Nebraska, Indiana, Louisiana AGs Sue to Block DEA Marijuana Rescheduling

Three-State Coalition Files Federal Challenge

Nebraska Attorney General Mike Hilgers, Indiana Attorney General Todd Rokita, and Louisiana Attorney General Liz Murrill filed the joint complaint in federal court, arguing the DEA rescheduling violates the Administrative Procedure Act and exceeds the agency's statutory authority. The suit names DEA Administrator Anne Milgram and Attorney General Pam Bondi as defendants. Nebraska leads the litigation. Indiana and Louisiana join as co-plaintiffs.

The complaint was filed in the U.S. District Court for the District of Nebraska. All three states maintain cannabis prohibition statutes and have opposed federal liberalization efforts since the Biden administration initiated the rescheduling review in October 2022.

Core Legal Arguments Target Agency Process

The attorneys general argue the DEA failed to follow proper notice-and-comment procedures required under the APA and relied on insufficient scientific evidence to justify moving cannabis from Schedule I to Schedule III. Schedule I designation requires a finding of high abuse potential and no accepted medical use. Schedule III allows for medical prescription but maintains federal control.

The complaint challenges the DEA's reliance on a Health and Human Services recommendation issued in August 2023. That HHS review, conducted by the Food and Drug Administration, concluded cannabis has accepted medical use and lower abuse potential than Schedule I or II substances. The three states dispute those findings.

Nebraska, Indiana, and Louisiana also assert the rescheduling would conflict with their state enforcement frameworks and impose undue administrative burdens on state agencies that coordinate with federal drug schedules.

Timeline and Procedural Posture

The DEA published a Notice of Proposed Rulemaking on May 21, 2024, opening a 60-day comment period that drew more than 43,000 public submissions. The agency held an administrative hearing in December 2024, with testimony from medical researchers, law enforcement officials, and industry representatives. A final rule hasn't been published.

The Trump administration inherited the rescheduling process when President Donald Trump took office in January 2025. DEA Administrator Milgram, a Biden appointee, remained in her role through the transition. The administration hasn't publicly committed to completing or halting the rescheduling.

For full background on this process, see the CannIntel topic hub on DEA rescheduling.

State Enforcement and Tax Implications

All three plaintiff states enforce total cannabis prohibition and coordinate their controlled-substance schedules with the federal Controlled Substances Act. Nebraska permits a limited medical CBD program enacted in 2020 but bans THC products. Indiana and Louisiana allow restricted medical cannabis programs but prohibit recreational use.

Rescheduling to Schedule III wouldn't legalize cannabis under federal law, but it would eliminate the application of Internal Revenue Code Section 280E to state-licensed cannabis businesses. That tax provision disallows ordinary business deductions for Schedule I and II traffickers, currently imposing effective tax rates exceeding 70 percent on multi-state operators in adult-use markets.

The plaintiff states argue federal rescheduling would undermine their enforcement priorities and create pressure to liberalize state laws.

Industry and Advocacy Reaction

The National Cannabis Industry Association and the U.S. Cannabis Council haven't yet filed motions to intervene in the lawsuit, but both organizations issued statements supporting the DEA rescheduling process. NCIA has estimated 280E relief would reduce industry tax liability by approximately $1.8 billion annually across state-legal markets.

Smart Approaches to Marijuana, an anti-legalization advocacy group, has previously called for the DEA to halt rescheduling. SAM hasn't announced whether it will seek to join the Nebraska litigation as an intervenor.

What Happens Next

The Justice Department has 60 days to file a response to the complaint unless it seeks an extension. The plaintiff states are expected to file a motion for preliminary injunction seeking to halt the rescheduling process while the case proceeds. No hearing date has been set.

The case is assigned to U.S. District Judge Robert Rossiter Jr., a Trump appointee confirmed in 2020. If the district court denies the states' claims, appeals would proceed to the Eighth Circuit Court of Appeals, which has jurisdiction over Nebraska.

Separate litigation challenging the rescheduling remains possible from additional state coalitions or private parties. The DEA hasn't announced a target date for publishing a final rule.