BY JEFFREY SCHULTZ ,  JESSE HARLAN ALDERMAN

On August 27, 2024, the Drug Enforcement Administration (DEA) has scheduled an ALJ hearing to consider briefs, evidence and witnesses from “interested parties”1 in connection with the DEA’s proposed rulemaking to reschedule cannabis from Schedule I to Schedule III under the Controlled Substances Act (CSA), following procedures established in both the CSA and the Administrative Procedures Act (APA). The notice, expected to be published in the Federal Register on Thursday, August 29th, will announce a December 2nd start date for the hearing. This follows the conclusion of the notice and comment period, which ended on June 20th with the submission of over 40,000 public comments. The proposed rescheduling of cannabis was initially proposed in a Notice of Proposed Rulemaking published in the Federal Register on May 21st.

The Hearing
As we have written about previously, ALJ hearings conducted pursuant to formal rulemaking are conducted similarly to federal bench trials. All parties to the ALJ hearing will receive the “record,” meaning a transcript of the testimony and exhibits, in addition to all papers and requests filed. Interested persons who wish to participate in the hearing must provide written notice on or before September 28th. Once the hearings conclude, the DEA will consider the public input for the final rule. 

Outside of providing testimony and evidence for official hearings and submitting (solicited) comments, the APA prohibits interested parties from communicating with the DEA about the cannabis rescheduling rule before it is finalized.

Final Rule and Judicial Review
Upon the conclusion of the ALJ hearing, the DEA will consider the public input from hearings (and continue to consider the +40,0000 solicited comments) before promulgating a final rule on cannabis rescheduling. OMB will review the final rule before it is published in the Federal Register. Pursuant to the Congressional Review Act (CRA), the federal agency promulgating a “major rule,” defined as an economically significant rule that requires OIRA to review, must submit a report to Congress (and GAO) and allow for a 60-day review session, in advance of the rule going into effect. Assuming the cannabis rescheduling rule is a “major rule,” DEA must submit the report to Congress and allow for a 60-day review before the rule can go into effect. 

Unfortunately, this means that the rule will not go into effect before the November election. When a final rule is promulgated, if an interested party challenges it, a federal court of appeals may grant jurisdiction, and a three-judge panel will weigh in on the final rule and its compliance with the APA. 

The ALJ hearing will attract significant engagement from interested parties and industry stakeholders. Our team of experts at Foley Hoag has years of experience with this step of the rulemaking process, and we will continue to monitor it and provide timely updates. In the interim, please contact the members of our Cannabis, Healthcare, Capital Markets and Tax Practices with any questions.
 

[1] “Interested party” is defined as “any person adversely affected or aggrieved by any rule or proposed rule issuable” under 21 U.S.C. 811.

A version of this article was originally published on foleyhoag.com

Jeffrey Schultz focuses his practice on representing cannabis industry operators, investors and ancillary businesses on corporate and securities law matters, early-stage corporate structuring and financing, joint ventures, strategic partnerships, as well as state and federal regulatory matters impacting the cannabis industry. Jeff also advises cannabis industry operators on M&A, banking laws, and intellectual property matters.

Jesse Alderman is a land use and regulatory expert, recognized by Chambers USA as one of the country’s leading cannabis lawyers. Jesse is co-chair of Foley Hoag’s Administrative Law Department and co-chair of Foley Hoag’s nationwide Cannabis Practice. He specializes in cannabis matters, competitive RFPs, regulatory and land use disputes and complex permitting issues.