Alabama Withdraws Opposition to Federal Marijuana Rescheduling

Alabama's Reversal Narrows State Opposition

Alabama filed a notice of withdrawal with the DEA on September 18, removing its objection to the proposed rescheduling rule. The state had been one of 17 states and multiple law enforcement organizations that requested a formal hearing before an administrative law judge to contest the reclassification. Sixteen state objections remain active.

The withdrawal filing didn't provide a rationale for the reversal. Alabama Attorney General Steve Marshall's office submitted the original objection in May 2026, arguing that Schedule III placement would conflict with state law enforcement priorities and create regulatory confusion. The state operates no legal medical marijuana program, though lawmakers authorized a limited CBD-only framework in 2021.

Alabama's reversal looks like political calculation. Governor Kay Ivey faces reelection in 2027, and polling shows 62% of Alabama voters now support medical marijuana legalization, according to a University of Alabama survey conducted in August 2026. Continued opposition to even federal rescheduling had become a liability in suburban districts.

DEA Hearing Timeline Remains Unchanged

The administrative law judge hearing is scheduled to begin October 14, 2026, with or without Alabama's participation. DEA Chief Administrative Law Judge John Mulrooney set the date in July after determining that the volume and substance of objections warranted a formal evidentiary proceeding under the Administrative Procedure Act.

The hearing will address three core disputes: whether marijuana meets the statutory criteria for Schedule III placement, whether the Department of Health and Human Services recommendation was procedurally sound, and whether Schedule III creates unresolvable conflicts with international treaty obligations under the Single Convention on Narcotic Drugs. Alabama's objection had focused primarily on the second and third questions.

Sixteen states remain as formal objectors, led by Nebraska, Idaho, and Kansas. The National Sheriffs' Association and the National Narcotic Officers' Associations' Coalition are also parties to the hearing. The proceeding is expected to last four to six weeks. Judge Mulrooney's recommended decision should arrive by January 2027.

Industry Impact Centers on 280E Tax Relief

Schedule III reclassification would eliminate Internal Revenue Code Section 280E restrictions, allowing cannabis businesses to deduct ordinary business expenses for the first time. Multi-state operators currently pay effective federal tax rates of 60-75% due to 280E, which prohibits deductions for businesses trafficking in Schedule I or II controlled substances. Schedule III substances are exempt.

The financial stakes are substantial. Curaleaf, the largest U.S. MSO by revenue, reported $312 million in non-deductible expenses in fiscal 2025. Rescheduling would reduce its federal tax liability by an estimated $94 million annually, according to the company's August 2026 earnings call. Industry-wide, analysts project $1.8-2.1 billion in annual tax savings for the top 15 publicly traded operators.

Alabama's withdrawal doesn't accelerate the timeline, but it removes one procedural obstacle. Had the state remained a party and later appealed an adverse ALJ decision, it could've extended litigation by 18-24 months. The state's exit narrows the coalition of objectors and may signal to other states that continued opposition carries political risk with diminishing legal upside.

State-Level Dynamics Shift in the South

Alabama's reversal is the first concrete sign that southern states are recalibrating their positions on federal cannabis policy. Mississippi, which operates a medical marijuana program approved by voters in 2020, never filed an objection. Louisiana, which expanded its medical program in 2025, also stayed out of the rulemaking process. Alabama's exit leaves Arkansas as the only southern state with an active medical program still formally objecting to Schedule III.

Political pressure is building regionally. North Carolina is expected to pass adult-use legalization in 2027 after the state legislature flipped in 2026 elections. Tennessee lawmakers introduced a medical marijuana bill in January 2026 that advanced further than any prior attempt. Even in Alabama, state Senator Tim Melson has pre-filed a comprehensive medical marijuana bill for the 2027 session with backing from 14 co-sponsors.

The withdrawal filing was submitted by Alabama Solicitor General Edmund LaCour, not Attorney General Marshall directly. That procedural detail suggests the reversal may have originated from the governor's office rather than the AG's policy shop, according to two sources familiar with Alabama executive branch dynamics who spoke on background.

What Comes Next in the Rulemaking Process

The DEA must issue a final rule within 90 days of the ALJ's recommended decision, per agency guidelines. If Judge Mulrooney issues his recommendation in January 2027, the DEA's final rule would be due by April 2027. The agency can adopt, modify, or reject the ALJ's findings, but it must provide a written rationale for any departure from the recommendation.

Remaining objectors have until September 30 to file pre-hearing briefs. The DEA will then release a consolidated statement of issues for the hearing, narrowing the scope to disputed questions of material fact or law. Parties can still withdraw after that date, but doing so forfeits the right to appeal the final rule in federal court.

For operators and investors, the key variable is whether any state appeals the final rule after the ALJ proceeding concludes. A federal circuit court appeal could delay implementation of Schedule III by 12-18 months, even if the government ultimately prevails. Alabama's exit reduces that risk by one potential appellant, but Nebraska and Idaho have both signaled they'll exhaust all legal remedies. For full background on this process, see the CannIntel topic hub on DEA rescheduling.

The next signal to watch: whether any other states withdraw before the September 30 brief deadline. If one or two more states exit, the political momentum shifts decisively in favor of rescheduling. If the coalition holds at 16, expect a protracted hearing and probable appeals in 2027.