DOJ Places FDA-Approved and State-Licensed Medical Marijuana in Schedule III: What Operators Need to Know

On April 22, 2026, Acting Attorney General Todd Blanche issued a final order placing two categories of marijuana in Schedule III of the Controlled Substances Act (CSA): (1) FDA-approved drug products containing marijuana, and (2) marijuana subject to a qualifying state-issued medical marijuana license). The order was issued under the Attorney General’s treaty-based scheduling authority in 21 U.S.C. § 811(d)(1), took effect immediately, and is accompanied by amendments to 21 CFR Parts 1300, 1301, 1308, and 1312.

Partial (Not Comprehensive) Rescheduling

Early media coverage has described the order as a rescheduling of “state-licensed marijuana,” but the order is considerably narrower. Because the Attorney General acted under Section 811(d)(1), which addresses only conduct required by the Single Convention on Narcotic Drugs (the “Single Convention”), the Acting Attorney General had discretion over how far to reach and elected to limit rescheduling to Schedule III to only two categories of marijuana:

• FDA-approved drug products containing marijuana; and
• Marijuana in any form, including extracts and naturally derived delta-9 THC, that is “subject to a state medical marijuana license.”

A new regulatory definition at 21 CFR § 1300.01 defines “state medical marijuana license” as a license issued by a state (or D.C. or federal territory) authorizing the licensee to manufacture, distribute, and/or dispense marijuana or marijuana-containing products “for medical purposes.”

The order is explicit about what is excluded: “any form of marijuana other than in an FDA-approved drug product or marijuana subject to a state medical marijuana license remains a Schedule I controlled substance.” That means marijuana that has not been channeled into an FDA-approved product, synthetic THC, and adult-use marijuana all remain in Schedule I.

Separately, Blanche announced on X that the DOJ was “[o]rdering a new, expedited hearing with set deadlines, to fully reschedule marijuana.” That proceeding is distinct from this order and will unfold on its own timeline.

Federal Registration

To continue U.S. compliance with the Single Convention, the rescheduling order creates a Drug Enforcement Administration (DEA) registration specifically for manufacturers, distributors, and dispensers of medical marijuana. This new registration mechanism appears designed to reduce duplication with existing state oversight:

• For purposes of satisfying DEA registration requirements, a state medical marijuana license constitutes conclusive evidence of state-law authorization to engage in the activity for which registration is sought.
• The DEA must register the applicant, unless registration would be inconsistent with the public interest or with the Single Convention.
• The DEA Administrator is directed to process applications submitted within 60 days of publication of the order within six months. Applicants who file within the 60-day window may continue to operate under their state license during the pendency of the federal application.
• Registrants may rely on state-required reports, records, order forms, labeling, packaging, disposal procedures, and physical security requirements “to the maximum extent permissible,” subject to inclusion of the statutory “warning that it is a crime to transfer the drug to any person other than the patient.”
• State-issued physician certifications function as the federal prescription substitute so long as they are dated, signed on the day of issuance, identify the practitioner, and contain the user’s name and address.
• Federal registration is automatically suspended if the underlying state license is suspended, revoked, or expired.
• State-licensed registrants are exempt from the DEA bulk-purchase and monopoly mechanism but are subject instead to a nominal-price purchase-and-resale arrangement designed to satisfy Article 23 of the Single Convention. Because non-medical marijuana remains a Schedule I substance under the CSA, it remains subject to the DEA bulk-purchase and monopoly mechanism.

Tax Relief

Section 280E of the Internal Revenue Code disallows deductions and credits for any trade or business “consist[ing] of trafficking in controlled substances . . . in a Schedule I or II.” The order addresses 280E directly, acknowledging that state medical marijuana licensees “will no longer be subject to the deduction disallowance imposed by Section 280E” as a consequence of the rescheduling. However, the order expressly disclaims any determination regarding federal tax liability and explicitly advises licensees to consult tax counsel. No implementation guidance from the Department of Treasury or IRS accompanied the rescheduling order. Operators should not alter tax reporting positions without professional advice.

The order also addresses retrospective 280E relief in measured terms. It “encourages 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.” As such, the order does not authorize refund claims or amended returns, and it creates no enforceable right against the IRS, but it has invited the Department of Treasury to provide limited tax relief to operators.

What Comes Next: Unanswered Questions

The rescheduling order marks a historic development in federal cannabis policy. Like most strides in this space, however, questions about scope, implementation, enforcement, etc. loom.

• Applying for DEA Registration: The order does not suggest there will be a medical marijuana-specific application. Instead, it details for applicants and DEA officials what documentation should be included in the registration application. Applications are available online. The question is not, therefore, “when can medical marijuana operators register”; the questions are whether to register, how state licensing structures may impact registration, and what impact failing to register will have on operators. More on those below.

To be clear, the CSA requires manufacturers and distributors of any controlled substance, including Schedule III substances, to obtain a registration from the DEA annually. A medical marijuana operator’s failure to obtain a DEA registration therefore bears federal compliance risk. This has been the case since the inception of state-legal marijuana markets.

• Dual-License Structures: Many states with both medical and adult-use marijuana programs have begun simplifying their licensure, issuing one license that permits the licensee to do business with medical and adult-use marijuana. Some programs, like Ohio, do not meaningfully distinguish between medical marijuana and adult-use marijuana until the point of sale. For dual-use licensees in Ohio, for example, there is a compelling argument that the dual-license framework – where marijuana and marijuana-derived products are generally compliant with both medical and adult-use requirements – satisfies the definition of a “state medical marijuana license.” However, if that argument is not successful, states like Ohio may be forced to make definitional changes or revive earlier distinctions between medical and adult-use marijuana to allow operators to comply with federal law.

By not addressing nuances in the varying state programs, the order creates potential compliance and documentation challenges that did not exist when all state-legal marijuana was uniformly Schedule I. Recordkeeping relating to medical-destined and adult-use-destined product may need to shift to reflect how the DEA and state agencies address this issue.

• Tax Relief for Non-Registrants: By rescheduling marijuana subject to a state medical marijuana license, at least medical marijuana operators should see immediate relief from 280E, subject to IRS guidelines and implementation details. The rescheduling order does not specify that medical marijuana manufactured by a non-DEA registrant remains Schedule I. However, that does not mean the IRS may not take a different approach, e., the IRS may impose 280E for medical marijuana operators that do not apply for DEA registration.
• DEA’s Purchase and Sale-Back: To comply with the Single Convention, the DEA is required to purchase harvested marijuana at a nominal price and sell it back to the harvesting entity or to a related or subsidiary entity for the same price, plus an administrative fee. We do not yet know what that administrative fee will be. The Single Convention has historically required the DEA to take possession of the controlled substance subject to purchase and sale-back requirements. The rescheduling order suggests medical marijuana will not be subject to that requirement, but significant questions remain on how this aspect of the program will be administered.
• Interstate Commerce: By implementing a DEA registration component based on state licensure, the order raises—but does not resolve—the question of whether state-licensed medical marijuana or marijuana products manufactured by DEA registrants may engage in interstate commerce. Even if a state-licensed medical operator achieves Schedule III compliance at the federal level, every state-regulated marijuana program currently prohibits the transport of state-regulated marijuana across state lines, which on its face forecloses interstate commerce regardless of the product’s federal scheduling status. But those state-level transport prohibitions may themselves be vulnerable to constitutional challenge, and the recent wave of Dormant Commerce Clause and preemption challenges to state restrictions on FDA-approved abortion medications offers a potential roadmap; similar theories could become available, at least in principle, if DEA-registered medical marijuana licensees sought to transport medical marijuana across state-licensed programs. How any such challenge would fare is an open question, but operators and counsel should expect the issue to be litigated.
• Banking Availability: It is unknown whether state-licensed medical marijuana operators that obtain a DEA registration to operate in a federally compliant manner will see increased availability of traditional banking services. Banks housing accounts of medical marijuana operators will almost assuredly require DEA registration as part of their due diligence, but it is difficult to imagine banks historically adverse to cannabis banking coming online now for only medical marijuana operators.
• Insurance Coverage: The rescheduling also opens questions on the insurance front that operators should begin considering. Health insurers have historically declined to cover marijuana on the ground that it is a Schedule I substance with no accepted medical use under federal law, but that rationale weakens for marijuana now placed in Schedule III under a qualifying state medical license, and operators may eventually see pressure on payers to cover medical marijuana the way they cover other Schedule III therapeutics.
• Employment Law: The employment law implications are potentially more immediate. Many state disability and medical-leave statutes require employers to accommodate an employee’s use of a lawfully prescribed medication. While courts have generally declined to extend those protections to marijuana because of its Schedule I status, that analytical foundation shifts once the product an employee is using is federally classified as Schedule III. Employers in Ohio and other medical marijuana states should anticipate renewed litigation over whether off-duty medical marijuana use must be accommodated and should review their drug-testing and accommodation policies with counsel before the first test case arrives.
• General Rescheduling: A final rule emerging from the parallel process addressing marijuana generally could move all marijuana—including adult-use marijuana—into Schedule III, which would substantially simplify the dual-channel analysis above and extend prospective 280E relief to adult-use operations.

Judicial challenge for any policy change seems inevitable in today’s political climate, though no such action has yet been brought. Likewise, any process that results in rescheduling all marijuana will likely be contested, either administratively or judicially. Any such changes, therefore, should be carefully considered in business planning.

The Frantz Ward cannabis attorneys Mia Garcia, Jean Smith-Gonnell, Tom Haren, Jim Ickes, and Keenan Jones are ready to answer any questions you may have about marijuana rescheduling, how it impacts your business, and how to navigate any regulatory changes.

This post is for general information and does not constitute legal or tax advice. If you have questions about how these recent rescheduling developments affect your business, please do not hesitate to reach out to one of the members of the Frantz Ward Cannabis Law and Policy team.