In the days following the DOJ's April 24 order placing state-licensed medical cannabis in Schedule III, cannabis law firm Vicente LLP convened a webinar with partners from Kleinfeld, Kaplan & Becker, NORML, and the Marijuana Policy Project to work through what the order does and does not change for operators. The picture that emerged is more complicated than the headlines suggested.
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Section 280E and taxes
The most immediate commercial impact is the removal of Section 280E for qualifying state-licensed medical businesses, a change that takes effect with the order's publication in the Federal Register. Charles Alovisetti, a partner at Vicente, urged caution. "The most meaningful thing here is the 280E piece," Charles said. "Medical cannabis is moved to Schedule 3, which means that 280E is no longer appropriate. For adult use, you're going to have to wait for the hearing."
IRS guidance has been announced but not yet issued, and Charles noted that large operators carrying significant uncertain tax positions on their balance sheets are watching closely, particularly given that the order encourages Treasury to consider retroactive relief, a step that remains discretionary. For dual-license operators, how to allocate costs between medical and adult-use operations remains an open question.
Controlled substances
Although taxes is on everybody's list, Charles identified compliance with the Controlled Substances Act as the change with the broadest potential downstream effects. "If you are compliant with the Controlled Substances Act, it potentially opens up things like uplisting to US exchanges, institutional investors that will not invest in federally illegal businesses, and payment processing," he said. "People say their store will do 20 to 30% more business if they can accept credit cards."
The pathway to those benefits runs through DEA registration, a new process created by the order. Samantha Hong, a partner at Kleinfeld, Kaplan & Becker and former FDA counsel, walked through the mechanics. State-licensed MMJ businesses have 60 days from the Federal Register publication to apply, and those that do can continue operating under their state license while the application is pending, with DEA targeting a six-month processing window. Dispensaries would register as practitioners, the same category as traditional pharmacies. Cultivators and processors would register as manufacturers or distributors. DEA defers entirely to the scope of the state license, and registration is automatically suspended if the state license is lost.
"The CSA prohibits manufacturing, distribution, and dispensing of controlled substances except as authorized by law," she said. "Doing so without DEA registration would render these products unlawful. To date, DEA has exercised its enforcement authority and elected not to go after state-licensed operators, but now that there is a structured legal pathway, DEA may start to take enforcement action against those operators that elect not to register."
On the other side, registration formally puts operators on DEA's radar, requires compliance with a closed-loop system in which registered entities can only operate with other registered entities, and introduces an administrative fee currently set at $113 per kilogram, though Samantha noted that how DEA will calculate that fee across a dramatically expanded program remains unclear.
What happens to dual license holders?
Sean Hauser, who leads federal policy at Vicente, flagged the hybrid license question as one of the most pressing unresolved issues for mature cannabis states. In markets like Nevada, Oregon, Washington, and Colorado, where a large share of the industry operates under licenses covering both medical and adult use, the order provides no current guidance on inventory segregation or how tax implications will be handled across the dual-use structure. "There's going to be a key piece to unpack as an industry, and one where industry engagement on guidance is going to need to be a priority," Sean said.
The administrative hearing beginning June 29 will determine whether the broader rescheduling of all botanical cannabis from Schedule I to Schedule III moves forward. Adam Fine, another Vicente partner, described the timeline as expedited by the standards of formal federal rulemaking, with the hearing running through July 15 and a final rule possible by end of year if DEA meets its burden.
Paul Armentano, Deputy Director of NORML, urged caution on the timeline. The previous set of hearings, scheduled for January 2025, was stayed by a judge over concerns about DEA communications with participants and never took place. The last time DEA held hearings on cannabis scheduling, in 1986, a final order did not arrive until 1990. "I would hesitate to try to predict any sort of timeline as to when these hearings will be concluded, or more specifically, when the judge issues a decision," Paul said.
Adam Smith, Executive Director of the Marijuana Policy Project, raised a longer-term question about what the order means for the push toward adult-use legalization in states that have not yet made that move. "I'm a little concerned that this changes the incentives to push for adult use, and that ultimately is bad for people, for arrest rates," Adam said. "There are a lot of operators in medical states, and I wonder how this changes the incentive for those operators to push toward adult use."
For operators focused on the immediate picture, the DEA registration window is the most time-sensitive item on the table. The 60-day clock is ticking.
