The rescheduling applies to two categories of marijuana: FDA-approved drug products containing marijuana (including those with naturally derived delta-9-THC), and marijuana that is subject to a qualifying state-issued medical marijuana license. All other marijuana, including recreational or “adult use” marijuana and synthetically derived THC, remains in Schedule I and continues to be subject to the full range of federal controlled substance restrictions. Hemp is unaffected as it is explicitly not classified as marijuana under federal law.
The order has several significant practical consequences. State-licensed medical marijuana businesses will no longer be subject to the deduction disallowance under Section 280E of the Internal Revenue Code, which previously prevented cannabis businesses from deducting ordinary and necessary business expenses because they were deemed to be trafficking in Schedule I or II controlled substances. Recreational cannabis businesses are not affected by this change and remain subject to 280E. The order also creates an expedited DEA registration pathway for state medical marijuana licensees, and requires that all imports and exports of rescheduled marijuana products still be made pursuant to a permit.
State medical licensees operating under this new framework should consult with Taft’s attorneys and tax counsel, as the order expressly notes that it does not constitute a final determination on federal tax liability for any particular business.
By way of background, the DEA acted without the usual notice-and-comment process based on the United States’ obligations under the United Nations Single Convention on Narcotic Drugs (1961), which permits the Attorney General to issue scheduling orders to satisfy international treaty commitments outside of standard rulemaking procedures. The Department of Health and Human Services also provided a supporting scientific recommendation.
A separate administrative hearing is scheduled to begin on June 29, 2026, to consider the broader rescheduling of all marijuana from Schedule I to Schedule III. That hearing, which replaces the Biden-era rulemaking process that the Trump administration terminated, will address whether marijuana beyond the two categories covered by this order, namely FDA-approved products and state-licensed medical marijuana, should be rescheduled more broadly.
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