Key Takeaways
- DOJ immediately moved state-licensed medical marijuana products to Schedule III and will hold an expedited hearing on broader cannabis rescheduling beginning June 29, 2026.
- State-licensed medical marijuana businesses can pursue expedited DEA registration to take advantage of new federal legal protections by demonstrating compliant controls for storage, dispensing, inventory and recordkeeping.
- Schedule III status provides major tax relief by lifting Internal Revenue Code § 280E limits on deductions for these businesses, with Treasury encouraged to consider retroactive relief.
On April 23, 2026, the Department of Justice (DOJ) issued an order placing medical marijuana and marijuana products “regulated by a state medical marijuana license” in Schedule III of the Controlled Substances Act.[1] The DOJ also announced an expedited administrative hearing to consider reclassifying all cannabis products from Schedule I to Schedule III. Schedule I controlled substances are defined as drugs with no currently accepted medical use and a high potential for abuse, whereas Schedule III controlled substances are defined as drugs with a moderate to low potential for physical and psychological dependence. The administrative hearing will begin on June 29, 2026.
The order allows state-licensed medical marijuana producers and distributors to register with the U.S. Drug Enforcement Administration (DEA) in an expedited process. Currently, 40 states have adopted medical marijuana programs. State-licensed medical marijuana entities that want to take advantage of new legal protections that come with Schedule III status will need to submit an application with the DEA outlining certain processes, including those for storage, ordering, dispensing, inventory and record keeping. While only medical marijuana is currently being moved to Schedule III, the DEA application will ask potential registrants whether the business also handles or dispenses recreational marijuana.
The order also provides a major tax break for state-licensed marijuana businesses. Previously, such businesses were subject to Section 280E of the Internal Revenue Code, which forbids business deductions for trafficking in Schedule I controlled substances. Now, these entities will be able to deduct ordinary and necessary business expenses for operating their cannabis companies. The order also encourages the U.S. Department of Treasury to consider retroactive relief for these businesses and prior tax years.
Although this move does not legalize marijuana for recreational use, it is a significant shift in federal policy regarding marijuana and a major boon to the cannabis industry. The rescheduling order will reduce barriers for research regarding the safety and efficacy of marijuana, providing insight into ways of improving care for patients and the health care community overall.
For questions about the rescheduling of cannabis and how it could affect you or your business, contact your Dinsmore attorney to schedule a targeted review of your DEA registration readiness, compliance controls and tax planning opportunities in response to the DOJ’s recent order and ahead of the June 29, 2026 hearing.
[1] https://www.justice.gov/opa/pr/justice-department-places-fda-approved-marijuana-products-and-products-containing-marijuana