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The U.S. Drug Enforcement Administration will move to reclassify marijuana as a less dangerous drug, a historic shift to generations of American drug policy that could have wide ripple effects across the country.

The proposal, which still must be reviewed by the White House Office of Management and Budget, would recognize the medical uses of cannabis and acknowledge it has less potential for abuse than some of the nation’s most dangerous drugs. However, it would not legalize marijuana outright for recreational use.

The agency’s move, confirmed to the AP on Tuesday by five people familiar with the matter who spoke on the condition of anonymity to discuss the sensitive regulatory review, clears the last significant regulatory hurdle before the agency’s biggest policy change in more than 50 years can take effect.

“While this rescheduling announcement is a historic step forward, I remain strongly committed to continuing to work on legislation like the SAFER Banking Act, as well as the Cannabis Administration and Opportunity Act, which federally deschedules cannabis by removing it from the Controlled Substances Act,” Senate Majority Leader Sen. Chuck Schumer of New York said in a statement. “Congress must do everything we can to end the federal prohibition on cannabis and address longstanding harms caused by the War on Drugs.”

Federal drug policy has lagged behind many states in recent years, with 38 having already legalized medical marijuana and 24 legalizing its recreational use.

That’s helped fuel fast growth in the marijuana industry, with an estimated worth of nearly $30 billion. Easing federal regulations could reduce the tax burden that can be 70 percent or more for businesses, according to industry groups.

Cannabis’ current regulatory status prevents dispensaries from using financial services in the manner of most other companies. The SAFE Banking Act, proposed in July 2023 and subsequently revised to the SAFER Banking Act, aims to expand access to banking services for state-legal cannabis businesses.

American Bankers Association President and CEO Rob Nichols said in a statement that while the ABA “takes no position on the legalization of cannabis, it’s important for policy makers to know that any potential decision to reclassify cannabis has no bearing on the legal issues around banking it.”

“Cannabis would still be largely illegal under federal law, and that is a line many banks in this country will not cross,” Nichols said. “The solution is the bipartisan SAFER Act, which would allow banks to provide services to the cannabis industry in those states where it’s now legal. Passing that legislation in Congress would address the ongoing legal limbo around cannabis banking, while enhancing public safety, tax collection and transparency.”

This article includes information from the Associated Press with additional reporting by The Commercial Record’s Cassidy Norton.