for having us. And I think I want to hone in on something you said right before there is like it's very exciting to see an industry go through this. And I want to know how truly historic that is. This is unprecedented, where you have such an established regulated industry for something that is scheduled in this way, that then is trying to move, move down. And you have 38 states with programs saying medical value. And this is the first time the federal government, even though those have been in place for decades, has acknowledge that there is currently accepted medical use for cannabis products, which they had been ignoring even as recently as 2016, that this is going on in the States. And, you know, David and I were talking earlier, the fact that they note in their findings that 30,000 healthcare professionals across 43 jurisdictions are authorized to utilize cannabis for medical conditions, for at least 15 medical conditions, those numbers are huge. And that's something they had been turning a blind eye to before. And so now they're really digging into how that has been playing out for the state, and to Savira's point, utilizing information from the states to look at its medical use now on that on this national and really global stage, because we are we are the leaders when it comes to drug policy in the world. A lot of the reasons why conventions global conventions have certain policies is because the United States set a precedent. And so by the United States now setting a precedent that it has currently accepted medical use, we are signaling that to the world. They are, at long last, what I would like to say, admitting it, that what has been proven in the States over the years. So when we look at this, and Safira had kind of said a little bit earlier, they are looking at not just medical use, but abuse potential, and that is what really signifies when something's in Schedule 1. Why something is in schedule one is because they have said before that there is zero, zero medical use for it and a high abuse potential. And when you go through this eight factor analysis and the work that FDA did, and they really, really show their homework in this, I feel like it's like it's like an exercise in new math where you have to show every single step. They are comparing it to other substances that are lower scheduled or similarly scheduled and they are finding that the abuse potential and actual harms are much lower. And so you have this historic acknowledgement by the federal government that schedule one was wholly inappropriate for cannabis to be in. And I'll just kind of pause there see if David or Saphira have anything to add on that. But that is what I think people really need to recognize in this moment is how monumental this acknowledgment is.
Karson Humiston: It's monumental and it's also just, it's very validating. I mean, the four of us have been sitting here with people telling us that we're crazy town looney tunes for working in the cannabis industry because, you know, cannabis is addictive and it's the same as heroin. And we've been saying, no, no, no, you're wrong, you're wrong, you're wrong. So everybody in the cannabis industry that's been working on this for decades should feel validated in this historic moment in time.
Erin: And you think about the millions of patients across the United States who have been saying, this helped me, this changed my life. And you have your own government's health department saying that there's no accepted medical use when it has been life changing for you. You're right. It is hugely validating for those that have fought for this patient access and safe access.
Saphira: I think the other thing it also adds for the comfort of both of our audience and the patients who rely on this medicine now and will for the future is the fact that HHS really looked to the states and they looked to the role that practitioners, and they even said, practitioners, like doctors, for example, and other medical professionals who are authorized to do their profession by, you know, by my state medical law or state law, state laws that oversee doctors and other health care providers. The fact that that is such a broad-based and so fundamental in this argument, in this discussion, also, I believe, solidifies the position that we have taken, which is just because it's Schedule 3 does not mean that state programs are going to be upended. I think there is a misnomer or a conflation that Schedule 3 means now everybody has to go through pharmaceutical, you know, like a is going to have to go through prescriptions. And we have spoken ad nauseum to individuals at FDA. And David can add on to this if you'd like. that there's no indication and no suggestion and no trajectory that the FDA is now going to step in and require prescriptions because they don't have the jurisdiction to do so. David, do you want to speak on that a little bit as well?
David: Sure. First, though, just on the significance of including patient numbers in a federal document. So throughout this document, several times says about six million patients are participating in state medical cannabis programs. For perspective, the VA, which is the largest healthcare provider in the United States, serves 9 million veterans. So you're looking at a population where there's certainly going to be some overlap, but having, you know, a medical patient population that's two-thirds the size of literally the largest healthcare system in the United States, it's so, so significant. And with this patient count, you know, we hadn't really had a a great, you know, federal source in terms of counting these participants in these programs. You know, you had advocacy groups here and there who sort of cobbled together what this looks like. But it's really significant now for us to take this data and, you know, put on our congressional hats and go to members of Congress and say, look, this is six million people. This is six million constituents. This is six million votes. You know, and so that is really compelling to have those numbers from a trusted federal source. Also, just really quick, I'd like to shout out my former employer, Americans for Safe Access. They have put a lot of great state data together, and some of it is in this report. So it's very cool to see the federal government turn to cannabis advocacy and say, you know, we necessarily didn't have all the answers we needed for some of these sections. Let's look at the really great work that advocates and activists have done in terms of pulling this together. As far as the FDA prescription piece, I think, you know, when you read this document, there is a undercurrent that they acknowledge what's happening on the state level, both for medical and non-medical use. Much of the analysis they put forward, particularly in the currently accepted medical use portion of this document, turns to what's happening on the state level. That's everything from checking the regulatory bodies, whether that's the Department of Health or a specific Cannabis Control Board, but they also look at patient data, namely from states from Maryland and Minnesota. They are very holistically looking at what's happening at the state level, and nowhere in this document are they saying the state-level cannabis programs need to be brought into line, brought into order with any of our conclusions. They make some references that there is a need for perhaps uniform cultivation regulations, which we may ultimately see from the USDA at some point in this process. And there's some other calls for uniformity. But there is nowhere in this document where there is an ongoing critique of how the states have handled cannabis for medical uses. It's actually praised in some parts of this document, and it serves as the basis for a lot of this document's findings. So to me, if you were going to completely shift the model into forcing the current cannabis patient market into a prescription model, I feel like this document would be much more critical of the current processes that are happening at the state level, rather than turning to them as a valuable source for data.
Karson Humiston: It's all incredibly helpful. So I texted my board members, and I told them that we were doing this podcast, and they've started to come with some live questions. So I'm wondering if we can turn this over. Absolutely. Because I'm sure the questions that they're asking, some are in cannabis, some are not in cannabis, are very relevant to others. Absolutely. I feel as though, and Safiya, before we move into some of these questions, I feel like we really set the stage to… I feel like we really set the context stage. Is there anything else that you think we need to cover before we get into some of these more nuanced questions?
Saphira: No, but I will say, as we begin to answer these questions, the team here at NCR, we are a what we know is what we report. I want to caution everyone who's listening to this to be very careful to what you're reading on social media. I frequently see kind of prognostications, the DOJ and the DEA are going to come out with something, sources in the know. And I just want to be clear, unless you work for DEA today, you are not in the know. And so what I frequently tell our constituents is people who know, people who don't know are saying, and people who are saying do not know. So be really careful of believing everything you read.
Karson Humiston: Yeah, the social media swamp is out of control. And I think that you can go down rabbit holes on social. And actually, that's kind of what we're combating here. I mean, a lot of us that run businesses, we're getting, you know, texts from whoever with an article. And that's why I think it's so important to come together and have conversations like this. Okay, so first questions we have from the audience is from Maddox Swenson from L2 Ventures and he asked about timing and comment period and what we can expect, which is a very classic investor question. So thank you, Maddox.
Saphira: Well, and I'm actually going to let so again, the timing that we're going to share is a timing that we internally have prognosticated. It's informed by information, but it is not timing that was received from the federal government. And David has this one so rote and top of tongue that I'm going to let him walk through how we are looking at the calendar.
David: I'll start by saying, except for the timeline of having rules made by the Biden administration be completed during the Biden administration's tenure, the federal government does not particularly care about timing. Where we do have dates certain is a public comment period. So once the DEA publishes their interim rule, there will be a minimum of 30 days public comment. Most likely this public comment will be 60 days or longer based on what we saw with some of the previous comment periods related to scheduling both of fentanyl analogs as well as sort of the entire comment period surrounded everything that related with the 2018 Farm Bill. That being said, there are some deadlines that come up in statutes that both the White House and presumably now the DOJ are mindful of. So these deadlines occur under things like the Congressional Review Act, where Congress can overturn any rules or regulations put in place, but they can only do so up to 60 legislative days once that has been implemented. So Congress has a much shorter work week than many of us do, especially your listeners. So that legislative calendar can drag on for several months. But the crux of what that means is that there is a time certain that the White House is eyeing, being very cognizant of when the Congressional Review Act kicks in and when that bleeds into this Congress versus next Congress. And they want to make sure that all of their rulemaking is done to make sure that it survives inside that period. So their rulemaking can't be overturned. So I'm talking in broad terms because that could mean a lot of things for this White House. They could maximize the amount of time allowed under statute, or they could take a shorter amount of time. And I don't think I want to give away the secret sauce of exactly what date that we're working with. If so, you guys can join the National Cannabis Roundtable as members and learn those dates specific. But I think… You definitely should.
Karson Humiston: You definitely should. It's been an incredible… I feel like this organization has made major progress that everybody listening to is getting soon to be able to enjoy the benefits of. So, shout out to NCR.
David: Yeah, and appreciate that. And then just some other timing considerations, you have to look at things like review by the Office of Management and Budget. So with a scheduling order like this, there's two previous executive orders that are certainly going to be triggered as part of this review. One of it is economically significant. So the White House defines economically significant if it has an economic impact of over $100 million. I think it's safe to say that a move from Schedule 1 to Schedule 3, based on some of the numbers we see in cannabis and the impact of perhaps the removal of 280E, that $100 million is going to be pretty easily satisfied. The second executive order to look out for in this process is whether or not a rulemaking has impacts on federalism. So with the ongoing conflict of states versus federal control in terms of how they are regulating cannabis that executive order is going to be triggered as well. So those are two additional pieces sort of after the rulemaking process plays out from the DEA, where the White House will need to be involved and do an analysis. So I think this is all to say that this is sort of the first step, and it's not really even the first step in the rulemaking process. Typically, when you see these scheduling decisions, this document that we're talking about in terms of the scientific backing for HHS's decision doesn't come out until the DEA releases their rule. The reason, again, and Saphira hinted at this earlier, that this document came out was because an attorney had filed a Freedom of Information lawsuit on these specific pages. But typically, the process is sort of the supporting analysis and documentation that supports a scheduling rule is just published when the rule is published. You know, cannabis is unique because there is a certain, I think, level of interest above your run-of-the-mill scheduling decisions of even something like fentanyl analogs or something that, you know, it's a synthetic that the chemistry is a little bit boring, and it doesn't have the same history and widespread use as cannabis. So this has become sort of a uniquely interesting document in a typically uninteresting process.
Erin: And I'll just put a fine tune kind of summarization of all of that for listeners to is Number one, there is no deadline for DOJ and DEA to respond to this rulemaking and that HHS sent it along to them. That HHS's job is done. It's all in DOJ and DEA's hands, and they are bound by no time frame.
Karson Humiston: Gotta love the government. No deadline.
Erin: Right, right, right. Also, keep in mind that when federal agencies work expeditiously to them, that means like within a couple years. Which is the other joy of federal government.
Karson Humiston: Within a couple years, Jesus.
Erin: Yeah, yeah. So I'm not saying that's going to happen, but I'm just saying I think it's important when folks are, like we say, the social media rabbit hole is when people say imminent or expeditiously for bureaucrats and members of Congress, we are moving at a lightning speed here already. That cannot be overstated enough. The fact that you had the president initiate this last October and we've already seen HHS finish their work is huge. So I just want to put like a fine tune on that is the short answer to when will DOJ and D.A. announce rulemaking and how long the comment period is is they are not bound by any requirements on either of those things. So we are working under the political political calendar nonetheless.
Karson Humiston: We're working out of the political calendar. Savira, if you would have had to take your, we're just making a prediction here. We're now moving into the prediction part of this. Before we get to the next question, what is your prediction?
Saphira: Yeah. I mean, I think we see something, at least I say by midsummer, but could be before. And, you know, my optimistic, I learned a term today, optimistic realism or realistically optimistic. Erin, remind me what we just, what was it this morning we learned?
Erin: Optimistic realism.
Saphira: Optimistic realism. That I think every, so I've been working in this space and on this issue since November 7th, 2017. And we've been involved in the process of the administration initiating this every step of the way. We have never had things line up so elegantly and precisely for this analysis at this moment. And then this document, 250 pages, and David will be able to tell you, normally you see an eight factor analysis, this is like, two pages to eight pages. This is 250 pages. So there is not much more that could be done to provide both the documentation and the findings. We'll call it, you know, in litigation, this is like, this is the record of the case. That plus some really outstanding dicta from Pat Pru from the State Department, like everything is lining up so perfectly such that the DEA's work should be able to be completed by midsummer with the hopes that it would absolutely be completed and communicated beforehand.
Karson Humiston: Great. All right. Well, my next question is, do we think there's any political curveballs that might exist?
Saphira: So the answer in D.C. when you ask that question is always yes. Always.
Erin: Yes. Always. I mean, we've seen a Speaker of the House removed from their speakership in this year. They're like if you were having curveballs on the federal level bingo card, like we would all have covered our board this year.
Saphira: And maybe we may have lost Aaron for a minute. We are seeing curveballs on the federal level that is unprecedented. And every time we have a conversation with decades long lobbyists in D.C. and former members of Congress, they say things have never been so vitriolic. Now, that being said, there is a stability and a certainty that we know that the administration has both embraced and led on as it relates to reform. And so while there are curveballs, always in Washington. There is also some stability in this process, meaning that the process is defined by statute. And we have demonstrated, based on where we are now and what we know to have happened by Friday, that the process is actually unfolding and revealing itself in the most, and I use the word not advantageous way, but in the way that supports The arguments that Carson, that we, since we've been in this industry, have been making all along, which is the states are the laboratories of democracy. The sky has not fallen. Alcohol is way more dangerous. Heroin, fentanyl, and oxy are the real problems. And these documents confirm that. So while there are curveballs and there are outliers of where things could go cattywomp, there's actually more predictability at this moment for this process than we've ever seen before in Congress. And that should give folks enthusiasm and some sense of like, I don't want to say exhale because I don't think any of us are exhaling in this industry, but some sense that we are headed in a trajectory where the outcome is more likely than not. David, do you want to at all make sure that I didn't overstate or misstate any of that?
David: No, I would just add that, you know, as important and momentous as this document is, it's also not entirely congratulatory on cannabis. You know, it does point out some adverse events. It does point out some increases, you know, in vulnerable population usage, use by minors. So, like, there are things in this document that I think even opponents of this move are going to see and say, okay, well, you know, HHS didn't just cherry pick the information they wanted to make this case. You know, Schedule 3 still does come with the identification of potential for abuse. It comes with the potential for, you know, physical or psychological dependence. And this document does sort of go through some of those areas and really makes the case, I think, quite fairly on both sides about, you know, why cannabis relative to some of these other substances should be reclassified. But at the same time, the limitations of the scheduling system in itself and, you know, why Schedule 3 is appropriate because of some of those factors. So, I mean, you're having a document where You know, it is very clearly not just one side, and it's not a political document. You know, HHS, you know, when you read this document, you can tell that the level of thought and detail put behind this, you know, they were anticipating potential challenges. They're anticipating potential pushback. But when you have a record this robust that addresses both sides of the debate, it's hard to say that this was, you know, truly politically motivated, and they just wanted to get this out the door to get Biden votes.
Karson Humiston: Yeah.
David: Okay.
Karson Humiston: Do you guys have a couple minutes to keep going? We just have a couple more questions. I know we're running a little over.
Saphira: Listen, this is really exciting for us. It's the first time we've spoken publicly since Friday, and you're our favorite podcast lead, so whatever you want.
Karson Humiston: I am hoping that this year we win cannabis podcast of the year and you guys coming on is definitely going to help. So if you're listening, please, please, please keep listening. All right. My next question is, and actually I would add my own kind of question onto this, but they say, ask about whether this would negatively impact DEA funding. And another question that I just want to add on to that, as far as DEA goes, I know earlier in the podcast you said that they're like the enforcement body. Is there going to be a level of enforcement around the illicit market? Because that's becoming a major issue for our customers trying to compete with a thriving illicit market.
Saphira: Yeah, I want to start with this and then I'll have David and Erin kind of follow up. So the question is whether or not a Schedule 3 would impact DEA funding and whether or not at Schedule 3, how it impacts the illicit market. Am I getting the two questions correct, Carson?
Karson Humiston: Yeah.
Saphira: OK, so the first one, DEA funding. So the politics around funding is so much broader and more complex than our little component of scheduling. And truthfully, the funding process lands in the world of appropriations in Congress. And, you know, while there have been a couple of outlier members of Congress that have, you know, tried to advance policy that says if cannabis moves to a Schedule 3, then we're going to shut down funding for X, Y, and Z, and we're going to All that is really posturing and narrative, but it has no traction. The truth of it is the support for a more predictable regulatory environment where federal law and state law is able to be reconciled. There are a lot of members of Congress that actually are incredibly supportive of that. And I don't think we see a negative implication on the appropriation side. I do think we see, again, some outliers. Some names that you all may remember, old Pete Sessions, who used to run the rules committee, who used to shut down everything we did, not a big fan of us. They're not going to quiet down, but their effectiveness is really deteriorating. That's one thing. And as this relates to illicit use or the illicit market, which is really one of the existential threats for our regulated market, because so much of that exists under state law, I think that a Schedule 3 helps support the state regulatory environment as being the primary place where cannabis regulation happens. And I think it emboldens the state government to ask the federal government to support the state government's work. I think it emboldens state governments to say, you now see that we're not dealing with a Schedule 1, cannabis is no longer a Schedule 1, it's a Schedule 3, and we have all this illicit activity, and we need your help with it so we can move and assure that there's more in the regulated market. Now, that now gets into politics between federal government and state government funding, but I think it lays the groundwork for that narrative being more firmly established when those conversations happen. So I'll pause there and let David, David always has a nice little flourishes and help to frame and help give context.
David: Yeah, and so I'll start on the funding piece. And I think it's important to remember that, you know, the DEA has over 10,000 employees and special agents, but not all of those agents and employees work on or frankly care about cannabis. So there's a program within the DEA that currently exists. It's called the Domestic Cannabis Eradication and Suppression Program. That program is exclusively designed to go after illicit grows. So it currently exists in the DEA. It will continue to exist in the DEA upon a rescheduling event. And I specify illicit because, you know, as many of your listeners may recall, there's an appropriations amendment that's gotten widespread bipartisan support in every year that it's been included in appropriations package that prevents the Department of Justice from using appropriated money to go after state legal, at least up until now, medical cannabis. I think with a scheduling change, you may see an expansion of that amendment to all programs, not just medical. But right now, the DEA can't use its resources to go after any sort of state legal candidates. That doesn't change from Schedule 1 to Schedule 3 with how this appropriations rider is written. If anything, you know, they you know, may see enforcement in some fewer states because some states, as Severa mentioned, do have sort of these triggering laws where if upon a scheduling change at the federal level, so too does their state-level controlled substances act. So with that, you would see a shift in priority, a shift in penalties, and then, you know, perhaps a shift in enforcement. So with this cannabis eradication program, its own line item funding issue and annual appropriations bills. So you may see an increase in that funding from some members, particularly in the Republican House, saying, look, you know, the administration has really classified, but we really want to make sure that law enforcement feels supported when they're going after, you know, these, you know, these illicit grows. As weird as it is to say, upon a scheduling change, the DEA may actually be a beneficial partner to the regulated cannabis industry if they continue to pursue shutting down some of more illegal activity.
Karson Humiston: Great. Next question is from Emily Paxia from Poseidon, and she says, I'm curious if they think the DEA could react negatively to all this public discourse on what they should do.
Saphira: So Emily, first of all, Emily always has such great questions and she's such an amazing friend to the industry and obviously has been a great advocate and worked with us in Washington. So I think, you know, there was definitely, there's definitely a rational reason when you're situated inside the DEA to have seen this HHS, the publication of this HHS, kind of will call, I don't use the word prematurely, but from the DEA perspective, because as David mentioned, Normally you would see the release of this document when DEA makes its recommendation. Because HHS released this document under the, basically because of the Freedom of Information Act, they weren't doing so to, you know, get out, we'll call it, getting out in front of the DEA. If I were going to intuit, which that's how I would have to answer this question because I don't work in the DEA and I've never spoken to anybody who works in the DEA, is that if I am a lifelong cannabis hater and I've And I've been working in the DEA for decades. And I loved Jeff Sessions when he was attorney general and rescinded the Cole memo. And that was like the happiest thing in the world when that happened. If I were that person, I would really, really be mad. And I would try to utilize my vitriol against cannabis and this release to do something to try to upset and upset the trajectory of DEA's analysis. However, I do think there are folks who are thoughtful on this conversation in DEA, and there are certainly folks who are part of, you know, the Biden's administration's intent on reforming cannabis, who are relieved to see that HHS did such a good job with its part of the equation. And so it actually could help the rational side of that DEA analysis. And ultimately, this is Anne Milgram's decision. She runs the DEA, and she works for Eric Garland and Attorney General Garland, and excuse me, Attorney General Garland, sorry for the mistake, and he oversees the Department of Justice, and they are the ones that ultimately are the that will release and make this recommendation. So there will be irritants. I don't think those irritants have attraction that upset our apple cart. David, do you think I'm, again, being too optimistically realistic enough?
David: And again, it's it's about talking, you know, what what is precedented and what what is not. And certainly the change from one to three is unprecedented, but equally as unprecedented would be current DEA employees, you know, publicly revolting against this recommendation. They have trusted HHS's science on thousands of other scheduling orders. Why would this one be any different? So it would be incredibly unusual to see, you know, current DEA employees, whether they're long-term career employees or they're political employees, revolt in a way that said, you know, This is, you know, completely inappropriate, whatever they whatever critique they want to do. That would be so unusual, just from the way that government agencies interact with one another. It's hard to think that HHS also conducted this analysis in a complete vacuum. You see that they incorporate some of the analysis from the National Institute of Drug Abuse in their analysis as well. And if you want to talk about another pretty anti-friendly cannabis government agency, NIDA has historically been just that. While NIDA does sort of have the single federal research license at the University of Mississippi, They have not been a, by any means, champion of reforming cannabis, you know, since that agency has really been, you know, part of the discourse. They have continually testified before Congress that they have concerns about things like increasing potency, you know, access by miners, the impact on, you know, highway accidents. And again, these are all important things that the industry, you know, should responsibly recognize that, you know, there are, you know, issues that we need to responsibly deal with. But NIDA has never been the agency to say, you know, hurrah, cannabis, we're very excited about it. So with HHS incorporating the feedback from NIDA, I think it really tempers the ability for, you know, some of the disgruntled individuals at the DEA to push back on this recommendation in a meaningful way.
Saphira: Just to make sure, NIDA is such a good point, David, because in the documents, NIDA concurs with the recommendation ultimately made by HHS. So if some DEA folks are going to come out and revolt, they're going to have to do that against NIDA as well.
Karson Humiston: Well, I'll ask kind of one more question to wrap it up. Look, I think a lot of people, particularly investors that invest in this space and ancillary companies, they're a little bit freaked out at this point because they've seen, you know, speak for my investors, they see our customers going out of business, our customers doing mass layoffs, only 25% of the industry is profitable. And the question becomes, if you're a company like mine, as an example, is now the moment to double down and wait it out in cannabis? Or do you start exploring other industries? And so I guess as the policy experts who might know of changes right here, and this is going to get better in the foreseeable 18 months, is now the time to double down in cannabis? Or is it going to stay as rough as it has been, where you have companies going out of business literally every single week? You know, would you double down now or would you start diversifying?
Saphira: So I can say, you know, one of the things my team has done is we've actually kept ourselves very separated from the investment side of cannabis so we can be kind of as credible on the policy side. And here, let me give this perspective. I'm going to use the and the my answer is has to do with the arc of progress. OK. So I understand that when looking at the U.S. Congress, anything that we think can and could happen, it is just the epitome of curveball. And it is the epitome of how things can go wrong. And we're on track, we're off track, we're way off track. We've not lost all hope, but it is a very difficult mountain to climb. I think where this scheduling change has landed us in the arc of progress is so significant that it's more than we could have frankly ever hoped for. The removal of 280E via an administrative progress is such a monumental leap in achievement and accomplishments for this industry, that it's something we could have not ever gotten in Congress because we didn't have the champions. And I know there's efforts in litigation that also, although those could be successful, that takes years and millions of dollars to do. So to be able to essentially repeal 280E from something that the administration initiated just barely over a year ago. And within this administration, if that happens, and that doesn't give your investors both the optimism and enthusiasm for where they put their money in, I do think that investors have to be more discerning shoppers. meaning they cannot look to policy to be the justification for making the investment. They've got to look at the caliber of the business as the justification for making the investment. They have to look at CEOs like you and other peers who are demonstrated very lean and mean business machines. We'll do our job in Washington to the extent we can, but we can't be the reason why you think you have upside.
Karson Humiston: What I would also say is that anybody that invests in this space, they had to have known that they're investing in what at the time was a federally illegal industry. And I've never heard anybody in the world say that they think the government moves fast. So I think it's easy to be frustrated, but it's also like, hello, there's a bazillion and one industries you could invest in that are perfectly legal. You chose this one. and I chose to start a business in this one so I was reflecting on it over Christmas break because the holiday break because I was a little bit you know I'm like this is taking forever and then I thought to myself I chose to start a business in cannabis. What did I think was going to happen? And so to me, the message that I'm sending to everybody, myself included, is this is a hard thing. We're taking an industry from being federally illegal for decades to legal. And if I thought it was going to happen overnight, joke's on me. This is going to take longer. It's going to be more expensive. It's going to be more painful than any of us thought, but it's historic. And the chance to build, you know, I think a once in a generation business for myself for my team members, for my investors, and for all the other businesses out there, if you can stick it through. So, to answer my own question, I think now's the moment to double down in this industry, and frankly, what did you expect getting into this space? So, I'll answer my own question. Look, we've now gone 51 minutes. I think it's a record. I try to cap these at 30 minutes. So we might have to come back. We might have to do it again. But this was so informative. I love the longer form, nuanced conversations. If people want to get in touch with you, if people want to join NCR, how do we get in touch with you? Of course, we'll have you back on the show in the coming months. But how can people get in touch with you guys?
Saphira: So if you go to our website, nationalcannabisroundtable.org, there's a quick little form at the bottom. You just send us your email and tell us what you're interested in, and we can do a call, tell you what we do, how we do it, how we work. And there are lots of ways to get involved, not just being a member of the organization. There's a lot of ways to activate that aren't quite so obvious, but we are so excited to be on the precipice of this change, to be at the tip of the steer of change, and we're in it for the long haul. to witness and support your success and your investor's success in the entire industry's growth and growth trajectory and impact on consumers and patients around the world.
Karson Humiston: Thank you very much. It was great to have you here and we will be in touch soon and we'll be having you back on hopefully with some additional good news in the coming months. So thank you guys both so much for being here.
Saphira: Thank you so much, Karsten.