Lit & Legit Business Briefs – Week 8
On April 23, 2026, the U.S. Department of Justice and Drug Enforcement Administration issued a Final Order immediately placing cannabis “subject to a state medical marijuana license” in Schedule III of the Controlled Substances Act, with effectiveness upon publication in the Federal Register on April 28, 2026. The Order also directs the DEA to restart formal rulemaking to consider the broader rescheduling of all cannabis. The pace of implementation has been rapid, and operators should be taking steps now to respond.
The effective date triggered a 60-day window for expedited DEA registration applications. The DEA portal opened on April 29, 2026, and applicants who file within this window may continue operating under their state licenses while their applications are under review. Operators should not underestimate the level of detail required, as the application calls for comprehensive disclosures regarding business operations, standard operating procedures, personnel, suppliers, and security controls.
Rescheduling to Schedule III introduces a new federal compliance overlay. State licensed medical cannabis operators will now be subject to Controlled Substances Act requirements, including registration, recordkeeping, reporting, and security obligations. This should be approached as a meaningful compliance buildout rather than a ministerial step.
The tax implications are significant. Because Section 280E of the Internal Revenue Code applies only to Schedule I and II substances, state licensed medical cannabis operators are expected to be able to deduct ordinary and necessary business expenses. The U.S. Department of the Treasury and Internal Revenue Service have indicated that guidance is forthcoming and will address expense allocation for mixed operators and transition rules tied to the 2026 tax year. Operators should begin modeling these impacts and implementing clear methodologies for allocating expenses between medical and non-covered activities.
Financial services access may improve, although not immediately. While marijuana remains a controlled substance, the shift to Schedule III lowers perceived risk and may encourage more financial institutions to provide services, particularly for ACH and other account to account transactions. Card network restrictions are likely to remain in place in the near term, and institutions will continue to scrutinize whether revenue is derived from Schedule III compliant activity or from non-covered operations.
At the same time, the DEA has initiated new rulemaking proceedings to consider broader rescheduling, with hearings scheduled from June 29 through July 15, 2026. Participation deadlines fall in May, and parties that previously sought to participate must submit new requests. The outcome of this process could further reshape the regulatory landscape.
For now, the industry should expect a two-tier framework. The Order applies only to state licensed medical cannabis and does not extend to recreational operations. Businesses engaged in both must carefully segregate operations, revenue, and compliance systems. Medical cannabis operators should move promptly to evaluate DEA registration, prepare application materials, and align compliance systems while also positioning to take advantage of tax and potential banking benefits.
Mandelbaum Barrett PC’s Cannabis, Hemp & Psychedelics attorneys are assisting clients with DEA registration strategy and application preparation, including development of standard operating procedures and coordination with tax advisors in light of these changes. Our team possesses a detailed understanding of laws associated with the production, sale, use, and regulation of a broad range of controlled substances — from cannabis and hemp to psychedelics.
If recent legal developments may affect your business, our team is available to discuss your specific circumstances. Whether you’re launching, growing, or addressing new regulatory challenges, Joshua S. Bauchner and Natalie C. Diaz provide practical, forward-looking guidance tailored to the needs of cannabis industry participants.
Looking for more insights like this? Visit our Lit & Legit Business Briefs series for additional guidance on cannabis business and compliance topics.