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. Pot stocks surged on the news.

Several steps remain in the process of rescheduling marijuana to Schedule III from Schedule I, said the sources, 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.

Shares of cannabis-related companies surged in Tuesday trading, with Curaleaf Holdings Inc. rising as much as 27% and Green Thumb Industries Inc. jumping 30%. Meanwhile, the MJ PurePlay 100 Index, which tracks 95 global stocks exposed to the cannabis industry, climbed 21%, its biggest one-day gain since October 2022.

“Rescheduling is likely to bring a vibrant return of investor interest that could quickly move the sector back to robust optimism,” said Morgan Paxhia, co-founder of Poseidon Investment Management, which invests in cannabis.

A majority of Americans believe marijuana should be decriminalized for recreational or medical use, a policy that 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 that he needs to win reelection, including young voters and Black Americans.

Rescheduling, if ultimately enacted, would represent a boon to the legal cannabis industry that is estimated to have generated around $35 billion in sales last year, according to New Frontier Data, a market research firm. It responds to growing cries to reclassify the drug in order to make medical use easier, and bring in more tax dollars through regulated sales. The decision would push back against concerns that reclassifying the drug could make it harder to prosecute drug cartels, and that new high-potency forms of cannabis are addictive.

If marijuana is reclassified as Schedule III it will be treated like substances such as ketamine and anabolic steroids, which require prescriptions but aren’t federally prohibited. Marijuana is currently classified as Schedule I, which means it’s seen as equally risky to drugs such as heroin.

A spokeswoman for the DEA declined to comment, and referred calls to the Department of Justice. The White House also declined to comment.

The Department of Health and Human Services said the agency has concluded its independent review and the decision now lies with the Department of Justice. The DEA is part of the DOJ.

The Associated Press was the first to report the DEA’s move.

...continued

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