Marijuana – Some Products Reclassified to Schedule III: What It Means, What It Doesn’t, and What Comes Next

On April 23, 2026, the U.S. Department of Justice and Drug Enforcement Administration (DEA) announced a long-awaited final order (Final Order) placing certain categories of marijuana and marijuana products into Schedule III of the Controlled Substances Act (CSA), in accordance with President Trump’s December 18, 2025, Executive Order on Increasing Medical Marijuana and Cannabidiol Research.

This is a landmark development in federal drug policy and one that carries significant legal and business consequences for entities in the pharmaceutical, cannabis, health care, tax, and regulatory compliance sectors. As with most everything touching marijuana, however, the details matter enormously.

What Does the Final Order Actually Do? 

Importantly, the Final Order does not broadly reclassify marijuana. Instead, it adopts a narrow and conditional rescheduling framework that includes several important caveats, added steps, and ongoing obligations that affected parties must understand.

What Marijuana or Marijuana Products Are Rescheduled?

The Final Order moves two specific categories of marijuana from Schedule I to Schedule III.

• First, it reclassifies drug products containing marijuana that have been approved by the U.S. Food and Drug Administration (FDA).
• Second, it reclassifies marijuana that is subject to a state-issued license to manufacture, distribute, and/or dispense marijuana for medical purposes only (a “state medical marijuana license”).

The Final Order covers marijuana as defined in the CSA, marijuana extracts, and naturally derived delta-9-tetrahydrocannabinol (Delta 9) from the cannabis plant, but only to the extent those substances are incorporated into an FDA-approved product or are covered by a qualifying state medical marijuana license.

DEA will hold a new hearing beginning on June 29, 2026, which will provide a timely and legally compliant pathway to evaluate broader changes to marijuana’s status under federal law.

What Marijuana or Marijuana Products Are Not Rescheduled?

Any form of marijuana other than an FDA-approved drug product or marijuana covered by a state medical marijuana license, such as state-licensed cannabis for adult recreational use, remains a Schedule I controlled substance. Individuals and entities handling such material remain subject to the full range of regulatory controls and criminal sanctions applicable to Schedule I substances.

Additionally, the Final Order does not apply to synthetically derived THC. Tetrahydrocannabinols that can be derived only through artificial synthesis, such as delta-10-THC, are expressly excluded and remain in Schedule I — a critical distinction for entities involved in the synthesis or sale of novel cannabinoid products.

Importantly, and to the dismay of industry advocates pushing for broad rescheduling, recreational marijuana (also referred to as adult-use marijuana under many state programs) is not covered by the Final Order. The rescheduling is expressly limited to FDA-approved products and state-licensed medical marijuana, consistent with the U.S.’ obligation under the Single Convention on Narcotic Drugs – a United Nations–sponsored international treaty governing the cultivation, production, distribution, trade, and transport of certain narcotic drugs, while setting out a system of regulatory controls to permit their medical and scientific use – to limit the use of these substances exclusively to medical and scientific purposes.

Moreover, the Final Order also does not affect the legal status of hemp, which remains excluded from the definition of marijuana under the CSA. It similarly does not alter the scheduling of any drug product containing marijuana or THC that was previously rescheduled out of Schedule I, such as Marinol or Syndros, nor does it impact any previously scheduled synthetic cannabinoids.

Who is Impacted by the Final Order?

Those individuals and entities directly impacted by the Final Order include: (i) state-licensed medical marijuana operators; (ii) handlers of FDA-approved products containing marijuana; and (iii) practitioners who prescribe FDA-approved products containing marijuana.

State-Licensed Medical Marijuana Operators

State-licensed medical marijuana entities face a concrete set of new federal requirements and should begin preparing now. The Final Order establishes an expedited DEA registration pathway for holders of state medical marijuana licenses. Importantly, Acting Attorney General Blanche expressly incorporated state licensing systems into the federal registration framework, which will hopefully streamline this new process and minimize disruption for patients and existing state medical marijuana systems. Under this process, applicants may submit their existing state credentials as conclusive evidence of state-law authorization, and the DEA must grant registration unless doing so would be inconsistent with the public interest or the requirements of the Single Convention. Entities that submit applications within 60 days of publication of the upcoming notice of hearing in the Federal Register may continue operating under their state licenses during the pendency of review, and the DEA has committed to processing those early applications within six months.

Registered state licensees will be subject to several operational requirements, though many are designed to minimize regulatory burden by leveraging existing state compliance infrastructure. State-required records, reports, and forms will be accepted to the maximum extent permissible. State-authorized medical marijuana certifications will be sufficient for dispensing purposes, provided they meet certain minimum criteria, including the patient’s name and address and the issuing practitioner’s information. Registrants may also rely on state-law labeling, packaging, disposal, and physical-security requirements in lieu of federal requirements, subject to inclusion of a statutory warning label.

Manufacturers, however, should be aware of a unique compliance obligation related to the Single Convention: all registered manufacturers must establish a nominal price for the purchase of their marijuana crops, and the DEA will execute a purchase-and-resale transaction at that price, plus an administrative fee, to satisfy the Convention’s requirement that a government agency serve as the exclusive purchaser of cannabis production. Manufacturers must store crops in a DEA-accessible facility until this transaction is complete.

Handlers of FDA-Approved Products

For those handling marijuana exclusively in the form of FDA-approved drug products, standard Schedule III regulatory requirements now apply. These include DEA registration for manufacturing, distributing, dispensing, importing, or exporting such products. Prescriptions are required prior to dispensing, and they must be issued for a legitimate medical purpose by a practitioner acting in the usual course of professional practice. Registrants must also comply with Schedule III requirements for recordkeeping, reporting, security, labeling, packaging, inventory, and disposal.  

Import and export activities involving these products will continue to require a permit, as the Final Order simultaneously amends DEA regulations to add these rescheduled marijuana products to the list of nonnarcotic Schedule III–V controlled substances subject to import/export permit requirements.

Prescribers of FDA-Approved Marijuana Products

Practitioners who intend to prescribe or dispense these products must hold a DEA registration applicable to Schedule III controlled substances. Entities that transfer marijuana to patients, including dispensaries, must separately register with the DEA as “practitioners” under 21 U.S.C. § 823(g), and such registration does not authorize the possession or dispensing of Schedule I controlled substances, including marijuana in forms other than an FDA-approved product or marijuana covered by a state medical marijuana license.

Each applicant for registration, other than government employees, must pay applicable fees, currently $3,699 annually for manufacturers, $1,850 annually for distributors, and $888 for a three-year dispenser registration (including pharmacies).

With respect to storage and physical security, registrants operating under state medical marijuana licenses may satisfy federal security requirements by complying with the security standards imposed by their state programs, rather than meeting the otherwise-applicable federal security regulations. This deference to state-level infrastructure extends to storage: registered manufacturers must maintain marijuana crops in a facility to which the DEA has access until the nominal-price purchase-and-resale transaction required by the Single Convention is complete, and the DEA retains the right to inspect such facilities on demand.

How Does the Rescheduling Impact Federal Income Tax Liabilities?

One of the most commercially significant consequences of this rescheduling is its potential impact on federal income taxation. Section 280E of the Internal Revenue Code disallows business expense deductions for entities engaged in trafficking in Schedule I or II controlled substances, other than the cost of goods sold. Because qualifying medical marijuana operations are now Schedule III, state licensees will no longer be subject to this deduction disallowance.

Importantly, Acting Attorney General Blanche encourages the Secretary of the Treasury “to consider providing retrospective relief from Section 280E liability for taxable years in which the state licensee operated under a state medical marijuana license.” Should the Secretary of the Treasury heed this encouragement, it would be a significant win for medical marijuana operators. Because the rescheduling is limited to only those FDA-approved products with marijuana or marijuana subject to a state medical marijuana license, Section 280E relief would not apply to entities operating solely under a state recreational or adult-use license.

Note, the final order did not address state and local taxes, which are not directly affected by this decision and we must await further guidance from the Internal Revenue Service, such as transitional rules for 2026. Further, if a dispensary sells both medical marijuana and adult recreational marijuana, it is uncertain how Section 280E would apply to such circumstances.

Taxpayers should consult with their own tax advisors as to impact of the rescheduling to them.

What are the Key Takeaways?

This order represents a historic but carefully bounded shift in federal marijuana policy. Only  FDA-approved marijuana products and state-licensed medical marijuana are rescheduled to Schedule III; recreational marijuana (even pursuant to a state program), unlicensed activity (i.e., bulk marijuana, marijuana extract, and Delta-9 material used to make FDA-approved products), and synthetically derived THC remain in Schedule I. Entities impacted by the order should consider taking the following steps:

• File DEA registration applications promptly. State medical marijuana licensees that submit applications within 60 days of publication may continue operating under their state licenses during DEA review. The DEA has committed to processing those early applications within six months.
• Assess Section 280E tax implications. State-licensed medical marijuana operators are no longer subject to Section 280E’s deduction disallowance and should consult tax advisors regarding both current and potentially retrospective relief.
• Prepare for new federal compliance obligations. Registered entities must comply with Schedule III requirements for recordkeeping, reporting, security, and labeling. Manufacturers must also prepare for the nominal-price crop purchase mechanism under the Single Convention and ensure crops are stored in a DEA-accessible facility.
• Maintain state license compliance. A DEA registration automatically suspends if the underlying state license is suspended, revoked, or expires. Any activity not authorized by or in violation of the CSA remains subject to administrative, civil, or criminal sanctions.
• Monitor the June 29, 2026, DEA hearing. Impacted entities should monitor this forthcoming hearing to stay abreast of any updates to the new processes outlined in the Final Order.

At Foley, we are tracking these developments closely and actively advising providers across the country on how to respond to this evolving legal landscape. From policy development and compliance strategy to enforcement defense, we are here to help. Please reach out to the authors, your Foley relationship partner, or to our Health Care Practice Group and Cannabis Industry Group with any questions.