
Daniel T. McKillop
Partner
201-896-7115 dmckillop@sh-law.comClient Alert
Author: Daniel T. McKillop
Date: April 23, 2026

Partner
201-896-7115 dmckillop@sh-law.com
On April 23, 2026, the United States Department of Justice and the Drug Enforcement Administration announced an order that marks the most consequential shift in federal cannabis policy in more than five decades. Acting Attorney General Todd Blanche signed an order that immediately places both FDA-approved cannabis products and state-regulated medical cannabis products into Schedule III of the Controlled Substances Act, while simultaneously setting in motion an expedited administrative process to consider broader rescheduling of cannabis for non-medical use.
This action follows President Trump’s December 18, 2025, Executive Order on Increasing Medical Marijuana and Cannabidiol Research, which directed the Attorney General to complete the rescheduling process as expeditiously as permitted by law. While the order delivers meaningful and long-awaited relief to medical cannabis operators, it notably does not extend that relief to the adult-use market.
The order announced today takes the following key actions:
Today’s action is the culmination of a multi-year federal review process that began in earnest in October 2022, when President Biden directed agencies to reassess cannabis’s Schedule I status.
In a prior post to my professional network, I discussed the two realistic paths forward for the administration: either completing the stalled DEA administrative process and issuing a reasoned Final Rule, or attempting to act without finishing the hearing. Today’s order effectively charts a hybrid course. The administration has taken immediate action on a narrower category of cannabis (FDA-approved and state-licensed medical products) while restarting and expediting a new administrative hearing process for the broader rescheduling question beginning June 29.
For state-licensed medical cannabis operators, the most immediate and tangible impact is tax relief. The removal of Section 280E as applied to these operators eliminates the prohibition on deducting ordinary and necessary business expenses, a change that has been among the most significant financial pressures on the licensed medical cannabis industry since its inception. Operators should work with their tax advisors promptly to evaluate the effect of this change on current-year tax positions, planned transactions, and financial reporting.
Medical operators should also begin preparing for the federal regulatory obligations that accompany Schedule III status, including DEA registration under the expedited pathway established by the order, and compliance with Schedule III rules governing recordkeeping, security, disposal, and labeling. Although the order integrates state licensing systems into the federal framework rather than displacing them, state-licensed operators must now plan for overlapping federal and state regulatory compliance.
Adult-use operators receive no direct relief from today’s order. Cannabis outside of the FDA-approved and state-licensed medical systems remains a Schedule I controlled substance, and Section 280E continues to apply to adult-use operators. The broader rescheduling question will now be addressed through the new DEA administrative hearing beginning June 29, 2026.
Adult-use operators should closely monitor the June 29 proceeding, evaluate whether to participate in the hearing, and continue planning for the possibility of broader rescheduling later in 2026 or beyond, subject to the outcome of that proceeding and any resulting legal challenges.
Today’s order is likely to face prompt legal challenges. Acting Attorney General Blanche invoked his authority to reschedule substances to carry out United States obligations under the Single Convention on Narcotic Drugs as the basis for immediate rescheduling of the narrower medical category, rather than completing the traditional notice-and-comment rulemaking process already underway. Opponents of rescheduling are expected to argue that the action is inconsistent with the Administrative Procedure Act and the Controlled Substances Act, particularly in light of the pending hearing that the DEA has now terminated.
Courts may be asked to review the scope of the Attorney General’s authority to act in this manner, and preliminary injunctive relief or stays are possible. Operators should closely monitor these challenges, as litigation outcomes could affect both the timing and the durability of the relief provided by today’s order.
Even as to the categories of cannabis covered by today’s order, it is important to recognize what Schedule III placement does not do. Rescheduling to Schedule III, whether through today’s order or through the broader process that begins on June 29, will not:
Cannabis will remain a federally controlled substance, and criminal penalties and regulatory controls will continue to apply to activity outside of lawful channels.
This is a watershed moment for the medical cannabis industry and a meaningful step in the broader federal cannabis policy conversation, but it also introduces new compliance obligations and legal uncertainty. Operators, investors, and other industry participants should consider the following next steps:
Scarinci Hollenbeck’s Cannabis & Hemp Law practice group advises cannabis and hemp operators, investors, and ancillary businesses on federal and state regulatory compliance, licensing, tax structuring, corporate transactions, and litigation. We are actively advising clients on the implications of today’s order and on how to position their businesses for both the immediate changes and the broader rescheduling process scheduled to begin on June 29.
If you have questions about how today’s DOJ and DEA order affects your business, please contact Daniel T. McKillop, Partner and Chair of the Cannabis Law practice group at Scarinci Hollenbeck, or the Scarinci Hollenbeck attorney with whom you regularly work.
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