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.
