Tracy Gallegos – Cannabis Industry

April 23, 2026April 23, 2026 by Paul P. Josephson

Relief, Finally? DEA Issues Order Expediting Cannabis Rescheduling to Schedule III

On April 22, 2026, a final order issued by the Acting Attorney General and the Drug Enforcement Administration took effect, fundamentally altering the federal regulatory landscape for marijuana. The order moves FDA-approved drug products containing marijuana and marijuana subject to qualifying state-issued medical marijuana licenses from Schedule I to Schedule III of the Controlled Substances Act (CSA).

Though a welcome and long hoped-for action, it is critical to note this is not a broad legalization of all adult use (recreational) cannabis sales. Nor does it legalize the controversial category of hemp-derived THC products.

This post summarizes the key provisions of this landmark action and its implications for stakeholders across the cannabis industry. We will follow up with more detailed analyses of the new order specific to various stakeholders and issues.

Highly Expedited Action

The DEA acted under 21 U.S.C. § 811(d)(1), which authorizes the Attorney General to control a substance under the schedule deemed most appropriate to satisfy U.S. obligations under the Single Convention on Narcotic Drugs. This move permits the Attorney General to issue a scheduling order “without regard to” the findings and notice-and-comment rulemaking procedures that ordinarily apply under the CSA. Accordingly, the DEA took the position that the Administrative Procedure Act’s notice-and-comment requirements do not apply to this action.

Scope of the Final Order

The rescheduling to Schedule III applies to two categories of marijuana:

FDA-approved drug products containing delta-9-tetrahydrocannabinol (Δ9-THC) derived from the plant Cannabis sativa L., other than the mature stalks and seeds.
Marijuana subject to a state medical marijuana license, defined as a license issued by a state entity authorizing the licensee to manufacture, distribute, and/or dispense marijuana or products containing marijuana for medical purposes.

The order also covers marijuana extracts, as defined in 21 CFR § 1308.11(d)(58), and naturally derived Δ9-THC to the extent they fall within the above two categories.

The DEA also announced an expedited hearing commencing June 29, 2026, to consider whether marijuana as a whole—not just FDA-approved and state-licensed medical products—is reclassified to Schedule III.

Several important exclusions apply:

Critically, any form of marijuana that is neither in an FDA-approved drug product nor subject to a state medical marijuana license remains a Schedule I controlled substance. This leaves the cultivation and sale of recreational cannabis that dominates the state-licensed industry in legal limbo for the time being.
The order does not apply to synthetically derived THC, which remains in Schedule I.
It does not affect the status of hemp as defined in Section 7 U.S.C. § 16390.
Nor does it affect the scheduling of previously rescheduled drug products such as Marinol and Syndros, or any previously scheduled synthetic cannabinoids.

Expedited Registration for State Licensees

Recognizing that forty U.S. states have now legalized the sale and use of marijuana for medical purposes under state law, the order establishes a new expedited federal registration pathway for entities holding state medical marijuana licenses.

State licensees may submit their existing state credentials as conclusive evidence of state-law authorization when applying for DEA registration as manufacturers, distributors, or dispensers. The Administrator must grant registration unless doing so would be inconsistent with the public interest under 21 U.S.C. § 823 or with the requirements of the Single Convention. A DEA registration will automatically suspend upon suspension, revocation, or expiration of the underlying state license.

To facilitate a smooth transition, the DEA will prioritize applications submitted within 60 days of publication, with a target of processing those applications within six months. Applicants who submit within that 60-day window may continue to operate under their state-issued licenses during the pendency of their application.

Regulatory Framework for State Licensees

The order contains several provisions designed to minimize regulatory burden on compliant state-licensed entities by deferring to existing state regulatory infrastructure:

Prescriptions. State-authorized medical marijuana certifications or similar documents are sufficient to permit dispensing, provided they include the user’s name and address, are dated and signed on the day of issuance, and identify the issuing practitioner.
Records and Reporting. The DEA will require only such reports, records, and order forms as are necessary to comply with federal statutory and treaty obligations, and will accept state-required records to the maximum extent permissible.
Labeling, Packaging, and Security. Registrants may comply with state-law labeling, packaging, disposal, and physical-security requirements in lieu of otherwise applicable federal requirements, subject to inclusion of the statutory warning label required by 21 U.S.C. § 825(c).

Tax Implications Under Section 280E

One of the most significant practical consequences of the rescheduling relates to federal taxation. The order notes that, as a consequence of moving state-licensed medical marijuana to Schedule III, licensees will no longer be subject to the deduction disallowance imposed by Section 280E of the Internal Revenue Code, which applies only to businesses trafficking in Schedule I or II controlled substances.

The Acting Attorney General further encouraged 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.

Notably, however, the order expressly states that nothing in the rule constitutes a determination regarding federal tax liability, and state licensees are advised to consult with tax counsel.

Key Takeaways

This final order marks a historic shift in the federal treatment of marijuana. For state-licensed medical marijuana operators, the rescheduling opens the door to DEA registration through an expedited pathway that leverages existing state regulatory infrastructure, potentially reduces or removes the punitive effects of Section 280E, and reduces duplicative federal compliance obligations. For pharmaceutical companies with FDA-approved marijuana products, the move to Schedule III eases regulatory requirements while maintaining robust federal oversight.

At the same time, stakeholders should recognize important limitations. Recreational marijuana remains squarely in Schedule I, as does any marijuana not covered by an FDA-approved product or a state medical marijuana license.

Synthetically derived THC is also unaffected.

What to Watch

The administrative hearing set to begin on June 29, 2026, will be the most significant near-term development to monitor. The outcome of that proceeding will determine whether marijuana as a whole — not just FDA-approved and state-licensed medical products — is reclassified to Schedule III.

Stakeholders should also watch for potential legal challenges to the Acting Attorney General’s use of treaty-implementation authority as the basis for the immediate rescheduling order, as this legal theory may face scrutiny in the courts. Finally, federal agencies such as the IRS, the Department of Health and Human Services, and the FDA may issue additional guidance clarifying how the rescheduling affects tax treatment, healthcare regulation, and product approval pathways.

We will continue to monitor these developments closely. Stakeholders with questions about how these changes may affect their operations, compliance programs, or research activities should not hesitate to reach out to Paul Josephson, Michael Schwamm, Tracy Gallegos or any member of our Cannabis and State Attorneys General teams.

December 18, 2025December 18, 2025 by Jim Hearon

Trumps Signs Executive Order to Reschedule Cannabis: A Dramatic Shift in Federal Cannabis Policy

On December 18, 2025, President Trump signed an Executive Order to expedite the administrative process of rescheduling cannabis, marking one of the most dramatic shifts in federal cannabis policy in the past few decades.

Under current federal law, cannabis is classified as a Schedule I controlled substance—the most restrictive category of drugs. Schedule I controlled substances are defined as having no accepted medical use and a high potential for abuse. Schedule I substances include inherently dangerous drugs, such as heroin and LSD.

The Executive Order directs the Attorney General to expedite rescheduling cannabis from Schedule I to Schedule III. Schedule III controlled substances are defined as having a lower potential for abuse and currently accepted medical uses, including substances such as ketamine and Tylenol with codeine.

The rescheduling process is handled through the Drug Enforcement Agency (“DEA”) and the Department of Health and Human Services (“HHS”). In 2022, at the direction of President Biden, DEA and HHS commenced the rescheduling process. Both HHS and the Department of Justice issued recommendations to reschedule cannabis, but the process eventually stalled, and there has been no movement on rescheduling since January 2025 until today.

Rescheduling cannabis to Schedule III will not only allow for medical research into cannabis, one of President Trump’s main selling points in issuing the Executive Order, but may also provide long awaited relief to cannabis operators, owners, investors, and other industry participants.

One of the most prominent and immediate benefits of rescheduling will be the removal of cannabis from the clutches of Section 280E of the Internal Revenue Code. Section 280E disallows standard business deductions for businesses engaged in the trafficking of Schedule I or II controlled substances. Once cannabis is rescheduled, cannabis operators will likely decrease their current tax liabilities and improve their financial viability.

What rescheduling will NOT do is open up the door for interstate commerce and may not immediately increase the number of federally chartered banks open to banking in the industry as many are still waiting for passage of the SAFER Banking Act or similar legislation. FinCEN guidance is not impacted by the Executive Order, which means that onerous reporting and other obligations for banks will remain in place. As such, any impact to banking will likely be minimal, as banks’ compliance obligations will remain the same until such time that the SAFER Banking Act or similar legislation is passed by Congress.

The Executive Order also seeks to expand research and access to CBD products. This comes on the heels of the funding bill passed to end the government shutdown, which included a controversial provision to close the loophole created by the 2018 Farm Bill and reclassify low-THC hemp products as controlled substances. The ban on low-THC hemp products goes into effect in November 2026.

While not full federal legalization, today’s Executive Order could mark the beginning of the end in draconian federal cannabis policy. The rescheduling process will take some time, and the Executive Order could still be challenged by Congress and stake holders in the cannabis industry, but operators should remain cautiously optimistic.

June 15, 2023 by Tracy Gallegos

Cannabis Consumption Lounges Delayed in Nevada – Again

In June 2022, the Nevada Cannabis Compliance Board (CCB) approved regulations pertaining to the licensing and operation of cannabis consumption lounges in accordance with its authority under Assembly Bill 341 (2021). Following the CCB’s implementation of the regulations, the license application window was opened from October 14 – October 27, 2022. During the application period, the CCB received ninety-nine applications, and on November 30, 2022, the CCB identified forty applicants who would be prospective holders of consumption lounge licenses. Of the total forty applicants identified, twenty were applicants that already held cannabis retail licenses in Nevada and intended to operate consumption lounges attached to their retail dispensaries, ten were social equity applicants that intended to operate standalone consumption lounges, and ten were non-social equity applicants that intended to operate standalone consumption lounges.

While cannabis consumption lounges seemed to be moving in the right direction in Nevada, prospective operators have experienced hurdles that have delayed the opening of consumption lounges, including changes to the regulations. Now, those prospective operators are faced with more challenges, including concerns regarding indoor air quality at consumption lounges. Specifically, the regulations include stringent air quality standards that require, among other things, that air be circulated every two minutes – a requirement that is even more stringent than those imposed on cigar bars, taverns and hookah lounges. Installing ventilation systems that meet the requirements set forth in the regulations would be a costly undertaking for an operator, with some industry experts estimating that a compliant HVAC system would cost nearly half a million dollars to install. Moreover, monthly utility bills are expected to be in the thousands of dollars. With cannabis operators already experiencing difficulties accessing capital due to the status of cannabis under federal law, and the volatility in the economic market as a whole further exacerbating capital constraints, some prospective operators simply do not have the capital required to build out a consumption lounge that complies with the strict regulations.

Some operators who are already in the build-out phase have been forced to pause construction while they attempt to raise the funds required to address the air quality requirements. Other operators have elected to halt construction until a final version of the regulations has been adopted, in order to avoid having to revise their build-out plans if the regulations are further revised.

When the CCB first approved the regulations, many predicted that consumption lounges would be open in Las Vegas as early as the end of 2022. That time line was subsequently pushed back to the second quarter of 2023, with many hoping that consumption lounges would open by 4/20 and, if not, by early summer in time for the tourists flocking to Sin City for their summer vacations. As prospective operators struggle to complete their build-outs, industry insiders have again revised the time line to sometime in the third or fourth quarter of 2023.

For now, the only consumption lounge where tourists can legally consume cannabis products is NuWu Cannabis Marketplace, which also includes a retail dispensary. Because it is located on tribal land, it is not required to obtain a consumption lounge license from the state.

November 3, 2022November 21, 2022 by Duane Morris

House Approved Its First Appropriations Bill that Supports Tribal Cannabis Production and Distribution

Tribal leaders of federally-recognized tribes that have legalized cannabis, either medicinally or for adult use, may soon be able to breathe a sigh of relief. The Fiscal Year 2023 appropriations bill for the Department of the Interior (the “2023 Appropriations Bill”), awaiting Senate approval after having passed the House, includes a provision prohibiting the use of any Interior funds to enforce federal laws that otherwise criminalize cannabis on Indian lands where tribal law authorizes its use, distribution, possession, or cultivation. There are, however, two important caveats.

First, if the tribe is subject to state law that is contrary to tribal law, or the tribal land is located in a state where cannabis is illegal, the non-enforcement provision does not apply. Some tribes are still subject to Public Law 280, a relic from the 1950s, which gives certain states criminal jurisdiction over tribal members on tribal land. For those tribes, state criminal law would control and cannabis use, distribution, possession, or cultivation would remain illegal on tribal land.

Second, tribes must take reasonable steps to ensure tribal laws regarding cannabis are compatible with certain federal policy objectives, such as prohibiting cannabis use for minors and ensuring cannabis is not diverted to states or tribes where it is illegal, used to support organized crime or other illicit drugs, or brought onto federal public lands.

These policy objectives mirror ones that had been included in the “Wilkinson Memo,” a 2014 Obama-era statement of policy emphasizing the Department of Justice’s non-enforcement policy against tribes for legal cannabis businesses (both medicinal and adult-use). That memo gave tribes and tribal members some comfort that legalization efforts would not subject them to prosecution, or prevent federal funds from continuing to support their communities. When Attorney General Sessions rescinded that policy statement in 2017, tribal legalization was left in political limbo. The Biden administration has remained silent on the issue of tribal legalization, despite President Biden’s pardon announcement earlier this month.

If the Senate approves the 2023 Appropriations Bill, it will give tribes that have already legalized cannabis some much-needed clarity on where the federal government stands on enforcement of the federal Controlled Substances Act. During the Obama administration, tribes in states like Washington and Nevada found success in compacting with the state to create a uniform system of distribution. Tribes in California do not have that option as the state has prevented any such partnership, despite the state and tribes separately legalizing adult-use. More recently, some tribes located in New York went ahead without state partnership while state adult-use licenses linger in the approval process. Indeed, more than 100 dispensaries have opened in New York on Native land.

For tribes in states where cannabis remains prohibited in some or all forms, or the state has criminal jurisdiction over tribal members, the 2023 Appropriations Bill is a reminder that the complex system of federal and state law governing tribal affairs continues to create issues affecting tribal sovereignty.