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The DOJ ordered cannabis moved from Schedule I to Schedule III, ending 56 years of the most restrictive federal classification and unlocking tax relief and research access.
By Hightree Team for The Canopy
April 25, 2026 · 5 min read
After 56 years, the federal government has changed its mind about marijuana.
Acting Attorney General Todd Blanche issued an order on April 23 moving state-authorized medical cannabis products from Schedule I to Schedule III under the Controlled Substances Act. The change took effect immediately — no waiting period, no phase-in, no ambiguity. Medical marijuana, in the eyes of the federal government, is no longer classified alongside heroin and LSD as a substance with "high potential for abuse" and "no accepted medical use."
This is the most significant shift in federal cannabis policy since Nixon signed the Controlled Substances Act in 1970. And it's going to change everything.
Schedule III is where the federal government puts substances like ketamine, testosterone, and Tylenol with codeine — drugs with legitimate medical applications, moderate abuse potential, and accepted therapeutic value. Cannabis now sits alongside them.
The practical impacts are enormous:
Tax relief. This is the big one for the industry. Under the infamous Section 280E of the Internal Revenue Code, cannabis businesses couldn't deduct normal business expenses from their federal taxes — rent, payroll, equipment, marketing. That penalty applied because cannabis was Schedule I. With the move to Schedule III, 280E no longer applies to state-licensed medical operations. The IRS has already announced that tax guidance for the cannabis industry is forthcoming. For operators who have been paying effective tax rates of 60-80%, this is transformational.
Research access. Scientists can now conduct clinical trials using cannabis products from state-licensed facilities instead of relying exclusively on federally grown supply from the University of Mississippi — a monopoly that researchers have criticized for decades as producing low-quality material that doesn't represent what patients actually use. Expect a wave of new clinical research to follow.
Federal registration. A new registration system for state-licensed medical cannabis entities has been established, creating a pathway for businesses to operate with explicit federal recognition rather than the legal gray zone that has defined the industry for years.
This is critical to understand: the order applies only to state-licensed medical cannabis. Recreational adult-use markets in the 24 states that have legalized them are not directly affected. "Unlicensed bulk marijuana" remains Schedule I.
Cannabis is not legalized. It's not decriminalized. It's not descheduled. Possession without a state medical authorization is still federally illegal. Interstate commerce is still prohibited. Federal banking restrictions, while likely to ease in practice, haven't been formally lifted.
As NORML's Deputy Director noted, the move "marks a historical reversal in federal cannabis policy" but "still falls well short" of the comprehensive reform needed to fully align federal law with the reality of legal cannabis in America.
The path to rescheduling has been long and winding:
The final push came from the Trump administration, which made medical cannabis rescheduling part of its broader regulatory agenda. Trump has also called on Congress to address the forthcoming federal ban on hemp products — a separate but related issue that the hemp industry has been fighting in courts across the country.
For medical cannabis vendors on Hightree, this is a watershed moment. The 280E tax relief alone could mean the difference between survival and profitability. Businesses that have been operating on razor-thin margins while paying taxes on gross revenue can now deduct the same expenses as any other legal business.
The research implications are equally significant. More clinical data means more credibility, more product innovation, and more confidence from consumers and regulators alike. The "we need more research" argument that has held back medical cannabis expansion in states like Tennessee, Texas, and Idaho just lost its most powerful counterpoint.
DEA administrative hearings on broader rescheduling begin on June 29, 2026. Those hearings will determine whether the Schedule III designation expands beyond state-licensed medical programs to include other cannabis products and markets.
In the meantime, expect a flurry of activity at the state level. States like South Carolina, which has an obscure medical cannabis law that could be triggered by federal rescheduling, are scrambling to figure out the implications. Maryland regulators have already expressed confusion about how the change interacts with existing state frameworks. Oklahoma, Missouri, Nevada, Vermont, Kentucky, and others are all assessing what rescheduling means for their markets.
The cannabis industry has been waiting for this moment for over half a century. It arrived not with a bang but with a bureaucratic order from the AG's office. That's how federal policy works — quietly, procedurally, and with enormous consequences.
Sources: NORML, NPR, Time Magazine, Colorado Public Radio, Marijuana Moment, Duane Morris LLP
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