Prescription Change: DOJ Reclassifies State-Licensed And FDA-Approved Marijuana Products

Cannabis

On April 23, 2026, the U.S. Department of Justice (the DOJ) announced the issuance of a final order (the Order) immediately placing two categories of marijuana from Schedule I to Schedule III under the Controlled Substances Act (the CSA): (i) drug products containing marijuana that have been approved by the U.S. Food and Drug Administration (the FDA), and (ii) marijuana products subject to a qualifying state-issued medical marijuana license. The DOJ also announced a new expedited administrative hearing process to consider the broader rescheduling of marijuana from Schedule I to Schedule III.

The Order follows President Trump’s Executive Order on Increasing Medical Marijuana and Cannabidiol Research, issued on December 18, 2025, which directed the Attorney General to complete the rulemaking process related to rescheduling marijuana to Schedule III “in the most expeditious manner” in accordance with U.S. federal law. Further details of the executive order can be found in our previous Cassels Comment.

While the Order is a significant development in U.S. federal drug policy, it does not broadly reclassify marijuana, nor does it legalize marijuana for medical or recreational use under U.S. federal law.

The Order

For state-licensed medical marijuana operators, the Order establishes an expedited registration pathway with the U.S. Drug Enforcement Administration (the DEA). Applicants holding state medical marijuana licenses may submit proof of their existing state medical credentials as conclusive evidence of state law authorization. The Order further provides that the DEA “must grant registration unless doing so would be inconsistent with the public interest under the 21 U.S.C. 823 factors or with the requirements of the Single Convention”. In addition, applicants that submit applications within 60 days of publication may continue to operate in their state-licensed medical marijuana activities during the pendency of DEA review, and the Order directs the DEA to process such early applications within six months.

For persons who handle marijuana exclusively in the form of an FDA-approved drug product, the ordinary Schedule III controlled-substance framework applies. Such persons must obtain the appropriate DEA registration to handle those products, and they remain subject to the applicable Schedule III requirements governing recordkeeping, reporting, security, labeling, packaging, inventory, and other controls under the CSA and DEA regulations.

Notwithstanding the foregoing, the Order does not authorize adult-use marijuana activity. The DEA’s new registration provisions expressly do not authorize the manufacture, distribution, dispensing, or use of marijuana products for non-medical purposes. Marijuana outside an FDA-approved drug product or a qualifying state medical marijuana license remains subject to Schedule I controls. Further, synthetically derived THC is not covered by the Order and remains in Schedule I, and the Order does not alter the status of hemp given its exclusion from the definition of marijuana under the CSA.

Tax Implications

Another consequence of the Order is its potential impact on the application of Section 280E of the U.S. Internal Revenue Code (Section 280E). Given that under Section 280E, businesses trafficking in Schedule I or II controlled substances are generally prohibited from deducting ordinary business expenses, the Order states that qualifying state licensees should no longer be subject to that deduction disallowance. That being said, the Order does not make any determination regarding federal tax liability.

Next Steps

The Order is a momentous, though limited, shift in U.S. federal policy on marijuana. By creating a Schedule III framework for FDA-approved marijuana products and qualifying state-licensed medical marijuana activity, it offers potentially significant pathways for research and for state medical operators while also potentially easing Section 280E exposure for qualifying businesses.

The DOJ also signaled that broader change may still be forthcoming, stating in its press release that the DEA will hold a new administrative hearing beginning June 29, 2026 regarding the proposed broader rescheduling of marijuana to Schedule III. The DEA also withdrew the prior hearing notice and terminated those proceedings in order to pursue what it describes as a more expedited process.

Cassels will continue to monitor these developments closely.