DEA Judge Pauses Marijuana Rescheduling Hearing Over Federal Process Gaps

Judge Mulrooney cited incomplete administrative record and unclear hearing scope as grounds for the pause.

The cleanest read on the delay is procedural, not substantive. Judge Mulrooney's September 29 order doesn't address the merits of rescheduling. Instead, it flags unresolved questions about which documents constitute the official administrative record and whether certain objectors have standing to participate in the hearing.

The DEA proposed moving marijuana to Schedule III in May 2024, following a Health and Human Services recommendation. The agency published a Notice of Proposed Rulemaking in the Federal Register, triggering a 60-day comment period that drew more than 43,000 public submissions.

The hearing was scheduled to begin in December 2026 with testimony from HHS officials and cannabis researchers.

DEA had set a December 2 start date for the evidentiary hearing, with witness lists submitted by the agency, industry groups, and public-health advocates. Witnesses were expected to include officials from the Food and Drug Administration and the National Institute on Drug Abuse, as well as independent pharmacologists and economists.

That timeline's now on hold. Judge Mulrooney's order doesn't specify a new hearing date. The pause will extend into 2027 at minimum.

Industry groups and state regulators had filed to intervene, complicating the procedural landscape.

More than two dozen parties sought formal intervenor status in the rescheduling proceeding, including the National Cannabis Industry Association, the Cannabis Regulators Association, and attorneys general from California, New York, and Illinois. Several anti-legalization organizations also filed objections.

Resolving who has the right to participate—and what evidence they can introduce—requires preliminary rulings before the hearing can proceed, the judge's order suggests. For background on the rescheduling timeline and regulatory framework, see the CannIntel topic hub on DEA rescheduling.

Schedule III status would eliminate the Section 280E tax penalty but leave cannabis federally controlled.

Rescheduling to Schedule III would allow state-licensed cannabis businesses to deduct ordinary business expenses on their federal tax returns, a change worth an estimated $1.5 billion annually to the industry. Under current Schedule I classification, Section 280E of the Internal Revenue Code bars deductions for businesses trafficking in controlled substances.

Schedule III drugs—including ketamine, anabolic steroids, and certain prescription medications—remain federally controlled and subject to DEA oversight. Rescheduling wouldn't legalize recreational cannabis or resolve the conflict between state and federal law.

The pause comes as the cannabis industry faces margin compression and consolidation pressure.

Multi-state operators including Curaleaf, Green Thumb Industries, and Trulieve have structured their business models around the assumption that 280E relief is coming. The delay adds uncertainty to 2027 earnings guidance and capital-allocation decisions.

Publicly traded MSOs have seen their stock prices decline an average of 18 percent since August 2026, driven in part by investor fatigue over the extended rescheduling timeline. The pause isn't likely to reverse that trend.

State-level regulatory agencies are watching the federal process for signals on interstate commerce rules.

California's Department of Cannabis Control, New York's Office of Cannabis Management, and other state regulators have indicated they'll adjust licensing and compliance frameworks once federal rescheduling is finalized. The procedural delay pushes those adjustments further into 2027 or 2028.

Several states, including Ohio and Florida, have ballot initiatives scheduled for November 2026 that could expand adult-use markets. Those campaigns have cited the pending federal rescheduling as evidence of shifting national policy.

No new hearing date has been set; the next procedural order is expected within 30 days.

Judge Mulrooney's order directs the DEA and intervenors to submit briefs addressing the procedural questions by October 29, 2026. A scheduling conference will follow. The earliest realistic hearing date is now spring 2027.

The delay doesn't foreclose rescheduling. It extends the timeline. It introduces additional procedural risk. The next signal to watch is the DEA's response brief and whether the agency seeks to narrow the scope of the hearing to accelerate the process.