DEA Releases Rescheduling Hearing Transcripts as Industry Weighs In

Transcript Release Follows Six-Month Delay

The DEA published over 1,200 pages of hearing transcripts more than eight months after the two-day administrative proceeding concluded in December 2025. Administrative Law Judge John Mulrooney presided. The hearing featured testimony from the Department of Health and Human Services, the Food and Drug Administration, academic researchers, state regulators, and cannabis industry representatives.

The transcripts include cross-examination exchanges that weren't previously available in summary form. Legal observers note that these records will form the evidentiary foundation for any final rescheduling determination by DEA Administrator Anne Milgram, who must issue a decision based on the administrative record.

Delays in releasing transcripts aren't unusual for DEA administrative proceedings, which typically require court-reporter certification and agency review before public release. Still, the extended timeline has frustrated stakeholders awaiting clarity on the rescheduling timeline.

HHS Testimony Reinforced Schedule III Recommendation

Health and Human Services officials testified that cannabis meets the statutory criteria for Schedule III classification based on accepted medical use and lower abuse potential compared to Schedule I and II substances. Dr. Rachel Levine, Assistant Secretary for Health, presented the agency's August 2023 scientific review, which concluded that cannabis has a currently accepted medical use in treatment in the United States.

That position directly contradicts the DEA's longstanding stance that cannabis lacks accepted medical use. FDA witness Dr. Patrizia Cavazzoni testified that the agency's analysis considered state-legal medical cannabis programs, peer-reviewed efficacy studies, and physician prescribing patterns as evidence of accepted medical use under the five-part test established in previous DEA proceedings.

Cross-examination by rescheduling opponents focused on the lack of FDA-approved cannabis products beyond Epidiolex, Marinol, and Syndros. HHS witnesses responded that the statutory test for "accepted medical use" doesn't require FDA approval of the substance itself—only that qualified experts recognize therapeutic applications.

Industry Groups Highlight Tax and Banking Implications

Cannabis industry representatives testified that Schedule III classification would eliminate Internal Revenue Code Section 280E tax penalties, which currently prohibit state-legal cannabis businesses from deducting ordinary business expenses. Aaron Smith, co-founder of the National Cannabis Industry Association, presented financial data showing that 280E compliance costs multi-state operators an average of 40-70% of gross revenue in effective federal tax rates.

Testimony from regional trade groups emphasized that rescheduling wouldn't resolve all federal-state conflicts. Morgan Fox, political director of the Cannabis Trade Federation, testified that Schedule III cannabis would remain a controlled substance subject to DEA manufacturing quotas, distribution controls, and registration requirements that don't align with state regulatory frameworks.

Banking access emerged as a secondary concern. Witnesses noted that Schedule III status wouldn't automatically grant cannabis businesses access to traditional banking services, as the Bank Secrecy Act's money-laundering provisions would still apply to proceeds from activities that violate the Controlled Substances Act.

Opposition Testimony Focused on International Treaties

Witnesses opposing rescheduling argued that moving cannabis to Schedule III would violate U.S. obligations under the 1961 Single Convention on Narcotic Drugs, which requires cannabis to remain in the most restrictive control category. Kevin Sabet, president of Smart Approaches to Marijuana, testified that rescheduling could trigger diplomatic challenges and potentially require the United States to withdraw from or renegotiate international drug control treaties.

DEA's own witnesses acknowledged the treaty conflict but testified that the agency's rescheduling authority under the Controlled Substances Act is a matter of domestic law that doesn't require treaty modification as a prerequisite. Internal debate over whether the State Department should be consulted before finalizing any schedule change surfaced in the transcripts.

Law enforcement representatives, including former DEA administrators, testified that Schedule III classification would complicate drug interdiction efforts. Regulatory ambiguity around cannabis products that cross state lines was a key concern.

THCA and Hemp-Derived Cannabinoids Addressed in Cross-Examination

Cross-examination of FDA witnesses revealed that the agency hasn't determined whether THCA (tetrahydrocannabinolic acid) would be covered under a Schedule III cannabis designation. THCA is the non-intoxicating precursor to delta-9 THC that converts to THC through decarboxylation when heated. Hemp industry attorneys pressed FDA officials on whether THCA derived from hemp containing ≤0.3% delta-9 THC on a dry-weight basis would remain legal under the 2018 Farm Bill if cannabis is rescheduled.

FDA witnesses declined to provide a definitive answer. They stated that the legal status of THCA and other hemp-derived cannabinoids would depend on how the DEA defines "cannabis" in any final rescheduling rule. This uncertainty has significant implications for the intoxicating hemp market, which has grown rapidly since 2018 based on the delta-9 THC concentration threshold in the Farm Bill's hemp definition.

Witnesses from the U.S. Hemp Roundtable testified that rescheduling cannabis to Schedule III shouldn't affect hemp or hemp-derived products, as hemp is explicitly excluded from the Controlled Substances Act's definition of marijuana. DEA witnesses indicated, though, that the agency may need to issue guidance clarifying whether THCA, delta-8 THC, and other cannabinoids derived from hemp fall within the scope of controlled cannabis.

State Regulators Testified on Implementation Challenges

State cannabis regulators from California, Colorado, and Michigan testified that Schedule III classification would create operational conflicts between state licensing systems and federal DEA registration requirements. Nicole Elliott, director of California's Department of Cannabis Control, testified that DEA registration mandates under Schedule III would impose duplicative compliance burdens on state-licensed cultivators and manufacturers already subject to comprehensive track-and-trace systems.

Regulators expressed concern that DEA quota allocations for Schedule III substances could limit the amount of cannabis that state-legal businesses are permitted to produce. Federal production caps could override state market demands. Colorado's Marijuana Enforcement Division director testified that DEA quotas could force the state to deny or revoke cultivation licenses to remain in compliance with federal limits.

Tension over laboratory testing standards also surfaced. State regulators testified that DEA-registered laboratories would be required to meet federal quality-control standards that differ from state testing protocols, potentially requiring duplicate testing for compliance with both systems.

Timeline for Final Decision Remains Unclear

The DEA hasn't announced a deadline for Administrator Milgram's final decision on rescheduling, and the transcripts provide no indication of when the agency will act. Administrative law requires the DEA to consider the full hearing record, including post-hearing briefs submitted by parties, before issuing a final rule. Legal experts estimate that the decision could come as early as late 2026 or extend into 2027, depending on the agency's internal review process.

If the DEA moves forward with Schedule III classification, the final rule would be subject to a notice-and-comment period under the Administrative Procedure Act. That adds additional months to the timeline. Any final rule would also be subject to judicial review if challenged by opponents.

For complete background on the rescheduling process and what Schedule III would mean for state-legal cannabis markets, see the CannIntel topic hub on DEA cannabis rescheduling.