After years of false starts, stalled hearings, a retired judge, a fired attorney general, and a president who last weekend told officials to stop “slow-walking” on cannabis, we finally have something to talk about. Effective April 22, 2026, Acting Attorney General Todd Blanche signed a final order moving FDA-approved marijuana products and state-licensed medical marijuana from Schedule I to Schedule III of the Controlled Substances Act (CSA). This is, the most significant federal cannabis policy shift in the United States since at least 1970, if not ever.
To be very clear, marijuana was not legalized. Recreational marijuana remains Schedule I pending further proceedings. But for the state medical marijuana industry and its patients, this order represents a seismic development. The time has come to weigh those things.
1. State-Legal Medical Marijuana Is Now a Schedule III Controlled Substance
As we have discussed before, Schedule III substances, unlike Schedule I substances, are deemed to have only a moderate-to-low potential for physical and psychological dependence and a currently accepted medical use. For over 50 years, the federal government treated marijuana as having no accepted medical use, keeping it at Schedule I along with heroin and LSD.
Again, the final order only applies to FDA-approved drug products and marijuana subject to a state medical marijuana license. So, while the prospect of adult-use-only marijuana joining these other two marijuana categories at Schedule III remains open, yesterday’s news does not directly do so just yet.
2. The Final Order Speaks Very Favorably of the State Medical Program Framework
One of the underappreciated aspects of this final order is what it signals about the federal government’s posture toward state medical marijuana programs. There has been some anxiety in the industry — particularly among operators, investors, and counsel — that rescheduling could destabilize existing state programs by subjecting them to a new, more stringent federal regulatory framework. The final order calms that fear.
Rather than signal a dismantling or preemption of the state program structure, the final order states:
“The Attorney General has reviewed the operation of these state systems and finds that, taken as a whole, they demonstrate a sustained capacity to achieve the public-interest objectives that underlie the CSA’s registration framework, including protecting public health and safety and preventing the diversion of controlled substances into illicit channels.”
The qualifying category for rescheduling is defined by reference to state medical marijuana licenses, which means the DOJ has effectively ratified the state-law framework as the vehicle for federally compliant medical cannabis. That is a remarkable development, even if it has been largely underappreciated in the early commentary.
Also of note here is the order’s language stating that “marijuana subject to state medical marijuana licenses” is exempt “from the requirement [that a government agency] monopolize the wholesale trade of marijuana” under the Single Convention.
3. 280E Is Dead for State Medical Marijuana Operators — and Yes, There May Be Retroactive Relief
Stop what you’re doing. Read this section twice.
The order states that “state licensees will no longer be subject to the deduction disallowance imposed by Section 280E of the Internal Revenue Code.” That alone is massive. But the final order goes further: It “encourages” the secretary of the Treasury “to consider providing retrospective relief from Section 280E liability for taxable years in which a state licensee operated under a state medical marijuana license.”
You read that correctly. The AG just nudged Treasury to look back at prior tax years and consider giving medical marijuana operators relief on 280E taxes they’ve already paid. According to CNN, since 2018, cannabis businesses have paid an estimated $15 billion in excess 280E-related taxes. Subject to 280E, some cannabis businesses have had effective tax rates of 70% or more. The order doesn’t guarantee retroactive relief, but it “encourages” Treasury to consider it; the fact that language like this appears in a final order signed by the attorney general of the United States is significant.
Yesterday, the Department of the Treasury issued a statement that included the following:
Guidance is expected to clarify the ways in which, for businesses with multiple activities, section 280E applies only to those activities related to trafficking in Schedule I or II controlled substances (e.g., by apportioning expenses).
Guidance is also expected to include a transition rule providing that, for purposes of section 280E, rescheduling generally will be considered to first apply for a business’s full taxable year that includes the effective date of the Final Order, for the business’s activities that do not involve Schedule I or II controlled substances as a result of the Final Order.
Questions remain about how companies holding both medical and adult-use licenses in a state can best realize these savings (or refunds). Tax lawyers and CPAs will be working overtime, that’s for sure.
Prospective 280E relief alone is still huge. Eliminating the 280E tax burden will free up capital for expansion and growth and should improve ledgers across the industry. The retroactive encouragement is a potential bonus that the industry’s tax lawyers will be watching very, very closely.
4. DEA Registration Is Coming — and the Clock Is Already Ticking
With the benefits of Schedule III status come some new federal obligations. Certain state licensees will need to undergo a DEA registration process under 21 CFR 1301 and will become subject to certain requirements under the United Nations Single Convention on Narcotic Drugs, the international treaty framework that governs controlled substances, and the Convention on Psychotropic Substances. This is new territory for state operators who have functioned entirely within state regulatory systems — far outside the ambit of national and international arenas.
Operators applying within 60 days of the order’s publication can continue operating under their state licenses during the review period, and those applications should be reviewed within the following six months. In other words, if you move quickly, you can keep your operations running under your existing state license while DEA processes your federal registration.
There are certainly benefits to acting quickly: You can engage competent counsel, begin gathering what you’ll need, and get your application in the queue. The 60-day window is both an opportunity and a deadline.
State licensees should also be aware that with DEA registration comes the entrance of DEA to the supply chain. The order describes a process through which the DEA will purchase a portion of a grower’s crop at a nominal price only to then resell those products back. The order obligates the registered manufacturers to store the subject products in facilities to which the DEA has access throughout the buy-sell process.
5. Are International Sales on the Horizon?
The order instructs DEA to “amend the regulations to require a permit to import or export” “state-licensed medical marijuana to the list of nonnarcotic Schedule III through V controlled substances that are subject to import permit requirement.” The order, therefore, envisions a scenario where state medical marijuana licensees can potentially access the international market by obtaining the requisite DEA licenses.
6. A New Rescheduling Hearing Kicks Off June 29 — with Set Deadlines
The final order takes a two-track approach. The immediate action covers state-licensed medical marijuana and FDA-approved products. The broader question is what happens to all marijuana, including adult-use. Through a Notice of Hearing on proposed rulemaking, the DOJ announced a hearing set to begin on June 29, 2026, “‘to receiv[e] factual evidence and expert opinion regarding’ whether marijuana (not limited to medical marijuana) should be transferred to schedule III of the list of controlled substances.”
The prior Biden-era hearing process we previously wrote on has been terminated. The allegations of agency bias, the stalled interlocutory appeal, the retired judge, the lingering procedural mess — all of it is being set aside in favor of a fresh start. DEA Administrator Terry Cole said the agency is “expeditiously moving forward with the administrative hearing process — bringing consistency and oversight to an area that has lacked both.”
For operators in adult-use states, or those who serve both medical and recreational markets, the June 29 hearing is the next major development to watch.
Bottom Line
Yesterday was a good day for advocates and stakeholders in state medical marijuana programs. The DOJ and attorney general have put their imprimatur on the state medical program framework, blown up 280E for medical operators (with an express encouragement of retroactive relief), and set a firm deadline for the next chapter of the rescheduling story. There is still plenty of work ahead — DEA registrations, treaty compliance, the June 29 hearing process, and almost certainly litigation from opponents of reform. But make no mistake: This is arguably the single most consequential federal cannabis development in the lifetime of this industry.
More to come.
