DEA Concludes 11-Day Marijuana Rescheduling Hearing

Hearing Closed After Two Weeks of Expert Testimony

The DEA's administrative law judge heard from 57 witnesses between August 12 and August 26, 2026, in proceedings that produced more than 1,000 pages of sworn testimony. The hearing addressed the Department of Health and Human Services' August 2024 recommendation to reclassify marijuana as a Schedule III controlled substance, a category that includes drugs with accepted medical use and moderate-to-low potential for physical and psychological dependence.

Witnesses included pharmacologists, clinicians, state regulators, and industry representatives. DEA structured the hearing around five core questions: whether marijuana has currently accepted medical use in treatment in the United States, whether it has a potential for abuse less than Schedule I and II substances, and whether the evidence supports a finding of moderate or low physical and psychological dependence liability relative to Schedule II drugs.

The administrative law judge hasn't set a deadline for issuing an initial decision. Under DEA regulations governing formal rulemaking, the judge will submit recommended findings to the DEA Administrator, who retains final authority to accept, reject, or modify the recommendation. No statutory timeline governs that decision.

Schedule III Would Eliminate 280E Tax Penalty

Rescheduling marijuana to Schedule III would allow state-licensed cannabis businesses to deduct ordinary business expenses under federal tax law, ending the application of Internal Revenue Code Section 280E. That provision, which prohibits deductions for businesses trafficking in Schedule I or II controlled substances, has been the single largest federal tax burden on the cannabis industry since the IRS began enforcing it in the 1990s.

Industry witnesses said 280E results in effective federal tax rates between 40% and 70% for vertically integrated operators, compared to the standard 21% corporate rate. Removing that penalty would free an estimated $1.5 billion to $2 billion in annual cash flow across the U.S. cannabis sector, according to financial models submitted into the hearing record by multi-state operators and trade groups.

Schedule III classification wouldn't legalize marijuana under federal law. Cannabis would remain a controlled substance subject to DEA registration, manufacturing quotas, and distribution restrictions. Interstate commerce would remain prohibited absent separate statutory authorization from Congress.

Next Step: ALJ Recommendation to DEA Administrator

The administrative law judge will now review the hearing record and issue a recommended decision to DEA Administrator Anne Milgram. That process historically takes between six and eighteen months in contested CSA scheduling proceedings. The Administrator may adopt the recommendation in full, reject it, or issue a modified final rule. Any final rule is subject to judicial review in federal appellate court.

DEA hasn't rescheduled a drug through the formal hearing process since the 1980s. Most modern scheduling actions have proceeded through the summary rulemaking process, which doesn't require an evidentiary hearing. The agency triggered the formal process here after receiving objections from more than 40 parties during the public comment period on the proposed rule published in May 2024.

We'll be watching for the ALJ's recommended decision in the first half of 2027. For comprehensive background on the rescheduling timeline and HHS's underlying recommendation, see the CannIntel topic hub on DEA rescheduling. The hearing transcript and all submitted exhibits are available through the DEA's public docket system.