DOJ Reclassifies Medical Marijuana, Launches Broader Rescheduling and Federal Registration Process

On April 23, 2026, the U.S. Department of Justice (DOJ) issued a final reclassifying both state-licensed medical marijuana and FDA‑approved cannabis products from Schedule I to Schedule III under the Controlled Substances Act (CSA). As a result, state‑licensed medical marijuana operators covered by the order are no longer deemed to be trafficking in a Schedule I substance, and criminal exposure that previously flowed solely from Schedule I status is lifted for those activities. The order, signed by acting Attorney General Todd Blanche, also initiates an administrative process to consider broader marijuana rescheduling, establishes a streamlined federal Drug Enforcement Administration (DEA) registration pathway for state‑licensed medical marijuana operators, and permits research using marijuana produced under state medical marijuana programs.

The DOJ action follows a December 2025 executive directing federal agencies to expedite marijuana rescheduling and builds on a 2023 recommendation from the Department of Health and Human Services supporting reclassification. Notably, DOJ relied on its treaty‑compliance authority under the CSA—rather than traditional notice‑and‑comment rulemaking—allowing the reclassification to take effect immediately upon publication in the Federal Register.

Reclassification to Schedule III

The DOJ’s final order reclassifies two categories of cannabis products from Schedule I to Schedule III under the CSA state-licensed medical marijuana products and FDA-approved cannabis‑derived drug products. In doing so, DOJ formally recognizes that these products have an accepted medical use and a lower potential for abuse than substances historically grouped alongside heroin and LSD. Schedule III substances remain subject to federal regulation but are treated as presenting a low to moderate risk of dependence, placing medical marijuana in the same general category as certain prescription pain medications (e.g., Tylenol with codeine) and steroids. The reclassification reflects a federal posture that defers to state medical marijuana licensure as the basis for lawful activity under Schedule III, while stopping short of establishing affirmative federal legalization or an approval framework independent of state law.

Broader Rescheduling Process Initiated

Importantly, the order does not extend to adult‑use or recreational cannabis activity, which remains classified as Schedule I. However, the DOJ order launches a separate, expedited administrative process to consider broader marijuana rescheduling under the CSA. To that end, the DOJ and DEA have announced that proceedings will begin on June 29, 2026, to collect evidence and expert input on whether a systemwide reclassification is warranted. Until that review is completed, recreational marijuana remains a Schedule I substance.

Expedited DEA Registration Pathway for State‑Licensed Operators

The order also establishes a new, streamlined pathway for state‑licensed medical marijuana operators to obtain federal registration with the DEA, a prerequisite for lawfully handling Schedule III controlled substances. In the interim, the order provides that state‑licensed medical marijuana entities that submit DEA registration applications within 60 days of the order’s publication may continue operating under their existing state licenses while their applications are pending. The DEA is directed to process these applications on an expedited basis, with a target review period of six months. The order does not expressly address the status of state‑licensed medical marijuana operators that do not seek DEA registration and such operators may therefore face residual federal risk associated with unregistered handling of a Schedule III controlled substance.

Expanded Research Through State‑Licensed Products

The final order removes a long‑standing barrier to marijuana research by expanding lawful access to state‑licensed medical marijuana products for scientific study. Under the new framework, researchers may obtain marijuana and marijuana‑derived products directly from state‑licensed medical marijuana operators, provided that both the researcher and the supplying entity hold the appropriate DEA registrations. This represents a significant departure from prior federal policy, which limited research to marijuana supplied through federally designated sources, a framework that has historically constrained both the availability and quality of cannabis products available for study. By permitting research using products actually distributed through state medical marijuana programs, the order facilitates studies that will more accurately reflect real‑world patient use and commercially available products.

Key Implications for Clients: Relief From Section 280E

The reclassification of state‑licensed medical marijuana to Schedule III removes the application of Section 280E of the Internal Revenue Code, which applies only to businesses engaged in trafficking Schedule I or II controlled substances. Prior to the DOJ’s action, marijuana businesses were therefore limited to deducting only cost of goods sold for federal tax purposes, resulting in an unusually heavy effective tax burden estimated at up to 70 percent. As a result of the order, eligible state‑licensed medical marijuana operators may now claim standard federal tax deductions, which commentators estimate could reduce effective tax rates to approximately 20–30 percent, materially improving after‑tax profitability and cash flow.

From a safety perspective, the prior tax regime often advantaged illicit operators, who bore no tax or compliance costs, allowing unregulated products to undercut licensed medical channels and limiting patient access to tested and controlled cannabis. As a result, a lower and more sustainable tax burden is expected to shift demand toward licensed operators, increasing the likelihood that medical patients obtain cannabis through regulated channels that emphasize testing, quality control, and patient safety.

In addition, the DOJ order directs the Secretary of the Treasury to consider whether retroactive relief from Section 280E liability may be appropriate for prior taxable years in which a business operated within a state‑legal medical marijuana program, raising the possibility of amended returns or refunds, subject to further guidance.

While the order materially improves the tax and regulatory posture of state‑licensed medical marijuana operations, and may ease access to traditional banking services for that segment, broader financial constraints persist, particularly for adult‑use cannabis and access to capital markets. Many financial institutions may continue to take a cautious approach toward businesses that engage in both medical and recreational activity. Absent further federal legislation, such as the CLIMB Act, access to national capital markets and U.S. stock exchanges is likely to remain limited.

Open Questions and What’s Next

• To qualify for expedited review and interim operating protections, applications must be submitted within 60 days of publication of the final order in the Federal Register—by June 29, 2026 (because the 60th day, June 27, falls on a Saturday, filings submitted on the next federal business day will be treated as timely).
• How the broader marijuana rescheduling process (outside of the medical marijuana context) unfolds remains uncertain, but the June 29 hearing will be critical.
• The order creates additional complexity in states where medical and adult‑use markets are intertwined and provides limited clarity on how federal regulators will treat products, facilities, or operators that participate in both regimes. The U.S. Department of the Treasury and the Internal Revenue Service have announced that guidance is forthcoming to address the federal tax consequences of DOJ’s rescheduling order, including how § 280E applies to enterprises that simultaneously engage in activities involving Schedule I controlled substances (still subject to § 280E) and Schedule III activities (no longer subject to § 280E).
• The Treasury is also expected to address the potential availability of retroactive relief for prior taxable years, although the scope and timing of any such relief remain uncertain.