Federal reclassification of marijuana

The Justice Department said Thursday that marijuana products approved by the Food and Drug Administration, plus marijuana products sold under qualifying state medical licenses, are now in Schedule III at the federal level. (justice.gov) Acting Attorney General Todd Blanche announced the move on April 23, 2026, and the department said it takes effect immediately for those products. The same order also starts an expedited hearing process on a broader shift of marijuana from Schedule I to Schedule III. (justice.gov) Federal drug schedules are the government’s ranking system for controlled substances. Congress put marijuana in Schedule I in 1970, a category for drugs with no currently accepted medical use under federal law and the tightest restrictions. (congress.gov) The Biden administration had already opened the formal rescheduling process in May 2024, when the Drug Enforcement Administration published a proposed rule to move marijuana to Schedule III after a recommendation from the Department of Health and Human Services. That proposal said marijuana would still remain subject to federal criminal prohibitions and Food and Drug Administration rules even if the broader transfer is finalized. (federalregister.gov) The immediate financial issue for cannabis companies is Section 280E of the tax code. That provision blocks businesses trafficking in Schedule I or Schedule II controlled substances from taking ordinary business deductions and credits on their federal returns. (congress.gov) Congressional Research Service lawyers wrote in February 2026 that, if marijuana is moved out of Schedule I and into Schedule III, Section 280E would no longer bar marijuana businesses from taking those deductions and credits. For multi-state operators that now pay tax on income before rent, payroll, and marketing are deducted, that is the biggest balance-sheet change. (congress.gov) The research rules also change. Schedule I drugs can generally be produced, possessed, and studied only in federally approved research settings, while the Justice Department said Thursday that its new order is meant to expand research on safety and efficacy for medical marijuana products. (congress.gov; justice.gov) What does not change is just as important: marijuana is still illegal under federal law outside authorized channels. Congressional Research Service said in December 2025 that most criminal and collateral consequences would remain even under Schedule III, and medical use under federal law still turns on Food and Drug Administration approval and valid prescriptions. (congress.gov) That leaves state regulators and cannabis businesses with a split system for now: immediate federal relief for approved and state-licensed medical products, and a June 29, 2026 hearing that will decide whether the wider market also moves out of Schedule I. (justice.gov)