As we discussed last week, the federal government took a massive step in cannabis law reform by entering an executive order rescheduling certain aspects of cannabis. The order and its proposed regulations also establish a streamlined pathway for state-licensed medical marijuana entities to register with the DEA as manufacturers, distributors, and/or dispensers. This post discusses the mechanics for that registration process and the pros and cons of registration.
Entities that hold state-level medical marijuana licenses can seek DEA registration by submitting their “existing state credentials as conclusive evidence of state-law authorization,” along with any applicable DEA form(s). The DEA must then grant registration unless doing so is inconsistent with the public interest or the United Nations Single Convention on Narcotic Drugs, Mar. 30, 1961, as amended (“Single Convention”). The DEA is directed to process applications within six months for all applications submitted within the 60 days following publication. The registration portal opens on April 29 at 9 am ET and is available here.
There are some burdens and uncertainty associated with registration, but the federal government has tried to minimize many of these issues. For example, the registration process itself does not appear onerous, as it only requires the completion of applicable DEA forms and the submission of state credentials. There will be ongoing operational requirements for registrants, including reporting requirements, record maintenance, and order forms, but the DEA is required to “accept state-required reports, records, and forms to the maximum extent permissible.” Similarly, registrants are authorized to rely on applicable state-law regulations on labeling, packaging, disposal, and physical-security, with the exception of adding a federal warning label. Accordingly, these requirements may only impose marginal, if any, operational burdens.
DEA registration, at this point, may not allow for registrants to engage in interstate commerce of cannabis. While one of the presumed benefits of a federal cannabis framework is the ability to transport cannabis and cannabis products across state lines, registered manufacturers, distributors, and/or dispensers are still expressly “subject to the limitations of [their] state license[s].” Because many states require that cannabis stay within their state lines, these state laws would need to be amended or otherwise addressed before true interstate commerce would be authorized. Lastly, manufacturers are required to establish a nominal price for the purchase of their cannabis crops, pay an administrative fee, and store crops in a DEA-accessible facility under the sale-and-resale transaction is complete. The costs and mechanics of this process are unclear at present.
Despite these burdens and uncertainty, there are potentially significant benefits of registration. The current registration process is streamlined and designed to impose minimal burdens on existing state-licensed medical marijuana operators. Current operators can leverage their existing state license and processes for preventing diversion, ensuring product safety, maintaining records, and conducting facility inspections to likely satisfy federal requirements. Further, state medical marijuana licensees that submit applications within 60 days following publication are allowed to continue operating under their state licenses while their applications are being considered. While interstate commerce may be effectively prohibited due to current state laws, federal registration would seem to be a prerequisite for any ability to legally move cannabis across state lines in the future. And it would not be surprising to see future federal cannabis laws, such as those directed at banking, capital, financial services, and insurance only apply to registrants or to offer additional benefits to registrants. Finally, it is unclear how long the current registration system will remain in place or when additional and more onerous processes will be required, so there may be an incentive to taking advantage of the current system.
If you would like to discuss your specific situation or discuss the issues in this post further, please contact the author.
