DEA ALJ Hearing Record Signals Framework for Schedule III Decision

ALJ Limits Testimony to Statutory Eight-Factor Test

The administrative law judge ruled that witness testimony must address only the eight factors enumerated in 21 U.S.C. § 811(c), excluding broader policy arguments. The August 8 procedural order rejected requests from advocacy groups to introduce testimony on incarceration rates, racial disparities in enforcement, and economic impact. The ruling cited Americans for Safe Access v. DEA (2013), which held that rescheduling proceedings are confined to scientific and medical evidence bearing on the statutory criteria.

The eight factors include actual or relative abuse potential, scientific evidence of pharmacological effect, current scientific knowledge, history and pattern of abuse, scope and significance of abuse, risk to public health, psychic or physiological dependence liability, and whether the substance is an immediate precursor of a controlled substance. The ALJ's order tracks the plain language of § 811(c). It doesn't import equitable considerations.

Witness List Reveals HHS-DEA Evidentiary Split

The preliminary witness list filed August 7 includes twelve HHS scientists and four DEA pharmacologists, signaling a factual dispute over abuse potential and accepted medical use. HHS witnesses are expected to testify that marijuana meets the three-prong test for Schedule III: lower abuse potential than Schedule I or II substances, currently accepted medical use in treatment in the United States, and moderate or low physical dependence or high psychological dependence.

DEA witnesses will argue differently. According to pre-hearing briefs, they'll contend that marijuana's abuse potential remains comparable to Schedule II stimulants and that FDA-approved uses are limited to synthetic cannabinoids, not plant material. The agency's position rests on the absence of a New Drug Application (NDA) for whole-plant marijuana and the persistence of high-potency THC products in state markets.

• HHS witness Dr. Nora Volkow (NIDA Director) will testify on dependence liability data from the National Survey on Drug Use and Health.
• DEA witness Dr. Timothy Condon will present emergency-department visit data linking high-THC cannabis to acute psychiatric episodes.
• Both sides will call expert witnesses on international treaty compliance under the 1961 Single Convention on Narcotic Drugs.

Treaty Obligations Emerge as Dispositive Issue

Pre-hearing motions filed by the DEA argue that rescheduling marijuana to Schedule III would violate U.S. obligations under Article 2 of the Single Convention, which requires parties to limit cannabis to medical and scientific purposes under strict control. The DEA's August 5 brief cites the International Narcotics Control Board's 2024 report, which stated that commercial recreational markets are incompatible with treaty obligations regardless of domestic scheduling.

HHS counters that Schedule III placement doesn't authorize recreational use and that the Controlled Substances Act's prohibition on non-medical distribution remains in force under 21 U.S.C. § 841. Treaty compliance turns on federal law, not state-level toleration of licensed sales, the government's August 6 reply brief argues. This framing suggests the ALJ may uphold rescheduling while emphasizing that federal criminal penalties for unauthorized distribution persist.

The hearing record indicates the ALJ will treat rescheduling as a narrow scientific determination under § 811, not a policy referendum on legalization.

Tax and Compliance Implications Under IRC § 280E

If marijuana moves to Schedule III, state-licensed operators would become eligible to deduct ordinary business expenses under IRC § 280E, which currently disallows deductions for trafficking in Schedule I or II substances. Treasury hasn't issued guidance on transition rules, but tax practitioners expect the IRS to require amended returns filed within the statute of limitations for refund claims.

Read § 280E strictly: the deduction disallowance applies only to businesses trafficking in controlled substances listed in Schedule I or II of the Controlled Substances Act. Rescheduling to Schedule III would remove marijuana from the statutory scope of § 280E, effective the date the final rule is published in the Federal Register. Operators should monitor the Federal Register for the effective date and consult tax counsel on amended-return strategy. For background on 280E compliance, see the CannIntel topic hub on DEA rescheduling.

The hearing is scheduled to begin September 15, 2026, with an estimated six-week duration. The ALJ's recommended decision is due within 90 days of the record's closure, likely by year-end 2026. DEA Administrator has final authority to accept, reject, or modify the recommendation under 21 C.F.R. § 1316.67.