Weed Week: It's showtime! Cannabis could come back from the dead as US makes biggest move in 50 years

US plans to reclassify marijuana to Schedule III, recognising its medicinal benefits
It’s a move billed as the biggest shift in marijuana policy by the DEA in 50 years.
Reclassification could lead to tax breaks for cannabis companies, potentially boosting the industry

It’s been called the biggest shift in marijuana policy by the US Drug Enforcement Administration (DEA) in 50 years.

Earlier this week, a widely cited report by the Associated Press suggested that the DEA plans to reclassify marijuana to Schedule III, essentially moving it to a less dangerous category shared with drugs like ketamine and codeine.

According to the DEA’s definition, Schedule III drugs are “drugs with a moderate to low potential for physical and psychological dependence.”

While the DEA will still not be legalising marijuana for recreational use, the reclassification acknowledges cannabis’ medicinal benefits, makes buying and selling easier, and recognises its lower abuse potential compared to drugs like heroin.

The plan still needs the White House’s green light, but if approved, it could become a significant catalyst for an industry hemmed in by US federal regulations, even as restrictions have begun to ease at state level.

The evolution of marijuana in the US

Cannabis (or marijuana) in the US has been classified alongside heroin and LSD as Schedule I drugs since the 1970s – ie; substances deemed to have no medical use and a high potential for abuse.

This classification effectively criminalises its possession, sale, and use at the federal level.

While the intentions are good, this has had far-reaching consequences.

It hindered scientific research into cannabis’ potential medical benefits, and disproportionately impacted some minorities through aggressive law enforcement and harsh sentencing policies.

Starting in the early 2000s, momentum for cannabis reform continued to grow, and US states began legalising them for medicinal purposes at an increasing rate.

Then, in 2012, Colorado and Washington became the first states to legalise recreational marijuana for adult use, followed by a wave of legalisation efforts in other states.

Despite these state-level reforms, marijuana remained illegal at the federal level, creating a tension between state and federal law.

In 2013 however, the Department of Justice issued guidance allowing states to regulate marijuana without federal interference, signalling a more hands-off approach to enforcement.

Momentum grew further when in 2021, the US House of Representatives passed the Marijuana Opportunity Reinvestment and Expungement (MORE) Act, which was meant to decriminalise marijuana at the federal level.

While the MORE Act still faces uncertain prospects in the Senate, the bill’s passage in the House marked a significant milestone in the push for federal marijuana reform.

What now?

The implications of this latest development are obviously still murky, but reclassifying marijuana in general would be good for cannabis companies.

According to the current US Internal Revenue Code Section 280E, companies selling marijuana can’t subtract their business expenses when paying taxes. This means they end up paying much higher taxes.

But if marijuana gets reclassified, these companies will be able to get those tax breaks, which could propel some into profitability.

The rescheduling will also make it easier for biotechs to study cannabis.

Right now, to take cannabis into clinical trials in the US, researchers have to jump through a bunch of hoops such as signing up with the DEA (but if they were studying drugs like cocaine or fentanyl, they wouldn’t need to).

These cannabis biotechs also need to get their research plans approved by the FDA, and meet strict rules about how they store the cannabis, which some companies find too costly and difficult to manage.

The rescheduling, if it happens, could remove all these barriers, paving the way for more cannabis research and development.

ASX-listed Little Green Pharma (ASX:LGP) released a statement on Thursday, sharing its thoughts on what this development would mean.

The company said:

“The rescheduling of cannabis in the US would represent the most significant change in global cannabis regulation ever and follows on the heels of Germany’s recent decision to legalise cannabis last month.

“The news has resulted in a re-rating of North American cannabis companies with the MJ ETF (US ETF to target the global cannabis industry) and the MSOS ETF (ETF with dedicated cannabis exposure focusing exclusively on U.S. companies, including multi- state operators) – both increasing by over 25%.

“This sector re-rating is expected to flow through to other cannabis companies including LGP, given the historical mirroring of the North American markets.”

To ASX Weed Stocks ….

Here’s how the ASX weed stocks have performed, sorted by winners over the past week

Code	Company	Price	% Week	% Month	% 6-Month	% Year	Market Cap
IRX	Inhalerx	0.039	39%	-22%	-7%	-13%	$6,072,543
VIT	Vitura Health	0.130	24%	-30%	-61%	-65%	$74,863,592
BOT	Botanix Pharma	0.243	13%	8%	73%	182%	$370,157,264
EOF	Ecofibre	0.068	11%	-24%	-53%	-62%	$25,763,425
ALA	Arovella Therapeutic	0.120	4%	-20%	36%	67%	$126,018,748
LGP	Little Green Pharma	0.135	4%	-4%	-4%	-16%	$39,228,879
EMD	Emyria	0.052	2%	-12%	-28%	-66%	$19,064,729
ZLD	Zelira Therapeutics	0.720	1%	3%	-21%	-23%	$7,886,273
WOA	Wide Open Agricultur	0.091	1%	-5%	-48%	-72%	$15,754,061
AC8	Auscann Grp Hlgs	0.040	0%	0%	0%	0%	$17,621,884
BOD	BOD Science	0.024	0%	0%	-57%	-59%	$4,256,124
CAN	Cann	0.062	0%	0%	-46%	-62%	$27,123,891
EPN	Epsilon Healthcare	0.024	0%	0%	-17%	33%	$7,208,496
EVE	EVE Health	0.001	0%	0%	0%	0%	$5,274,483
EXL	Elixinol Wellness	0.005	0%	0%	-30%	-68%	$7,806,444
MDC	Medlab Clinical	6.600	0%	0%	0%	0%	$15,071,113
ROO	Roots Sustainable	0.007	0%	0%	40%	0%	$1,124,217
HGV	Hygrovest	0.046	0%	-6%	-21%	-23%	$9,674,288
NTI	Neurotech Intl	0.090	0%	-18%	73%	80%	$92,582,361
AVE	Avecho Biotech	0.004	0%	-20%	0%	-20%	$11,092,540
BP8	Bph Global	0.001	0%	-33%	0%	-75%	$1,954,116
RGT	Argent Biopharma	0.395	-2%	-4%	-44%	-95%	$17,885,680
IDT	IDT Australia	0.094	-3%	22%	34%	6%	$33,390,550
DTZ	Dotz Nano	0.130	-4%	-21%	-26%	-43%	$67,856,099
WNX	Wellnex Life	0.019	-5%	-32%	-53%	-61%	$23,754,965
LV1	Live Verdure	0.705	-7%	47%	93%	370%	$82,161,120
ECS	ECS Botanics Holding	0.020	-9%	-20%	-13%	-5%	$27,059,541
AGH	Althea	0.029	-12%	-6%	-33%	-47%	$11,754,641
ME1	Melodiol Glb Health	0.004	-13%	-30%	-94%	-98%	$2,020,462
WFL	Wellfully	0.003	-25%	-25%	-25%	-73%	$1,478,832

inhaleRX (ASX:IRX)

inhaleRX rose on Thursday on no specific news.

The company did report its quarterly update on Tuesday, reiterating that it was preparing the necessary information for a Phase 1 HREC (Human Research Ethics Committees) submission for IRX616a.

IRX says it remains confident that IRX will be able to demonstrate the safety and tolerability of inhaled cannabidiol (CBD), which is already licensed for the treatment of rare pediatric-onset epilepsies and widely available as a non-prescription health supplement globally.

IRX616a is a drug-device product consisting of synthetic CBD delivered via inhalation in a fixed dose to treat panic disorder.

Vitura Health (ASX:VIT)

The digital health platform company said its wholly-owned subsidiary, Canview, was successful in restraining Code 4 Cannabis Pty Ltd (C4C), the licensor of the software used as part of the Canview platform, from acting on its service termination.

C4C consented to the orders by Justice Kelly in the Supreme Court of Queensland. The effect of the injunction orders is that C4C is restrained from disabling Canview’s access to the software until the proceedings are determined, or until further order.

In January, C4C told Vitura it did not intend to extend its licensing agreement with the company beyond the existing contract’s expiry in August, after Vitura raised a “number of issues” with the software developer.

The two companies agreed to proceed to the courts last week to resolve the matter.

Botanix Pharma (ASX:BOT)

Botanix Pharma was included in the ASX All Ordinaries Index in April.

Botanix joins the ranks of the index, which comprises the 500 largest companies listed on the ASX, based on its strong performance over the last 12 months.

Botanix shares have risen by over +100% in the last 12 months, driven by interest in the company’s treatment for excessive underarm sweating that is expected to receive approval from the US FDA in late June.