The Hidden Potential Winners of Marijuana Rescheduling: DEA-Registered Bulk Manufacturers

As the cannabis industry awaits potential marijuana rescheduling, eyes seem focused on state-legal operators and the tax relief they might enjoy. But there’s a group of players who’ve been surprisingly quiet, despite potentially having the most to gain: DEA-registered bulk marijuana manufacturers.

The current landscape for DEA bulk marijuana manufacturing

Currently, eight companies hold the coveted DEA registration for bulk marijuana manufacturing (“DEA Registrants”):

1. Biopharmaceutical Research Company LLC
2. Bright Green Corporation
3. Groff NA Hemplex LLC
4. Irvine Labs, Inc.
5. Maridose, LLC
6. National Center for Development of Natural Products
7. Royal Emerald Pharmaceuticals Research and Development
8. Scottsdale Research Institute

These companies can grow federally legal marijuana for research/pharmaceutical purposes. The market for such marijuana is generally restricted to US and foreign researchers. However, under current US law, DEA Registrants are missing out on a massive opportunity.

The global market potential for DEA bulk marijuana manufacturers

While the market for researching marijuana is relatively modest, the global cannabis market is projected to reach $82.3 billion by 2027. Medical marijuana is expected to hit $21.04 billion by 2025. Germany alone, with the recent expansion of its medical program, has seen medical marijuana imports surge to 31.6 tons in Q4 of 2024 – a fourfold increase from Q1. This booming global market is one that DEA Registrants are unable to access.

The current roadblock to global markets

Despite this booming market, DEA Registrants face significant hurdles. The U.S. doesn’t officially recognize marijuana’s medical efficacy, limiting exports to research purposes only. This misalignment with global marijuana markets creates buriers to exporting US “research” marijuana to countries wanting to import it as “medical” marijuana.

The game-changing potential of rescheduling marijuana

Moving marijuana outside of schedule I could be transformative for DEA Registrants. It would acknowledge marijuana’s medical efficacy, potentially allowing DEA registrants to access global medical markets. DEA would need to amend some of its marijuana regulations to fill minimal gaps that would arise with a scheduling change, but such a move is within DEA’s authority.

Why DEA bulk marijuana manufacturing registrants should be vocal

1. Untapped Capacity: Current DEA bulk manufacturers aren’t operating at full capacity due to limited research demand. Until they are, we may not see many, or any, new DEA registrants.
2. Global Market Access: Rescheduling could open doors to the lucrative global medical marijuana market. The US could solely export medical marijuana, until such time as a domestic market is legalized.
3. Competitive Advantage: Only eight companies are DEA Registrants. As such, eight companies would basically have a government-created oligopoly in exporting US made medical marijuana.

A path forward for DEA bulk marijuana manufacturing registrants

1. Advocate for Rescheduling: DEA Registrants should push for at least Schedule II status, while the current rescheduling process plays out.
2. Leverage Existing Authority: The Attorney General could move marijuana to Schedule II immediately under 21 USC 811(d)(1) to align with international treaty obligations. In December of 2020, the Commission on Narcotic Drugs at the United Nations voted to remove marijuana from schedule IV of the Single Convention on Narcotic Drugs (leaving it only in schedule I). Such a move acknowledges, for purposes of treaty interpretation, that cannabis has medical and therapeutic efficacy. Since a move in the US to schedule II would basically do the same, it would fall squarely into the Attorney General’s authority.
3. Redefine “Medical Cannabis”: DEA could expand its definition of “medical cannabis” for export purposes to include raw flower and other preparations. DEA has already made up a definition for “medical cannabis” without any express authorization to do so. Following that precedent, DEA could simply add flower and other substances to the current definition.

Potential partnerships and opportunities for DEA registrants

Rescheduling could pave the way for innovative partnerships. DEA Registrants could collaborate with state-legal operators for seed sourcing, leveraging the 2018 Farm Bill’s hemp provisions. With only eight DEA Registrants, exclusive agreements could be highly profitable for both DEA Registrants and the chosen few state-legal operators.

Potential political coverage favoring DEA registrants

In the current political climate, where leaders at the DEA, DOJ, and FDA lean towards prohibition rather than liberalization, DEA Registrants face a unique opportunity. Pushing for Schedule II while the official rescheduling process unfolds could be a strategic move. This approach might gain traction with reform critics, as Schedule II status wouldn’t offer state-legal operators the coveted 280E tax relief. Moreover, the fate of Schedule III remains uncertain, with several possibilities in play:

1. The HHS recommendation could be withdrawn at any moment, citing the need for further research into high-THC abuse potential;
2. President Trump’s “just say no” nominee for DEA Administrator, could reject the HHS recommendation outright, maintaining marijuana’s Schedule I status; or
3. DEA could announce that it will spend the next few years “researching” the scheduling recommendation—effectively preserving the status quo.

Any decision to keep marijuana in Schedule I would likely spark litigation, further extending the process. Thankfully, some within the rescheduling coalition have taken the appropriate steps to preserve the record showing DEA’s bias, but that is beside the point (see Thoughts on the Terrible Pageant of Marijuana Rescheduling, by Vince Sliwoski for more on this).

Given these circumstances, now is an opportune time for DEA registrants to engage with Attorney General Bondi. As advocates already authorized by DEA to work with marijuana, their voices may find an audience within DEA. By acting promptly, DEA Registrants could position themselves advantageously in the evolving domestic and global landscape of medical marijuana regulation while addressing immediate concerns within the existing federal framework.

Conclusion

While the entire cannabis industry stands to benefit from rescheduling, DEA-registered bulk manufacturers may have the most to gain – especially in the short-term. Their unique position could give them a significant advantage in accessing international medical markets. As the industry evolves, these manufacturers should be at the forefront, advocating for changes that could unlock substantial growth opportunities in the global cannabis market.