For a while now, cannabis lawyers and their clients have been living, albeit somewhat trepidatiously, with the assumption that cannabis would soon lose its 56-year standing as a Schedule I drug under the Controlled Substances Act. The regulatory fervor that began in October 2022, with President Biden issuing a directive to review cannabis scheduling, culminated yesterday when the DEA and DOJ issued a final order placing FDA-approved marijuana products and state-licensed medical marijuana in Schedule III, effective April 22, 2026.
Since the Biden directive, operators and investors have been structuring around rescheduling, not waiting for it. So, the latest news, while historic, does not necessarily come as a surprise. Yet buried in the details are key aspects that did not go the way most people expected, which will have real consequences for transactions already in progress and those about to start.
A Partial Rescheduling, With Complications
The working assumption was that rescheduling would be comprehensive or it would not happen. Instead, the order draws a line through the middle of the industry. State-licensed medical marijuana is now Schedule III. State-licensed adult-use cannabis is still Schedule I. For operators that hold both types of licenses, which represent a large portion of the MSO universe, that distinction is not academic. They now operate across two federal schedules with no guidance yet on how the analysis differs for each side of their business.
That creates a diligence problem that did not exist last week. A target’s regulatory compliance posture looks different depending on which licenses you are examining. Representations that seemed straightforward need to be thought through again. Additionally, the indemnification structure in any deal involving a dual-license operator should reflect that the answer to “what schedule are we in?” is no longer singular.
Procedure Is Substance Here
The administration used a treaty-based legal authority, 21 U.S.C. § 811(d)(1), to move without ordinary notice-and-comment rulemaking. That is a recognized legal pathway, but it is not immune from challenge. The order includes a severability clause, which suggests DOJ was not entirely confident every provision would survive judicial scrutiny. For any transaction with a regulatory closing condition tied to federal cannabis status, the possibility of a court-imposed stay belongs in the risk analysis, even if the probability is not high.
A New Federal Hook in Every State-Licensed Transaction
The order creates a federal DEA registration requirement for state-licensed operators and, importantly, ties that federal registration directly to the underlying state license. If the state license lapses, is suspended, or is revoked, the federal registration suspends automatically. That linkage is new, and it matters in acquisitions. Change-of-control provisions in state licenses, the timing of license transfers, and the gap between closing and new registration all take on added significance when federal status rides on the answer.
The 280E Retroactivity Question
Prospective tax relief for medical operators was expected, as Schedule III status eliminates the deduction disallowance imposed by Section 280E of the Internal Revenue Code. Less expected was the order’s encouragement to the Treasury Department to consider retroactive relief for prior taxable years. That language is precatory, not binding, and there is no guarantee the IRS follows through. But the potential value is significant for operators that have carried years of disallowed deductions. In deals being negotiated now, the question of who benefits if that relief materializes is worth resolving explicitly rather than leaving it to a purchase price adjustment dispute after closing.
What Comes Next
A June 29, 2026 administrative hearing will determine whether broader rescheduling follows. If it does, the calculus for adult-use operators changes considerably, and the current two-tier structure becomes a transitional footnote. If the proceeding bogs down, that structure becomes the operating reality for an extended period, with all of the complexity that entails.
Yesterday’s order is a meaningful development for a battered industry. But it raises as many new questions as it answers.
Thompson Coburn’s Corporate & Securities practice group and Cannabis industry group regularly advise clients on transactions in the cannabis and cannabis-adjacent industries. For questions about how these developments may affect your business or a pending transaction, please contact Michael Rosenblum.
