Medical Marijuana Rescheduling Q&A: Cutting Through the Noise
Since acting Attorney General Todd Blanch announced that state-legal medical marijuana would move to Schedule III, the commentary has been relentless — hot takes, doomsayers, and self-proclaimed experts flooding LinkedIn with conflicting interpretations. Much of it is speculative, overstated, and uneducated. This piece cuts through the noise and responds to the questions I have fielded the most about state medical programs.
The DOJ order shifts state-legal medical marijuana from Schedule I to Schedule III and establishes an optional DEA registration framework through which state-licensed operators may seek to participate. The confusion, on whether registration is mandatory, stems from confusion over two federal provisions: (1) 21 USC 811(d)(1)— a provision that suddenly everyone claims to understand, but few actually do; and (2) 26 USC 280E.
Q: Why does 21 USC 811(d)(1) matter now?
It largely didn’t for industry, until now. The industry spent years chasing legislative solutions, whether full legalization, SAFE Banking, or uplisting. This provision sat ignored, despite a handful of us arguing its importance. Legal and policy wonks like me were talking about 811(d)(1) to any operators and industry associations who would listen. All of them brushed us aside. Ironically, many operators who ignored us then are unlikely to obtain the maximum benefits from it now.
21 USC 811(d)(1) allows the Attorney General to “issue an order controlling such drug” if doing so is required by U.S. obligations under the Single Convention. There is an important distinction between that language and what actually occurred: that is, DEA didn’t reschedule a “drug”; instead, it rescheduled a program. Further, under U.S. law, what constitutes a “drug” is a determination to be made by FDA under the Food, Drug, & Cosmetic Act. These are likely two of the main arguments Smart Approaches to Marijuana (SAM) will make in its forthcoming litigation.
Q: Does 280E apply to state licensed medical operators who don’t register with DEA?
No, it does not. Tax code 280E prohibits deduction and credits for any trade or business trafficking in Schedule I or II substances. The order includes the following: “as a consequence of this rule, state licensees will no longer be subject to the deduction disallowance imposed by Section 280E.” Further, “[t]he final rule places in schedule III . . . marijuana subject to a state medical marijuana license.”
IRC 280E says nothing about DEA registration. The only qualification for schedule III placement, is that marijuana is subject to a state medical marijuana reprogram. Therefore, whether a state license operators is DEA registered is not a factor in whether it is operating with a schedule III substance. Only its state legality and license matters. For more information on the tax implications of this final rule, please read Vince Sliwoski’s blog post last week.
Q: What is the likelihood of opponents’ litigation prevailing?
This question should be the first one operators ask , but surprisingly, it rarely is. If SAM, or anyone else challenging this rescheduling order prevails, all of this will be for naught. As noted above, there are substantial legal questions as to whether DEA exceeded its authority in issuing this order. I believe there is greater than a 50% chance that this order is stayed and ultimately overturned. It is not 100% certain, however, which is why I recently published a blog post calling DEA registration a “Calculated Risk.” If you already have a medical license and all that is required is $10,000–$15,000 to hire an attorney and apply for registration, you have much better odds than playing Powerball or going to Vegas.
Q: Do international treaty obligations apply to state-licensed operators?
This depends on who you ask. The U.S. has maintained for years that international drug treaty obligations do not apply to state-licensed programs. That position, vocalized by Patt Prugh at the 2024 CND (though the video has since been removed), has not been refuted under this administration. The U.S. position is that the international drug treaties “take a ‘highly respectful’ stance toward member states’ domestic policies,” and much of those obligations apply, subject to each member state’s constitutional limits.
Even with the recent rescheduling order, state-licensed medical operators without DEA registration remain federally illegal and fall outside treaty scope (though this is a heavily contested issue within the international treaty community). In the face of Canada and Uruguay legalizing recreational marijuana, the Netherlands’ coffee shop model, and the Dutch and Swiss scientific adult-use pilot programs, it is difficult to argue that applying the Single Convention’s constitutional limitation to state-legal, non-DEA-registered medical marijuana programs is inappropriate. Under the U.S.’ current position, only those operators that join the federal DEA registration apparatus would be required to comply with U.S. treaty obligations. Whether DEA will take this stance, however, is unknown. Under the rescheduling order’s wording, DEA could certainly apply those obligations to state-legal, but non-DEA-registered, operators. That said, enforcing these obligations would be a nightmare for DEA. Where will the funding and staffing come from?
Q: How does the order affect dual-license operators?
Unevenly. Medical-only states stand to benefit most. Dual-license states, those with both medical and adult-use programs, face a harder path. The DEA application asks directly: “Will your firm be handling or dispensing recreational marijuana?” It would make sense if an honest “yes” results in denial. A fraudulent “no” would likely lead to worse.
There is no way DEA has the staff to personally review all applications, let alone implement the program commenced in the order. As such, it is likely DEA will take two steps to aid in review: (1) launch an initial AI review of all applications; and (2) deny as many applications as possible. Denying an application because the applicant also handles recreational marijuana seems obvious. That said, if you are a dual licensee, I still think it’s worth applying, just in case I am wrong.
Q: What happens with interstate commerce?
Interstate transfers between DEA registrants are theoretically possible, but FDA has not clarified whether they are permissible under the Food, Drug, & Cosmetic Act. Until it does, such transfers carry legal risk. Enforcement discretion may fill the gap in practice, but operators should not rely on that.
Q: Can a company move product between its own DEA-registered facilities in different states?
Possibly. Internal transfers between a company’s own registered locations may not constitute a “sale” or “marketing” activity under the FDCA, potentially keeping federal food and drug law out of the picture. If so, state law governs what can ultimately be sold. Transfers between separately owned DEA registrations in different states, would remain subject to the FDC&A, so FDA guidance on this will be important. All of this remains unsettled, and operators should seek counsel before acting on that assumption.
Q: What if state law prohibits interstate transport?
State law controls DEA registration indirectly. Registration requires a valid state license. If a state enforces a ban on interstate transport through license suspension or revocation, federal authorization goes with it. Operators need to map their state-level exposure before pursuing DEA registration. If the importing state denies that transport, Dormant Commerce Clause implications would certainly follow. If the exporting state prohibits such transfers, however, it remains unclear whether the Dormant Commerce Clause would apply. What is clear is that in states where legislation has already legalized interstate transport, such transfers will likely carry far less legal uncertainty upon federal legality.
Q: Where do tribal operators stand?
In limbo. The order does not clearly address tribal eligibility for DEA registration. The application references tribal law violations, but stops short of recognizing tribal licenses as a valid basis for registration. Tribal operators should consider applying while simultaneously pursuing advocacy. Waiting for clarity may mean waiting indefinitely.
Q: What current DEA regulations will apply to state-licensed, DEA-registered medical operators, and what won’t?
21 CFR 1318 applies treaty obligations to DEA registrants operating with marijuana, so this section will certainly apply. The rescheduling order largely punts other requirements to state medical marijuana programs, leaving operators without a clear roadmap. DEA has promulgated an extensive body of regulations applicable to controlled substances and those who handle them (see 21 CFR 1300 et seq.) and it is not yet clear which of those regulations will be required of registered state-licensed operators, and which will be displaced by state law requirements.
What DEA has clarified, at least in part, is that holding a valid state license will allow registrants to bypass much of 21 CFR 1301, the section governing the registration process itself. Beyond that carve-out, however, the picture remains murky.
For now, operators pursuing registration are effectively agreeing to enter a federal regulatory framework without knowing its full contours. This is another dimension of the calculated risk that registration represents.
Q: Does acknowledging violations of federal law prior to obtaining DEA registration put an operator at greater risk than already exists?
Presumably, state-legal medical operators have been filing taxes since inception, so responding to this question in the application will not suddenly make anything newly known to the federal government. Is it a risk? Yes. But is it more of a risk than what state-legal operators have already been doing? I don’t think so.
One thing all operators should do is ensure their employees (down to the budtenders) are comfortable with their names and Social Security numbers being provided to DEA. An operator can make this disclosure a condition of employment, but they should give employees advance notice and the option to leave if they prefer not to be disclosed. Disclosing without such notice could lead to legal liability.
Q: What does this mean for patients?
Very little has changed. Medical marijuana patients remain federally illegal because the drug has not received FDA approval. Until further guidance is issued, patients should proceed as if the order does not exist: do not travel across state or international borders with marijuana, and understand that restrictions on housing and firearm ownership remain fully in effect.
Q: What does this mean, if anything, for Congress overturning the intoxicating hemp products ban effective November 12th?
I believe this order makes it less likely that Congress will pass an amendment or extend the effective date of the hemp ban. Many Republicans already oppose reversing the ban, and rescheduling has not helped. I believe many will stand firm in opposing any changes, simply as a stand against this rescheduling move by the Administration.
Conclusion
The bottom line: rescheduling is meaningful, but its practical impact is narrow, uneven, and still developing. Anyone telling you otherwise is getting ahead of the facts. If you are navigating these questions and want an objective, experienced perspective from practitioners who have been working through these issues for years — not weeks — we are happy to offer a free consultation. Reach out to our team anytime.
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