By: Irina Dashevsky, Esq. and David Standa, Esq.
After a buzzy news day, the dust is beginning to settle as everyone digs into the implications of yesterday’s cannabis rescheduling order. As an initial point of clarification, cannabis, as a whole, has not been rescheduled from Schedule I to Schedule III of the Controlled Substances Act (CSA). That would be too easy, and nothing in the cannabis industry is too easy. Rather, “FDA-approved drug products containing marijuana, as well [as] marijuana in any form covered by a state medical marijuana license, be placed in Schedule III of the CSA.” The Order went into effect immediately. At the same time, the Order set an expedited administrative hearing for June 29, 2026, to address the possibility of rescheduling all cannabis from Schedule I to Schedule III. Because there is a forthcoming administrative hearing on the matter of rescheduling, it is unlikely that there will be challenges to the Order brought in the interim, given all such challenges can presumably be raised at the June 29th hearing.
The two categories of cannabis products that have been placed in Schedule III are products containing marijuana that have received FDA approval, of which there are very few, and marijuana “in any form” that is covered under a state-issued medical marijuana license. The second category is the critical category for the cannabis industry. To be clear, any cannabis not included in an FDA-approved product or not covered under a state medical license remains a Schedule I narcotic.
The disparate treatment of cannabis comes from the Attorney General’s authority to issue such an order. The Order relies on Section 811(d)(1) of the CSA and the United States’ obligation to comply with various treaties related to narcotics as the legal authority for rescheduling without going through the standard notice-and-comment procedures or evidentiary hearings required under Sections 811(a) and (b) of the CSA. Section 811(d)(1) directs the Attorney General to classify a controlled substance in the schedule “most appropriate to carry out” the country’s treaty obligations. Per the Order, the Attorney General determined that this limited rescheduling “ensures that the United States will continue to meet these obligations without delay or disruption.” The Order acknowledges the HHS’s recommendation that cannabis be placed in Schedule III because it has characteristics consistent with Schedule III criteria, but it explicitly states that “the plain and unambiguous statutory language [of Section 811(d)(1)] does not require the Administrator [of the DEA] to request a medical and scientific evaluation or scheduling recommendation from the [HHS], as is normally done pursuant to rulemaking under section 811(b ).”
As such, we (the country) are presently left with an entirely bizarre (and nonsensical) arrangement wherein the same plant and products appear on two different Schedules of the CSA. By way of illustration, if you possess a cannabis product that you obtained via a state-licensed medical dispensary, you are compliant with federal law. If you possess that same cannabis product via a state-legal adult-use license, you’ve violated Schedule I of the CSA and could be subject to the associated criminal penalties.
Beyond the disparate treatment of cannabis, the 33-page Order leaves us with a lot to unpack. The aim of this article is to give the reader an overview of some of the key aspects of the Order. We will be providing additional analysis on all of these items in the coming days and weeks, so please stay tuned.
KEY TAKEAWAYS
- Recreational cannabis remains Schedule I. The Order only reschedules FDA-approved products containing marijuana and marijuana covered by a state medical license.
- The administrative rulemaking process regarding rescheduling all of cannabis is officially restarted.
- Effective immediately, medical state-licensed cannabis is no longer subject to 280E.
- The Order asks the Treasury to consider “retrospective relief” from Section 280E for state medical operators for any year of operation (there is additional tax analysis about the Order here).
- The Order provides for a temporary expedited application process wherein State-licensed medical operators may apply for DEA registration within 60 days of publication of the final order in the Federal Register. DEA registration is not required for the tax relief provided by the Order, but registration would allow the limited ability to engage in interstate commerce through DEA-registered facilities. An expedited DEA licensing process appears to be a nice feature, but the benefits and drawbacks of such licensure require further analysis and consideration. Without a doubt, such licensure would come with certain newly added burdens, including (1) storage in a facility to which the DEA maintains access, (2) specifications with respect to cultivation areas, and (3) record-keeping and reporting requirements. It is also unclear how DEA will treat applicants that operate in a dual-license framework and whether individual state subsidiaries will be eligible for their own licenses or if each license must go through at the parent company level.
- Notably, those who obtain DEA registration will be required to transact with the Administration. The mechanics and extent of this transaction are presently unclear and could range from perfunctory to invasive, but “the rule establishes a nominal price purchase-and-resale mechanism through which the Administration acquires and resells registered manufacturers’ marijuana crops….” This mechanism is being put in place to allegedly “satisfy the Convention’s requirement that a government agency serve as the exclusive purchaser of cannabis production.”
- The Order does not legalize cannabis or decriminalize cannabis possession. As a result, many of the banking and access to capital issues that currently hinder state-legal cannabis operators are likely to remain. Nevertheless, this Order is another step in putting pressure on Congress to pass comprehensive reform legislation, such as the SAFE Banking Act and the CLIMB Act, to give this pivotal development more sense and shape.
While the Order represents a historic development in federal cannabis regulation, many practical questions remain unanswered, including how agencies will implement the new registration process, how tax authorities will apply Section 280E going forward, and how banking, IP, transactional, and employment issues will evolve under a Schedule III framework.
Greenspoon Marder’s Cannabis Law Group is actively analyzing all of these items and we will be providing updates as additional guidance becomes available and as industry practices begin to develop.
If you have questions about how this order may affect your business or operations, please reach out to our team.
