The United States has moved to reclassify marijuana as a less dangerous drug in a historic shift that sent shares in cannabis firms soaring.
The US Justice Department’s recommendation on Tuesday that cannabis be classified as a schedule three drug – the same as ketamine and Tylenol with codeine – does not legalise recreational use outright, but opens the way to lighter punishments as well as greater private investment and tax benefits for the industry.
Cannabis firms are currently prevented from deducting normal business expenses at tax time due to the drug’s classification as a schedule one on par with heroin and LSD.
Shares of Canada’s Canopy Growth Corporation and Cronos Group surged 80.02 percent and 15.71 percent, respectively, while US-based Cronos Group jumped nearly 40 percent.
The proposed change, which follows a review initiated by US President Joe Biden, will be subject to approval by the White House Office of Management and Budget, a period of public comment, and review by an administrative judge before taking effect.
The move helps narrow a widening gulf between federal law and the legal frameworks in about 40 states where the drug is legal in some form.
Biden initiated a review of federal law on marijuana in October 2022 and announced pardons for thousands of Americans convicted for possession.
“Too many lives have been upended because of our failed approach to marijuana. It’s time that we right these wrongs,” Biden said in December.
Although the cannabis industry is estimated to be worth tens of billions of dollars in the US, the drug is considered a controlled substance under federal law, hampering interstate commerce, blocking business’s access to banking services and limiting funding for medical research.
Prohibition of the drug, which was first outlawed at the national level in 1937, has also been blamed for exacerbating racial inequality in the justice system.
Black people are 3.6 times more likely than white people to be arrested for marijuana possession despite using the drug at similar rates, according to the American Civil Liberties Union.
In a Pew Research Center survey last month, 88 percent of Americans said marijuana should be legal for medical or recreational use.
Colorado and Washington became the first states to legalise cannabis for recreational use in 2012.
