State Cannabis Regulators Criticize DEA for Lack of Schedule III Guidance

State Officials Demand Federal Clarity on Schedule III Implementation

State marijuana regulators told the DEA at a May 30 industry roundtable that the lack of federal guidance on Schedule III compliance is forcing state programs to operate in a regulatory vacuum. Officials from California, Colorado, Illinois, and New York described the situation as "frustrating" and warned that the silence from federal agencies is creating conflicting interpretations across state lines. The roundtable, convened by the National Cannabis Industry Association, included representatives from 14 state regulatory bodies.

Nicole Elliott, director of California's Department of Cannabis Control (DCC), said her agency has received more than 200 inquiries from licensees seeking clarification on federal tax treatment, interstate commerce rules, and banking access since rescheduling took effect in January 2026. "We can't answer questions we don't have answers to," Elliott said, according to a summary of the meeting released by the NCIA.

280E Tax Deduction Questions Remain Unresolved

The Internal Revenue Service hasn't published guidance on whether cannabis businesses can now deduct ordinary business expenses under Section 280E following the Schedule III reclassification. Section 280E of the Internal Revenue Code prohibits businesses trafficking in Schedule I or Schedule II controlled substances from deducting expenses. Rescheduling to Schedule III should eliminate that bar. But the IRS has issued no formal notice to taxpayers or tax preparers.

Colorado's Marijuana Enforcement Division director, Dominique Mendiola, said operators in her state are filing amended 2025 tax returns claiming full deductions but face uncertainty about IRS acceptance. "We're advising licensees to consult tax counsel, but that's not a substitute for clear federal rulemaking," Mendiola said. Industry accountants estimate that 280E relief could reduce effective tax rates for multi-state operators by 15 to 25 percentage points, potentially unlocking hundreds of millions in working capital.

Interstate Commerce and Banking Access Still Unclear

State regulators also pressed the DEA and Treasury Department for clarity on whether Schedule III status permits interstate shipments of cannabis products and whether federally insured banks can now serve the industry without risk. The Controlled Substances Act doesn't automatically authorize interstate commerce in Schedule III substances; separate DEA registration and compliance with Good Manufacturing Practice (GMP) standards are typically required for pharmaceutical distributors.

No federal agency has confirmed whether state-licensed cannabis businesses must obtain DEA registrations to ship products across state lines or whether existing state track-and-trace systems satisfy federal chain-of-custody requirements. The Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency haven't updated their guidance to banks, leaving financial institutions hesitant to onboard cannabis clients despite the rescheduling.

The absence of interagency coordination is creating a compliance minefield for businesses that want to follow the law but can't determine what the law requires.

DEA and FDA Roles in Schedule III Oversight

The Food and Drug Administration hasn't clarified whether it will regulate cannabis products as drugs, supplements, or a new category under Schedule III. Schedule III substances are subject to FDA oversight if marketed for therapeutic use, but the agency hasn't opened a docket for cannabis product standards or issued draft guidance on manufacturing, labeling, or clinical claims.

Illinois Cannabis Regulation Oversight Officer Bret Bender said the FDA's silence is particularly problematic for medical cannabis programs, which operate under state-specific dosing and product-purity rules that may conflict with federal drug standards. "If FDA asserts jurisdiction, do state medical programs become obsolete?" Bender asked. The question hangs unanswered. The DEA has similarly not published a notice of proposed rulemaking (NPRM) on registration requirements, GMP compliance, or quota allocations for Schedule III cannabis production.

What State Regulators Are Watching Next

State officials said they're monitoring three federal actions: an expected IRS revenue ruling on 280E, a joint DEA-FDA notice on product regulation, and potential Treasury guidance on Bank Secrecy Act compliance for cannabis accounts. The NCIA roundtable summary indicated that state regulators plan to submit a formal letter to the White House Office of Management and Budget requesting a 90-day deadline for interagency guidance.

New York's Office of Cannabis Management Executive Director Chris Alexander said the lack of federal coordination is undermining the Trump administration's stated goal of reducing regulatory burden. "Rescheduling without implementation is just a new kind of prohibition," Alexander said. For comprehensive background on the rescheduling process and its legal implications, see the CannIntel topic hub on DEA rescheduling.

The Path Forward

What happens next? Whether OMB convenes an interagency task force or whether the DEA and FDA continue to defer action remains to be seen. State regulators have set a June 30 internal deadline to finalize their letter to the administration. Until federal guidance arrives, state programs will continue to operate under pre-rescheduling rules, and operators will face a patchwork of conflicting compliance strategies.