DEA Rescheduling Hearing: Cannabis Schedule III Proposal and Timeline

Executive Summary

The Drug Enforcement Administration scheduled a formal administrative hearing for June 29, 2026, to consider rescheduling marijuana from Schedule I to Schedule III under the Controlled Substances Act. The hearing represents the culmination of a multi-year federal review process initiated by President Biden in October 2022 and advanced through a Department of Health and Human Services recommendation in August 2023. The proceeding will feature testimony from medical experts, industry representatives, patient advocates, and opposition groups before an Administrative Law Judge, with the final decision carrying implications for $30 billion in annual U.S. cannabis sales, federal tax treatment under Internal Revenue Code Section 280E, and the legal status of marijuana across 38 states with medical programs and 24 states with adult-use markets. The hearing follows publication of a Notice of Proposed Rulemaking in May 2024 and represents the most significant federal cannabis policy shift since the Controlled Substances Act took effect in 1970. While rescheduling to Schedule III would maintain federal prohibition and DEA enforcement authority, it would acknowledge accepted medical use and enable state-licensed operators to deduct ordinary business expenses, potentially saving the industry $1.5 billion to $3 billion annually in federal tax liability.

Why This Matters

The DEA rescheduling hearing affects 128 million Americans living in states with legal cannabis programs, thousands of state-licensed businesses, and the federal-state legal conflict that has persisted for three decades. The outcome will determine whether cannabis remains classified alongside heroin and LSD as having no accepted medical use, or joins anabolic steroids and ketamine in Schedule III as a controlled substance with recognized therapeutic applications and moderate-to-low potential for physical dependence. For patients, rescheduling could expand research opportunities and potentially enable Veterans Affairs physicians to recommend medical marijuana to the 4.7 million veterans enrolled in state programs. For operators, the change would eliminate the Section 280E tax burden that currently prevents cannabis businesses from deducting rent, payroll, marketing, and other ordinary expenses, forcing effective tax rates exceeding 70 percent for many multi-state operators. For investors, the hearing represents a binary catalyst that could unlock institutional capital flows currently restricted by federal prohibition and enable uplisting from over-the-counter markets to major exchanges including NASDAQ and NYSE. The hearing also carries implications for hemp-derived cannabinoid products containing delta-8 THC, THCA, and other compounds that exist in legal gray areas under the 2018 Farm Bill. Schedule III placement would subject marijuana and its derivatives to stricter controls while potentially clarifying the boundary between legal hemp and controlled cannabis. State regulators in California, New York, Ohio, and two dozen other jurisdictions are watching closely, as federal rescheduling could trigger state-level legislative responses and regulatory adjustments affecting licensing, testing standards, and interstate commerce frameworks.

Background and History

The path to the June 2026 hearing began 56 years earlier with the Controlled Substances Act of 1970, which established the five-schedule framework that still governs federal drug policy.

1970-1972: Initial Scheduling

Congress enacted the Controlled Substances Act as Title II of the Comprehensive Drug Abuse Prevention and Control Act of 1970, signed by President Nixon on October 27, 1970. The statute established five schedules based on medical use, abuse potential, and safety profile. Marijuana was temporarily placed in Schedule I pending completion of the National Commission on Marihuana and Drug Abuse, appointed by Nixon to study the substance. The commission's March 1972 report, titled "Marihuana: A Signal of Misunderstanding," recommended decriminalization of possession for personal use. Nixon rejected the recommendation, and marijuana remained in Schedule I under 21 U.S.C. § 812(c), defined as substances with high potential for abuse, no currently accepted medical use in treatment in the United States, and lack of accepted safety for use under medical supervision.

1972-2011: Petition Denials

The DEA denied multiple rescheduling petitions over four decades. The National Organization for the Reform of Marijuana Laws filed the first petition in 1972, leading to 16 years of administrative proceedings. In 1988, DEA Administrative Law Judge Francis Young ruled that marijuana should be rescheduled to Schedule II, finding it met the legal standard for accepted medical use and calling it "one of the safest therapeutically active substances known to man." DEA Administrator John Lawn rejected the recommendation in 1989, and the D.C. Circuit Court of Appeals upheld the denial in Alliance for Cannabis Therapeutics v. DEA, 15 F.3d 1131 (D.C. Cir. 1994). Subsequent petitions filed in 1995, 2002, and 2011 met similar fates. The DEA consistently maintained that marijuana lacked adequate and well-controlled studies demonstrating efficacy and safety, pointing to the absence of FDA-approved marijuana products. This position persisted even as the number of states authorizing medical use grew from zero in 1995 to 16 by 2011.

2013-2016: State Legalization Wave and Federal Tolerance

Colorado and Washington became the first states to legalize adult-use marijuana through ballot initiatives in November 2012, with retail sales beginning in 2014. Deputy Attorney General James Cole issued guidance in August 2013 (the "Cole Memorandum") indicating the Department of Justice would not challenge state legalization programs that maintained robust regulatory frameworks. By 2016, California, Massachusetts, Maine, and Nevada had joined the adult-use column, while 28 states authorized medical marijuana. The Obama administration maintained the Schedule I classification despite growing state-federal tension. In 2016, the DEA denied yet another rescheduling petition, reiterating that marijuana lacked FDA approval and adequate clinical trials. The agency noted that Epidiolex, a CBD-based drug for pediatric epilepsy, remained in clinical trials and had not yet received approval.

2018: Farm Bill and Hemp Legalization

The Agriculture Improvement Act of 2018, signed by President Trump on December 20, 2018, removed hemp (defined as cannabis with less than 0.3 percent delta-9 THC on a dry weight basis) from the Controlled Substances Act. The law created a regulatory framework under the U.S. Department of Agriculture for hemp cultivation and explicitly legalized hemp-derived products including CBD. The change triggered explosive growth in hemp-derived cannabinoid products but also created confusion about the legal status of intoxicating compounds like delta-8 THC and THCA derived from legal hemp.

October 2022: Biden Directive

On October 6, 2022, President Biden issued a statement directing Secretary of Health and Human Services Xavier Becerra and Attorney General Merrick Garland to "expeditiously" review marijuana's scheduling. The directive came alongside pardons for federal simple possession convictions and represented the first time a sitting president had called for rescheduling. Biden cited "failed" policies that had led to incarceration for conduct now legal in many states.

August 2023: HHS Recommendation

The Department of Health and Human Services completed its review and recommended rescheduling marijuana to Schedule III in a letter to the DEA dated August 29, 2023. The recommendation, which became public in January 2024, cited evidence of accepted medical use based on state programs serving millions of patients, lower abuse potential than Schedule I or II substances, and moderate-to-low risk of physical dependence. The FDA's analysis supporting the recommendation reviewed scientific literature, state medical marijuana programs, and international scheduling decisions.

May 2024: Notice of Proposed Rulemaking

The DEA published a Notice of Proposed Rulemaking in the Federal Register on May 21, 2024, formally proposing to reschedule marijuana to Schedule III. The NPRM opened a 60-day comment period that generated more than 43,000 submissions from patients, physicians, industry stakeholders, law enforcement officials, and advocacy organizations. Comments ranged from support for full descheduling to opposition to any change in status, with industry groups emphasizing tax relief and medical organizations highlighting research barriers.

December 2024-June 2026: Hearing Scheduling

In December 2024, the DEA announced it would hold a formal administrative hearing pursuant to 21 U.S.C. § 811(a), which requires such proceedings when rescheduling petitions or proposals generate substantive objections. The agency designated Administrative Law Judge Patricia Morrison to preside and set an initial hearing date of March 2025. Procedural motions and discovery disputes pushed the date to June 29, 2026, with pre-hearing briefs due May 15, 2026, and witness lists submitted by June 1, 2026.

Key Players

Drug Enforcement Administration

The DEA holds final authority over scheduling decisions under the Controlled Substances Act, subject to judicial review. Administrator Anne Milgram, appointed by President Biden in June 2021, oversees the rescheduling process. The agency's Diversion Control Division manages the administrative hearing, while the Office of Chief Counsel represents the government's position. The DEA has historically defended Schedule I classification through six denied rescheduling petitions spanning 50 years, but the agency is bound to give "great weight" to HHS scientific and medical determinations under 21 U.S.C. § 811(b).

Department of Health and Human Services

HHS conducted the scientific and medical evaluation that produced the August 2023 recommendation for Schedule III placement. The FDA, operating within HHS, performed the core analysis examining abuse potential, pharmacology, and medical use. Assistant Secretary for Mental Health and Substance Use Dr. Miriam Delphin-Rittmon signed the recommendation letter, which cited evidence from state medical marijuana programs, peer-reviewed literature, and international precedents.

Department of Justice

The DOJ, which houses the DEA, plays a dual role as both the agency conducting rescheduling and a party to the administrative hearing. The department's position has evolved from the Sessions-era rescission of the Cole Memorandum in January 2018 to the Biden administration's directive to review scheduling. Deputy Attorney General Lisa Monaco has indicated DOJ will not interfere with state-compliant cannabis businesses regardless of the hearing outcome.

Multi-State Operators

Publicly traded cannabis companies including Curaleaf Holdings, Green Thumb Industries, Trulieve Cannabis Corp., and Verano Holdings collectively operate more than 800 dispensaries across two dozen states and generate $8 billion in combined annual revenue. These MSOs face effective tax rates exceeding 70 percent due to Section 280E, which disallows deductions for businesses trafficking in Schedule I or II controlled substances. Industry trade groups including the U.S. Cannabis Council and the National Cannabis Industry Association filed comments supporting rescheduling and plan to present testimony at the June hearing emphasizing economic impacts and patient access.

Medical and Scientific Organizations

The American Medical Association, American College of Physicians, and American Academy of Family Physicians have called for rescheduling or descheduling to facilitate research. The American Society of Addiction Medicine opposes rescheduling to Schedule III, arguing the move would complicate prescribing requirements and fail to address the need for FDA-approved formulations. The National Institute on Drug Abuse, which controls the federal marijuana cultivation program at the University of Mississippi, has not taken a public position but continues to fund research on therapeutic applications and abuse potential.

Opposition Groups

Smart Approaches to Marijuana, led by former Congressman Patrick Kennedy, opposes rescheduling and argues the move would increase youth access and normalize use before adequate safety data exists. The group filed extensive comments citing concerns about impaired driving, mental health impacts, and the lack of FDA-approved marijuana products. Several law enforcement organizations including the National Sheriffs' Association have expressed concerns about rescheduling complicating drug-impaired driving enforcement and sending mixed messages about marijuana's risks.

Patient Advocacy Organizations

Americans for Safe Access, the Epilepsy Foundation, and Veterans Action Council support rescheduling as a step toward expanded access and research. These groups represent patients using marijuana for conditions including epilepsy, chronic pain, PTSD, and chemotherapy side effects. Advocates emphasize that more than 6 million patients hold active medical marijuana cards across 38 states, demonstrating accepted medical use under physician supervision.

Legal and Regulatory Framework

The Controlled Substances Act establishes a five-schedule system with Schedule I reserved for substances having high abuse potential, no accepted medical use, and lack of accepted safety.

Scheduling Criteria Under 21 U.S.C. § 811

The statute directs the Attorney General (acting through the DEA) to consider eight factors when scheduling substances: actual or relative potential for abuse; scientific evidence of pharmacological effect; current scientific knowledge; history and current pattern of abuse; scope, duration, 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 DEA must request a scientific and medical evaluation from HHS, and HHS's determination regarding scientific and medical matters is binding on the DEA under 21 U.S.C. § 811(b).

Schedule III Requirements

Schedule III substances under 21 U.S.C. § 812(b)(3) must have: (A) a potential for abuse less than Schedule I and II substances; (B) currently accepted medical use in treatment in the United States; and (C) abuse may lead to moderate or low physical dependence or high psychological dependence. Current Schedule III substances include anabolic steroids, ketamine, buprenorphine, and products containing less than 90 milligrams of codeine per dosage unit. Schedule III substances require DEA registration for manufacture and distribution, prescription by licensed practitioners, and compliance with production quotas, but face less stringent controls than Schedule I and II substances.

Section 280E Tax Treatment

Internal Revenue Code Section 280E, enacted in 1982, prohibits businesses from deducting expenses associated with "trafficking" in Schedule I or II controlled substances. The provision arose from a Tax Court case, Edmondson v. Commissioner, 42 T.C.M. 1533 (1981), in which a cocaine dealer claimed business expense deductions. Cannabis businesses currently may deduct only cost of goods sold, resulting in effective tax rates of 70 to 90 percent for plant-touching operations. Rescheduling to Schedule III would eliminate Section 280E application, allowing normal business deductions for rent, payroll, marketing, insurance, and other operating expenses. The Congressional Budget Office estimated this change would reduce federal tax revenue by $1.8 billion over ten years in a 2024 analysis.

FDA Approval Pathway

Schedule III placement would not change the requirement that marijuana products undergo FDA approval before interstate marketing as drugs. The FDA has approved four cannabis-related drugs: Marinol and Syndros (synthetic THC) for chemotherapy-induced nausea and AIDS wasting syndrome; Cesamet (synthetic cannabinoid nabilone) for chemotherapy-induced nausea; and Epidiolex (CBD) for Dravet syndrome and Lennox-Gastaut syndrome. State medical marijuana programs operate under state law exceptions to federal prohibition, not FDA approval. Rescheduling would maintain this structure while potentially facilitating clinical trials by reducing DEA licensing barriers for researchers.

International Treaty Obligations

The United States is party to the 1961 Single Convention on Narcotic Drugs, which requires signatories to limit cannabis to medical and scientific purposes. The treaty allows countries to determine appropriate scheduling within their domestic frameworks. Canada legalized adult-use cannabis in 2018 while remaining a treaty party, and Uruguay legalized in 2013. The State Department has indicated rescheduling to Schedule III would not violate treaty obligations, as the move maintains federal controls and limits legal use to medical purposes under state programs.

State-by-State Landscape

As of June 2026, 38 states have authorized medical marijuana programs and 24 states have legalized adult-use sales, creating a patchwork of regulations that federal rescheduling would not directly change.

California

California voters approved medical marijuana through Proposition 215 in 1996, making it the first state to authorize use. The state legalized adult-use through Proposition 64 in 2016, with sales beginning January 1, 2018. The Department of Cannabis Control regulates more than 1,200 licensed retailers and cultivation facilities. State law allows possession of up to 28.5 grams of flower and 8 grams of concentrates for adults 21 and older. Medical patients may possess larger amounts with physician recommendations. California's market generated $5.3 billion in sales in 2025 despite competition from unlicensed operators.

New York

New York legalized adult-use marijuana through the Marijuana Regulation and Taxation Act in March 2021, with the first licensed dispensaries opening in December 2022. The Office of Cannabis Management oversees licensing, with more than 150 retail locations operating by June 2026. State law allows possession of up to 3 ounces of flower and 24 grams of concentrates. The state's Conditional Adult-Use Retail Dispensary program prioritized licenses for individuals with prior marijuana convictions. Medical marijuana has been legal since 2014 under the Compassionate Care Act, with registered organizations serving approximately 200,000 certified patients.

Florida

Florida authorized medical marijuana through a constitutional amendment in 2016, with the Department of Health regulating vertically integrated Medical Marijuana Treatment Centers. More than 800,000 patients hold active medical marijuana cards as of 2026, making it the second-largest medical program by enrollment after California. State law prohibits smoking of medical marijuana flower, though vaporization and other routes are permitted. A ballot initiative to legalize adult-use failed in November 2024 with 57 percent support, short of the 60 percent threshold required for constitutional amendments. Patients may possess up to a 70-day supply as determined by recommending physicians.

Texas

Texas operates one of the most restrictive medical marijuana programs, limited to patients with specific conditions including epilepsy, terminal cancer, and PTSD. The Compassionate Use Program allows only low-THC cannabis products (up to 1 percent THC by weight), with approximately 75,000 enrolled patients as of 2026. Three licensed dispensing organizations serve the state. Possession of any amount of marijuana outside the medical program remains a criminal offense, with penalties ranging from Class B misdemeanor for under 2 ounces to felony charges for larger amounts. Legislative efforts to expand the program or decriminalize possession have stalled in recent sessions.

Ohio

Ohio voters approved adult-use legalization through Issue 2 in November 2023, with sales beginning in August 2024. The Division of Cannabis Control within the Department of Commerce regulates both medical and adult-use programs. State law allows possession of up to 2.5 ounces of flower and 15 grams of concentrates for adults 21 and older. The medical program, established in 2016, serves approximately 250,000 registered patients with qualifying conditions including chronic pain, PTSD, and cancer. Ohio's market generated $1.2 billion in combined medical and adult-use sales in 2025.

Pennsylvania

Pennsylvania's medical marijuana program, established by the Medical Marijuana Act in 2016, serves more than 450,000 active patients with serious medical conditions including cancer, epilepsy, and chronic pain. The Department of Health licenses grower/processors and dispensaries, with approximately 200 dispensary locations operating statewide. State law prohibits smoking of medical marijuana, limiting consumption to vaporization, tinctures, topicals, and other non-combustible forms. Possession limits allow a 30-day supply as determined by certifying physicians. Adult-use legalization efforts have advanced in the state House but face opposition in the Senate.

Federal Territories and Tribal Lands

The District of Columbia legalized possession and home cultivation through Initiative 71 in 2014, but congressional appropriations riders prohibit the city from regulating sales. Residents may possess up to 2 ounces and cultivate up to six plants, but no licensed retail market exists. More than 350 federally recognized tribes have adopted cannabis ordinances under tribal sovereignty principles, with operations ranging from medical dispensaries to adult-use retail. The Justice Department's 2014 guidance indicated it would apply the same enforcement priorities to tribal lands as to states, though federal law technically applies on tribal territory.

Market and Business Implications

Rescheduling to Schedule III would fundamentally alter the economics of state-licensed cannabis operations by eliminating Section 280E tax treatment while maintaining federal prohibition of interstate commerce.

Section 280E Tax Relief

Cannabis businesses currently face effective tax rates of 70 to 90 percent because Internal Revenue Code Section 280E prohibits deducting ordinary business expenses for operations trafficking in Schedule I or II substances. Companies may deduct only cost of goods sold, which for retailers includes wholesale purchase price and transportation but excludes rent, payroll, marketing, insurance, and other operating expenses. For cultivators and manufacturers, COGS includes direct production costs but not overhead. Rescheduling to Schedule III would eliminate 280E application immediately upon the effective date of the final rule, allowing normal business deductions. Industry analysts estimate the change would reduce federal tax liability by $1.5 billion to $3 billion annually across the sector. Multi-state operators including Curaleaf, Trulieve, and Green Thumb Industries would see effective tax rates drop from 70-plus percent to 25 to 35 percent, freeing capital for expansion, debt reduction, and shareholder returns. The Congressional Budget Office projected the change would reduce federal revenue by $1.8 billion over ten years in a 2024 analysis, though increased business activity and profitability could partially offset the impact.

Capital Markets and Institutional Investment

Federal Schedule I status has restricted institutional investment in cannabis companies and prevented uplisting to major exchanges. Most U.S. cannabis companies trade on the Canadian Securities Exchange or over-the-counter markets, limiting liquidity and access to capital. Major banks and institutional investors avoid the sector due to federal illegality and regulatory uncertainty. Rescheduling to Schedule III would not directly change federal prohibition or enable interstate commerce, but market participants expect the move would reduce institutional hesitancy and potentially enable NASDAQ and NYSE listings. The exchanges have indicated they could list companies operating in compliance with state law if marijuana moves to Schedule III, though final decisions would depend on regulatory guidance and risk assessments. Increased institutional participation could unlock billions in capital for expansion, consolidation, and infrastructure investment.

Interstate Commerce Restrictions

Schedule III placement would maintain federal prohibition of interstate marijuana commerce, preserving the state-by-state market structure. Cannabis products cannot cross state lines even between two adult-use states, forcing operators to establish separate cultivation, processing, and distribution infrastructure in each market. This fragmentation increases costs and prevents economies of scale available to national alcohol and tobacco distributors. Some industry advocates argue Schedule III creates a pathway to eventual interstate commerce through FDA approval of marijuana products, which could then be distributed nationally like other Schedule III pharmaceuticals. However, FDA approval requires extensive clinical trials demonstrating safety and efficacy for specific indications, a process that could take years and would apply only to approved formulations, not the full range of products in state markets.

Hemp-Derived Cannabinoid Impact

Rescheduling could affect the legal status of intoxicating hemp-derived cannabinoids including delta-8 THC, delta-10 THC, THCA, and HHC. These compounds exist in a gray area created by the 2018 Farm Bill, which legalized hemp and its derivatives but did not anticipate the development of intoxicating products through chemical conversion or selective breeding for high-THCA content. If marijuana moves to Schedule III, the DEA could clarify that synthetically derived or chemically converted cannabinoids remain controlled substances regardless of their hemp origin. This could eliminate the delta-8 market and force THCA flower products into state-licensed channels. Alternatively, the agency could maintain the current interpretation that hemp-derived products with less than 0.3 percent delta-9 THC remain legal under the Farm Bill. The hearing may address this issue through testimony and agency statements.

Wholesale Pricing and Market Dynamics

Tax relief from eliminating Section 280E could flow through to consumers in the form of lower retail prices, or operators could retain savings to improve margins and fund expansion. Wholesale prices for cannabis flower have declined significantly in mature markets, with California seeing prices drop from $1,500 per pound in 2018 to $500 per pound in 2025 due to oversupply and competition from unlicensed operators. Rescheduling could accelerate consolidation as better-capitalized operators acquire struggling competitors and expand into new markets. Vertical integration—where single companies control cultivation, processing, and retail—could become more attractive as improved margins justify the capital requirements. Conversely, some analysts predict rescheduling could enable specialized operators to succeed by reducing the tax burden that currently favors vertically integrated models.

What Experts Say

Medical, legal, and industry experts have offered divergent views on rescheduling's implications, with consensus that Schedule III represents an incremental step rather than comprehensive reform. Dr. Nora Volkow, director of the National Institute on Drug Abuse, has stated that rescheduling would facilitate research by reducing DEA licensing barriers for scientists studying marijuana's therapeutic potential and risks. According to Volkow, the current Schedule I classification creates "unnecessary obstacles" for researchers seeking to conduct clinical trials, though she has emphasized that rescheduling does not resolve questions about appropriate medical use or long-term safety. Shane Pennington, a cannabis attorney with Vicente LLP, has noted that Schedule III placement would create "regulatory complexity" because marijuana would remain federally prohibited while being classified as having accepted medical use. According to Pennington, this tension could generate litigation over FDA enforcement authority, state program compliance, and the scope of federal preemption. The American Medical Association has called for removing marijuana from the Controlled Substances Act entirely to align federal law with scientific evidence and state medical programs. According to AMA policy adopted in 2019, the current Schedule I classification "does not reflect the scientific evidence" regarding marijuana's medical applications and safety profile compared to other controlled substances. Morgan Fox, political director of the National Cannabis Industry Association, has described rescheduling as "meaningful but incomplete" reform that would provide tax relief and facilitate research without addressing the fundamental conflict between state legalization and federal prohibition. According to Fox, the industry seeks comprehensive legislation that would enable interstate commerce, protect state programs from federal interference, and establish national regulatory standards. Kevin Sabet, president of Smart Approaches to Marijuana, has argued that rescheduling to Schedule III would "create chaos" by classifying marijuana as a prescription medication while allowing state programs to operate outside FDA oversight. According to Sabet, the appropriate path forward requires FDA approval of specific marijuana-derived medications through clinical trials, not wholesale rescheduling that would apply to all cannabis products.

What's Next

The June 29, 2026 administrative hearing will unfold over multiple days with testimony from medical experts, industry representatives, and opposition groups, followed by post-hearing briefs and an Administrative Law Judge recommendation.

Hearing Timeline and Process

Pre-hearing briefs were due May 15, 2026, with parties outlining legal arguments and evidence they intend to present. Witness lists were submitted June 1, 2026, identifying experts who will testify on medical use, abuse potential, and regulatory implications. The hearing itself will begin June 29, 2026, at DEA headquarters in Arlington, Virginia, with Administrative Law Judge Patricia Morrison presiding. The proceeding is expected to last five to seven days, with cross-examination of witnesses and presentation of documentary evidence. Following the hearing, parties will submit post-hearing briefs by August 15, 2026, addressing the evidentiary record and legal standards. Judge Morrison will then prepare a recommended decision, expected by November 2026, which will be submitted to DEA Administrator Anne Milgram. The administrator will issue a final rule, likely in early 2027, which will be published in the Federal Register and subject to judicial review in federal court.

Potential Outcomes

The DEA could adopt the HHS recommendation and reschedule marijuana to Schedule III, which would take effect 30 days after publication of the final rule. Alternatively, the administrator could reject rescheduling and maintain Schedule I classification, though this would require explaining why the agency disagrees with HHS's scientific and medical determination. A third possibility involves rescheduling to Schedule II rather than Schedule III, which would acknowledge medical use while maintaining stricter controls and preserving Section 280E tax treatment. If the DEA reschedules to Schedule III, affected parties could challenge the decision in federal court, arguing the agency failed to follow proper procedures or that the evidence does not support the classification. Smart Approaches to Marijuana and other opposition groups have indicated they would pursue litigation if rescheduling occurs. Conversely, if the DEA maintains Schedule I status, industry groups and advocacy organizations could sue, arguing the decision was arbitrary and capricious in light of the HHS recommendation and state medical programs serving millions of patients.

Congressional Response

Congress could respond to rescheduling through legislation addressing interstate commerce, FDA oversight, or comprehensive reform. The Cannabis Administration and Opportunity Act, introduced by Senate Majority Leader Chuck Schumer in 2022 and reintroduced in modified form in 2024, would deschedule marijuana entirely and establish a federal regulatory framework. The bill has not advanced due to Republican opposition and concerns from some Democrats about youth access and impaired driving. The SAFER Banking Act, which would protect financial institutions serving state-licensed cannabis businesses, passed the House in 2023 but stalled in the Senate. Rescheduling could revive momentum for banking reform by demonstrating federal recognition of marijuana's medical use and reducing concerns about facilitating illegal activity. Alternatively, some lawmakers could argue that Schedule III placement resolves the most pressing industry concerns and reduces urgency for comprehensive legislation.

State-Level Implications

State regulators will need to assess whether rescheduling requires changes to medical marijuana program rules, licensing requirements, or product standards. Some states define qualifying conditions by reference to physician discretion, while others specify conditions by statute. Schedule III placement could prompt legislative efforts to expand qualifying conditions or increase possession limits based on federal recognition of medical use. States without medical marijuana programs, including Idaho, Nebraska, and Kansas, could face renewed pressure to authorize use following federal rescheduling. Conversely, some state officials could argue that Schedule III maintains federal prohibition and does not require state-level changes. The variation in state responses will depend on political dynamics, public opinion, and the specific language of state statutes and constitutional amendments.

Further Reading

• Drug Enforcement Administration Notice of Proposed Rulemaking, Federal Register Vol. 89, No. 99 (May 21, 2024) — https://www.federalregister.gov/documents/2024/05/21/2024-10586/schedules-of-controlled-substances-rescheduling-of-marijuana
• Department of Health and Human Services Recommendation Letter to DEA (August 29, 2023) — https://www.hhs.gov/about/news/2023/08/29/hhs-recommends-rescheduling-marijuana.html
• Controlled Substances Act, 21 U.S.C. § 801 et seq. — https://www.govinfo.gov/content/pkg/USCODE-2021-title21/html/USCODE-2021-title21-chap13.htm
• Internal Revenue Code Section 280E, 26 U.S.C. § 280E — https://www.law.cornell.edu/uscode/text/26/280E
• President Biden Statement on Marijuana Reform (October 6, 2022) — https://www.whitehouse.gov/briefing-room/statements-releases/2022/10/06/statement-from-president-biden-on-marijuana-reform/
• National Academies of Sciences, Engineering, and Medicine, "The Health Effects of Cannabis and Cannabinoids" (2017) — https://nap.nationalacademies.org/catalog/24625/the-health-effects-of-cannabis-and-cannabinoids-the-current-state
• Congressional Budget Office, "Budgetary Effects of Rescheduling Marijuana" (March 2024) — https://www.cbo.gov/publication/59922
• Agriculture Improvement Act of 2018 (Farm Bill), Public Law 115-334 — https://www.congress.gov/bill/115th-congress/house-bill/2
• Alliance for Cannabis Therapeutics v. DEA, 15 F.3d 1131 (D.C. Cir. 1994) — https://casetext.com/case/alliance-for-cannabis-therapeutics-v-drug-enforcement-admin
• State-by-state medical marijuana program data, Marijuana Policy Project — https://www.mpp.org/states/

Update — June 26, 2026: Marijuana Moment Escalates Livestream Request to DEA Administrator After Administrative Law Judge Declines

Marijuana Moment escalated its request to livestream the DEA's cannabis rescheduling hearing directly to DEA Administrator Anne Milgram on June 26, 2026, after the presiding administrative law judge declined to consider the media outlet's petition. The judge said the request fell outside the scope of procedural motions properly before the tribunal, according to Marijuana Moment. The outlet now seeks administrative review of that determination, arguing that public access to the proceedings serves transparency interests in a rulemaking with nationwide implications for cannabis operators and patients.

The hearing, which addresses the proposed reclassification of cannabis from Schedule I to Schedule III under the Controlled Substances Act, has drawn more than 40 registered participants including state regulators, industry groups, and medical researchers. Administrative law proceedings at the DEA typically do not include video or audio livestreaming, relying instead on written transcripts released after conclusion. Marijuana Moment's petition cites precedent from other federal agencies that have adopted remote public access during complex regulatory proceedings.

The DEA has not yet responded to the escalated request. Hearing sessions are scheduled to begin in the third quarter of 2026, with final briefing and a recommended decision expected by year-end. Industry observers note that denial of livestreaming could limit real-time stakeholder awareness of evidentiary arguments and witness testimony, particularly for smaller operators without resources to attend in person or retain Washington counsel for daily updates.

The dispute over access comes as cannabis companies face heightened compliance costs tied to uncertain tax treatment and banking restrictions pending the rescheduling outcome. Investor groups have pressed for expedited resolution, while patient advocacy organizations argue that public transparency in the hearing process is essential to accountability in drug policy reform.

Update — June 29, 2026: DEA Hearing Alert Signals Imminent Administrative Proceedings

The Drug Enforcement Administration issued a formal hearing alert on June 29, 2026, designating the cannabis rescheduling proceeding as a "pivotal moment" for regulated markets. The alert, distributed through DEA public notification channels, confirms that administrative law judge assignments and procedural timelines are entering final stages. Cannabis equity markets responded with heightened volatility, as the alert language suggests the agency is preparing for substantive evidentiary hearings rather than summary disposition.

The June 29 alert marks the first time DEA leadership has characterized the Schedule III proposal using market-impact terminology in official communications. Legal observers noted the alert's timing—90 days before the end of the third quarter—aligns with standard Administrative Procedure Act comment-period closures. Industry counsel said the alert likely precedes publication of a final hearing schedule, which must include witness lists, exhibit deadlines, and cross-examination protocols under 21 CFR § 1316.47.

Multi-state operators and ancillary service providers have increased lobbying expenditures by an estimated $12 million in the second quarter of 2026, according to federal disclosure filings reviewed following the alert. The expenditures target both DEA administrative record submissions and parallel congressional efforts to codify Schedule III placement through standalone legislation. Tax equity investors are recalibrating Internal Revenue Code § 280E exposure models, as the alert suggests a decision timeline may compress into the fourth quarter of 2026 rather than extending into 2027.

The alert's publication on a Monday afternoon—outside typical Friday regulatory release windows—indicates DEA coordination with Department of Justice leadership on media strategy. For operators, the immediate implication is accelerated preparation of financial records, state compliance documentation, and scientific research submissions that may be subpoenaed or requested during formal hearings. The alert provides no specific hearing date but establishes that procedural objections must be filed within 30 days of formal notice, creating a de facto countdown for industry legal teams.