Federal Medical Marijuana Policy: Laws, Rescheduling & Patient Access

Executive Summary

The federal government's recent embrace of medical marijuana marks a historic shift in U.S. drug policy, ending decades of categorical prohibition under the Controlled Substances Act. Following the Drug Enforcement Administration's May 2024 proposal to reschedule cannabis from Schedule I to Schedule III, and subsequent finalization in early 2026, federal agencies now recognize marijuana's accepted medical use for the first time since the passage of the Controlled Substances Act in 1970. This rescheduling does not legalize recreational cannabis at the federal level, nor does it eliminate all federal restrictions on medical marijuana. However, it fundamentally alters the regulatory landscape for researchers, physicians, patients, and the cannabis industry. The change removes the most significant barrier to clinical research, allows physicians to prescribe cannabis products approved through FDA pathways, and eliminates the punitive 280E tax provision that prevented cannabis businesses from deducting ordinary business expenses. With 38 states now operating medical marijuana programs serving approximately 6.7 million registered patients, the federal policy shift creates both opportunities and complex implementation challenges across regulatory, banking, interstate commerce, and veterans' access domains.

Why This Matters

Federal recognition of medical marijuana affects millions of patients, billions in economic activity, and the foundational structure of American drug policy. Approximately 6.7 million Americans hold valid medical marijuana cards across 38 state programs, relying on cannabis to manage conditions ranging from chronic pain and PTSD to epilepsy and chemotherapy side effects. The rescheduling decision directly impacts these patients' ability to access consistent, research-backed treatment options and removes the threat of federal prosecution that has shadowed state-legal medical programs since California's Proposition 215 passed in 1996. The economic implications extend across a $30 billion legal cannabis market. Rescheduling to Schedule III eliminates Internal Revenue Code Section 280E, which previously prohibited cannabis businesses from deducting ordinary expenses like rent, salaries, and utilities. According to industry analysts, this tax change alone will save multi-state operators between $1.2 billion and $1.8 billion annually, fundamentally altering profitability models and potentially accelerating consolidation. Smaller operators in competitive markets like California and Michigan stand to benefit most from improved margins. For researchers, the policy shift removes the primary obstacle to rigorous clinical trials. Under Schedule I classification, scientists faced years-long approval processes and could only obtain cannabis from a single federally approved cultivation facility at the University of Mississippi. Schedule III status streamlines research protocols and allows multiple cultivation sources, potentially accelerating the development of FDA-approved cannabis-derived medications beyond the currently available Epidiolex, Marinol, and Syndros. Veterans represent a particularly affected stakeholder group. The Department of Veterans Affairs serves approximately 9 million veterans annually, with studies indicating that between 18% and 25% of veterans experience chronic pain and 11% to 20% suffer from PTSD. Despite state-level legalization, VA physicians have been prohibited from recommending or prescribing medical marijuana due to federal law. The rescheduling creates a pathway for VA policy reform, though implementation remains subject to agency rulemaking.

Background and History

Federal medical marijuana policy evolved through seven decades of prohibition, incremental state defiance, and mounting scientific evidence that ultimately forced regulatory reconsideration.

The Controlled Substances Act and Schedule I Classification (1970)

The Controlled Substances Act of 1970, codified at 21 U.S.C. § 801 et seq., established the modern framework for federal drug regulation. Congress created five schedules based on medical utility, abuse potential, and safety profile. Schedule I, the most restrictive category, was reserved for substances with "no currently accepted medical use in treatment in the United States," "a lack of accepted safety for use under medical supervision," and "a high potential for abuse." Cannabis was placed in Schedule I alongside heroin, LSD, and peyote, despite recommendations from the Shafer Commission in 1972 that marijuana be decriminalized for personal use. The Schedule I classification created a circular research barrier: scientists could not easily study cannabis to demonstrate medical utility because it was classified as having no medical utility. The National Institute on Drug Abuse maintained a monopoly on research-grade cannabis cultivation at the University of Mississippi, and approval for clinical trials required clearance from both the DEA and FDA through a process that typically took 18 to 36 months.

State Medical Marijuana Programs Begin (1996-2012)

California's Proposition 215, the Compassionate Use Act of 1996, became the first successful state medical marijuana initiative. The law allowed patients with a physician's recommendation to possess and cultivate cannabis for conditions including cancer, AIDS, chronic pain, and "any other illness for which marijuana provides relief." The federal government responded with threats to prosecute physicians who recommended cannabis, leading to the landmark Conant v. Walters decision in 2002, in which the Ninth Circuit Court of Appeals ruled that physician recommendations were protected speech under the First Amendment. Between 1996 and 2012, 17 additional states and the District of Columbia enacted medical marijuana laws, each creating distinct regulatory frameworks. Oregon established a registry system in 1998. Colorado and Nevada followed in 2000. The programs varied widely in qualifying conditions, possession limits, and cultivation rights, but all directly conflicted with federal Schedule I classification.

Federal Enforcement and the Cole Memorandum (2009-2018)

The Obama administration's 2009 Ogden Memorandum signaled a shift in federal enforcement priorities, directing U.S. Attorneys not to focus resources on "individuals whose actions are in clear and unambiguous compliance with existing state laws providing for the medical use of marijuana." The 2013 Cole Memorandum, issued by Deputy Attorney General James Cole, expanded this guidance to include recreational programs, establishing eight enforcement priorities including preventing distribution to minors, preventing revenue from going to criminal enterprises, and preventing drugged driving. These memoranda created an unofficial federal tolerance for state-legal programs but provided no legal safe harbor. The Trump administration's Attorney General Jeff Sessions rescinded the Cole Memorandum in January 2018, creating renewed uncertainty. However, actual federal prosecutions of state-compliant medical marijuana operations remained rare, with fewer than 50 cases filed between 2013 and 2020 according to federal court records.

Congressional Protection Measures (2014-Present)

Congress began attaching riders to annual appropriations bills starting in 2014 to prevent the Department of Justice from using federal funds to interfere with state medical marijuana programs. The Rohrabacher-Farr Amendment, later renamed the Rohrabacher-Blumenauer Amendment and currently known as the Joyce-Leahy Amendment, has been renewed in every appropriations cycle since 2014. In United States v. McIntosh (2016), the Ninth Circuit ruled that this provision bars federal prosecution of individuals in strict compliance with state medical marijuana laws. The 2018 Farm Bill, signed by President Trump, removed hemp (cannabis with less than 0.3% delta-9 THC) from the Controlled Substances Act entirely, creating a legal market for CBD products derived from hemp. This bifurcation of the cannabis plant based on THC content created regulatory complexity but demonstrated congressional willingness to carve out exceptions to blanket prohibition.

The Rescheduling Process (2022-2026)

President Biden's October 2022 directive to Health and Human Services Secretary Xavier Becerra and Attorney General Merrick Garland initiated the formal rescheduling review. Biden specifically requested HHS to review "how marijuana is scheduled under federal law" in conjunction with pardoning thousands of individuals convicted of simple federal marijuana possession. HHS completed its scientific and medical evaluation in August 2023, recommending to the DEA that cannabis be rescheduled to Schedule III. The recommendation, based on an eight-factor analysis required by 21 U.S.C. § 811(c), concluded that cannabis has accepted medical use, lower abuse potential than Schedule I or II substances, and moderate to low potential for physical dependence. The DEA published a Notice of Proposed Rulemaking in the Federal Register on May 21, 2024, proposing to move marijuana and its derivatives from Schedule I to Schedule III. The proposal triggered a 60-day public comment period that ultimately received more than 43,000 submissions from patients, physicians, researchers, industry stakeholders, and advocacy organizations. An administrative law judge hearing was held in December 2024, with testimony from medical experts, DEA pharmacologists, and state regulators. The final rule was published in the Federal Register on January 15, 2026, with an effective date of March 1, 2026. The DEA's final decision acknowledged "accumulating evidence of marijuana's medical utility in treating certain conditions, particularly chronic pain, nausea associated with chemotherapy, and spasticity related to multiple sclerosis."

Key Players

Drug Enforcement Administration

The DEA holds statutory authority under 21 U.S.C. § 811 to schedule and reschedule controlled substances, though it must request a scientific and medical evaluation from HHS for substances not initially scheduled by Congress. DEA Administrator Anne Milgram oversaw the rescheduling process, navigating pressure from both reform advocates and law enforcement organizations opposed to any relaxation of cannabis restrictions. The agency's final rule emphasized that rescheduling does not legalize marijuana under federal law, does not change its status as a controlled substance, and maintains criminal penalties for unauthorized manufacture, distribution, and possession.

Food and Drug Administration

The FDA, operating within HHS, conducted the eight-factor analysis that formed the scientific basis for rescheduling. The agency evaluated cannabis's abuse potential, scientific evidence of pharmacological effects, current scientific knowledge, history and pattern of abuse, scope and significance of abuse, and risk to public health. FDA Commissioner Robert Califf has stated that the agency will apply the same approval standards to cannabis-derived medications as to any other drug, requiring randomized controlled trials demonstrating safety and efficacy. The FDA has approved three cannabis-derived or cannabis-related drugs: Epidiolex (cannabidiol) for seizures, and Marinol and Syndros (synthetic THC) for nausea and appetite stimulation.

National Institute on Drug Abuse

NIDA, part of the National Institutes of Health, has historically controlled the only federally legal source of research-grade cannabis through its contract with the University of Mississippi. The institute's research portfolio has historically focused on cannabis's harms and abuse potential rather than therapeutic applications, drawing criticism from medical marijuana advocates. Following rescheduling, NIDA announced in March 2026 that it would expand its research priorities to include therapeutic applications and would facilitate additional cultivation facilities to supply clinical trials.

Multi-State Operators and Industry Groups

Publicly traded multi-state operators including Curaleaf, Green Thumb Industries, Trulieve, Cresco Labs, and Verano Holdings stand to benefit substantially from 280E tax relief. These companies, which collectively operate more than 800 dispensaries across multiple states, have paid effective federal tax rates exceeding 70% due to the inability to deduct ordinary business expenses. The National Cannabis Industry Association and the U.S. Cannabis Council, the industry's primary trade groups, advocated for rescheduling while simultaneously pushing for full descheduling through the proposed Cannabis Administration and Opportunity Act.

Patient Advocacy Organizations

Americans for Safe Access, the Marijuana Policy Project, and NORML (National Organization for the Reform of Marijuana Laws) have advocated for medical marijuana access for decades. These organizations mobilized patients to submit public comments during the rescheduling process and continue to push for broader reforms including interstate commerce, veterans' access, and protection from employment discrimination. The Epilepsy Foundation and the American Academy of Neurology have specifically advocated for research access to study cannabis's effects on seizure disorders.

Law Enforcement Opposition

The National Sheriffs' Association, the Major County Sheriffs of America, and several state attorneys general submitted comments opposing rescheduling, arguing that it would increase youth access, impaired driving, and diversion to illegal markets. These organizations have advocated for maintaining Schedule I status pending more conclusive research on long-term health effects and addiction potential.

Legal and Regulatory Framework

The rescheduling of marijuana to Schedule III creates a complex regulatory environment governed by multiple statutes, existing case law, and overlapping federal and state jurisdictions. Under 21 U.S.C. § 812, Schedule III substances are defined as drugs with "a potential for abuse less than the drugs or other substances in schedules I and II," "currently accepted medical use in treatment in the United States," and abuse that "may lead to moderate or low physical dependence or high psychological dependence." Schedule III includes anabolic steroids, ketamine, and products containing less than 90 milligrams of codeine per dosage unit. The rescheduling does not change marijuana's status as a federally controlled substance. Unauthorized possession, cultivation, and distribution remain federal crimes under 21 U.S.C. § 841, punishable by up to five years imprisonment for first-time offenders possessing any amount. However, Schedule III status reduces maximum penalties compared to Schedule I and creates pathways for FDA-approved medical products. The elimination of 280E tax treatment represents the most immediate practical impact. Internal Revenue Code Section 280E, enacted in 1982 following a Tax Court decision allowing a cocaine trafficker to deduct business expenses, prohibits deductions for businesses trafficking in Schedule I or II controlled substances. With marijuana now in Schedule III, cannabis businesses may deduct ordinary and necessary business expenses under 26 U.S.C. § 162, though they remain subject to standard corporate tax rates and cannot access certain deductions available to non-controlled substance businesses. The Controlled Substances Act's registration requirements under 21 U.S.C. § 823 now apply to medical marijuana businesses. Manufacturers, distributors, and dispensers of Schedule III substances must register with the DEA and comply with security, recordkeeping, and reporting requirements. The DEA has indicated it will issue guidance on registration procedures for state-licensed medical marijuana businesses by July 2026, though the agency retains discretion to deny registrations based on public interest factors including compliance with state and local law. Federal firearms restrictions remain in effect. Under 18 U.S.C. § 922(g)(3), it is unlawful for any "unlawful user" of a controlled substance to possess firearms. The Bureau of Alcohol, Tobacco, Firearms and Explosives has not revised its position that marijuana users, even in state-legal medical programs, are prohibited from purchasing or possessing firearms. This restriction survived legal challenge in Wilson v. Lynch (9th Cir. 2016). Banking access remains constrained despite rescheduling. The Bank Secrecy Act, 31 U.S.C. § 5311 et seq., requires financial institutions to file Suspicious Activity Reports for transactions involving proceeds of illegal activity. While the 2014 FinCEN guidance provided a framework for banks to serve marijuana businesses in compliance with state law, most major banks have declined to offer services due to ongoing federal prohibition. The proposed SAFE Banking Act, which would provide explicit safe harbor for financial institutions serving state-legal cannabis businesses, has not been enacted as of May 2026.

State-by-State Medical Marijuana Landscape

As of May 2026, 38 states, four territories, and the District of Columbia have enacted medical marijuana laws, creating a patchwork of qualifying conditions, possession limits, and regulatory structures.

California

California's Compassionate Use Act of 1996 and the subsequent Medical and Adult-Use Cannabis Regulation and Safety Act created a dual medical and recreational market. Medical patients in California may possess up to eight ounces of dried cannabis and cultivate up to six mature plants, with physician recommendations allowing higher amounts. The state's medical program serves approximately 750,000 registered patients as of 2026, down from peak enrollment of 1.2 million in 2018 as some patients shifted to the recreational market. Qualifying conditions include cancer, AIDS, chronic pain, arthritis, migraine, and "any other chronic or persistent medical symptom" that substantially limits major life activities.

Florida

Florida's medical marijuana program, established by constitutional amendment in 2016 and implemented in 2017, serves approximately 820,000 active patients as of May 2026, making it the second-largest state program by enrollment. Patients may possess up to a 70-day supply as determined by their physician, with smokable flower permitted following a 2019 legislative change. Qualifying conditions include cancer, epilepsy, glaucoma, HIV/AIDS, PTSD, ALS, Crohn's disease, Parkinson's disease, and multiple sclerosis. The state licenses 22 vertically integrated operators who handle cultivation, processing, and retail.

Ohio

Ohio implemented its medical marijuana program in 2019 following legislative authorization in 2016. The state serves approximately 230,000 registered patients who may possess up to a 90-day supply as determined by their physician, typically equivalent to approximately 8 ounces. Qualifying conditions include chronic pain, PTSD, cancer, AIDS, epilepsy, and 21 other specified conditions. Ohio prohibits home cultivation for medical patients and operates a seed-to-sale tracking system. The state has licensed 57 dispensaries and 28 cultivation facilities as of May 2026.

Pennsylvania

Pennsylvania's medical marijuana program, launched in 2018, serves approximately 450,000 active patients. The state permits possession of up to a 30-day supply and prohibits dry leaf/flower form, though this restriction was challenged following rescheduling. Qualifying conditions include cancer, epilepsy, PTSD, inflammatory bowel disease, and 17 other serious medical conditions. Pennsylvania operates a registry system and has licensed approximately 180 dispensaries across the state.

New York

New York's medical marijuana program, established in 2014 and expanded significantly in 2016 and 2021, serves approximately 180,000 registered patients. The state allows possession of up to a 60-day supply and home cultivation of up to six plants for medical patients. Qualifying conditions include cancer, HIV/AIDS, ALS, Parkinson's disease, epilepsy, inflammatory bowel disease, chronic pain, and PTSD. The state's Office of Cannabis Management oversees both medical and adult-use programs.

Illinois

Illinois implemented its medical cannabis program in 2014 and expanded to adult-use in 2020. Medical patients may possess up to 2.5 ounces of cannabis flower over a 14-day period, with cultivation of up to five plants permitted for registered patients. Qualifying conditions include cancer, HIV/AIDS, hepatitis C, ALS, Crohn's disease, PTSD, and more than 40 other conditions. The state serves approximately 140,000 medical patients as of May 2026.

Arizona

Arizona voters approved medical marijuana in 2010 and adult-use in 2020. Medical patients may possess up to 2.5 ounces of usable marijuana and cultivate up to 12 plants if they live more than 25 miles from a dispensary. Qualifying conditions include cancer, glaucoma, HIV/AIDS, hepatitis C, ALS, Crohn's disease, and chronic pain. The state serves approximately 130,000 medical cardholders who receive benefits including lower taxes and higher possession limits compared to recreational users.

States Without Medical Marijuana Programs

As of May 2026, twelve states have not enacted comprehensive medical marijuana laws: Idaho, Wyoming, Nebraska, Kansas, South Carolina, Tennessee, Kentucky, Indiana, Wisconsin, Iowa, Georgia, and North Carolina. Several of these states have limited CBD-only laws for specific conditions like epilepsy, but do not permit access to whole-plant cannabis or THC-containing products. Following federal rescheduling, legislatures in Kansas, Kentucky, and North Carolina introduced medical marijuana bills in their 2026 sessions.

Market and Business Implications

The rescheduling of marijuana to Schedule III fundamentally alters the economics of the cannabis industry, with tax relief, banking access, and research opportunities creating both consolidation pressures and growth potential. The elimination of 280E tax treatment represents an immediate $1.2 billion to $1.8 billion annual benefit to the industry according to analysts at Cowen and Company. Multi-state operators that previously paid effective federal tax rates of 70% to 85% will now pay standard corporate rates of 21%, with the ability to deduct rent, salaries, marketing, and other ordinary business expenses. Curaleaf, the nation's largest MSO by revenue, reported in its Q1 2026 earnings that 280E relief would improve EBITDA margins by approximately 12 percentage points. Smaller operators in competitive markets stand to benefit disproportionately. In California, where wholesale cannabis prices have declined by more than 60% since 2020 due to oversupply, many cultivators and manufacturers have operated at a loss even before federal taxes. The ability to deduct business expenses may determine survival for hundreds of small businesses. The California Cannabis Industry Association estimated in April 2026 that 280E relief could prevent the closure of 200 to 300 small operators in the state. Capital markets access remains limited despite rescheduling. Major U.S. stock exchanges including the New York Stock Exchange and NASDAQ continue to prohibit listings of companies that handle cannabis flower or THC products, as these activities remain federally illegal. Canadian MSOs including Canopy Growth, Tilray, and Aurora Cannabis trade on U.S. exchanges but do not operate plant-touching businesses in the United States. U.S. MSOs trade on Canadian exchanges or over-the-counter markets, limiting institutional investor participation. The rescheduling has not changed exchange listing policies as of May 2026, though the NYSE announced it would review its policies in light of the regulatory change. Banking access has improved marginally. Approximately 800 banks and credit unions now serve cannabis businesses according to FinCEN data from Q1 2026, up from 750 in Q4 2025. However, this represents less than 10% of U.S. financial institutions, and most cannabis businesses continue to operate primarily in cash or through limited banking relationships with smaller regional institutions. The Federal Reserve has not changed its guidance prohibiting Reserve Banks from providing master accounts to banks whose primary business is serving cannabis companies. Insurance markets are expanding. Following rescheduling, several major commercial insurers including Chubb and Travelers announced they would offer general liability, property, and product liability coverage to state-licensed medical marijuana businesses. Previously, cannabis businesses relied on specialty insurers charging premiums 300% to 500% higher than comparable non-cannabis businesses. The entrance of mainstream carriers is expected to reduce insurance costs by 40% to 60% according to insurance brokers specializing in cannabis. Research and development investment is accelerating. Pharmaceutical companies including Jazz Pharmaceuticals, Cara Therapeutics, and Zynerba Pharmaceuticals have announced expanded clinical trial programs for cannabis-derived medications. The ability to conduct research under Schedule III protocols rather than Schedule I significantly reduces regulatory burden and timeline. Jazz Pharmaceuticals announced in March 2026 a $150 million investment in Phase III trials for a cannabis-based treatment for chemotherapy-induced nausea, with anticipated FDA submission in 2028. Interstate commerce remains prohibited under the Controlled Substances Act's distribution provisions, 21 U.S.C. § 841(a)(1), which criminalize distribution of controlled substances regardless of schedule. Each state's medical marijuana program operates as a closed system, with cultivation, processing, and retail confined within state borders. This prohibition drives inefficiency, as operators must replicate cultivation and processing facilities in each state rather than achieving economies of scale through regional production. Industry groups are advocating for congressional action to permit interstate commerce for state-licensed medical marijuana businesses, though no legislation has advanced as of May 2026.

What Experts Say

Medical researchers, policy analysts, and industry leaders have offered varied assessments of rescheduling's impact, with consensus that it represents significant progress while falling short of comprehensive reform. Dr. Nora Volkow, director of the National Institute on Drug Abuse, said in congressional testimony in March 2026 that rescheduling "removes a significant barrier to research while maintaining appropriate controls on a psychoactive substance with abuse potential." According to Volkow, the change will facilitate studies on dosing, drug interactions, and long-term effects that have been impractical under Schedule I restrictions. Dr. Igor Grant, director of the Center for Medicinal Cannabis Research at the University of California San Diego, said the rescheduling "opens the door to rigorous clinical trials that can establish evidence-based treatment protocols." Grant noted that most current medical marijuana recommendations are based on observational studies and patient reports rather than randomized controlled trials. According to Grant, Schedule III status will enable research comparing cannabis to existing treatments for chronic pain, potentially offering an alternative to opioids. Kevin Sabet, president of Smart Approaches to Marijuana and a former drug policy advisor in the Obama administration, said rescheduling "prioritizes industry profits over public health" and argued that the decision was premature given limited long-term safety data. According to Sabet, the federal government should have maintained Schedule I status while expanding research access through alternative mechanisms. Aaron Smith, co-founder of the National Cannabis Industry Association, said in a May 2026 statement that while rescheduling "provides meaningful tax relief and research opportunities, it does not address fundamental issues including banking access, interstate commerce, and the continued federal criminalization of a substance legal in 38 states." According to Smith, the industry will continue advocating for complete removal of cannabis from the Controlled Substances Act. Dr. Sunil Aggarwal, a palliative care physician and medical director of a Seattle-based cannabis research organization, said rescheduling represents "a partial acknowledgment of what patients and clinicians have known for decades—that cannabis has legitimate medical applications." According to Aggarwal, the change will particularly benefit patients with chronic pain who have been unable to access consistent, quality-controlled cannabis products through medical channels. Paul Armentano, deputy director of NORML, said the rescheduling "maintains an outdated framework that treats cannabis more restrictively than cocaine or methamphetamine," both of which are Schedule II substances with accepted medical uses. According to Armentano, the appropriate policy would be removing cannabis from the Controlled Substances Act entirely and regulating it similarly to alcohol.

What's Next

Implementation of the rescheduling decision will unfold through 2026 and 2027 across multiple regulatory domains, with key decision points in DEA registration procedures, VA policy reform, and potential congressional action on banking and interstate commerce. The DEA has indicated it will publish guidance on registration procedures for state-licensed medical marijuana businesses by July 2026. This guidance will clarify security requirements, recordkeeping obligations, and the process for obtaining DEA registration numbers necessary to legally handle Schedule III controlled substances. Industry analysts expect the agency to establish a streamlined registration pathway for businesses already licensed and regulated by state authorities, though the DEA retains discretion to deny registrations based on public interest factors. The Department of Veterans Affairs is conducting a policy review to determine whether VA physicians may recommend or prescribe medical marijuana to veterans in states with legal programs. VA Secretary Denis McDonough said in April 2026 that the department is "evaluating how rescheduling affects our ability to serve veterans suffering from chronic pain and PTSD." A decision is expected by September 2026, with implementation potentially beginning in fiscal year 2027. Veterans' advocacy organizations including the American Legion and Iraq and Afghanistan Veterans of America have urged the VA to authorize physician recommendations. The FDA is expected to receive applications for cannabis-derived medications now that Schedule III status removes certain research barriers. Industry observers anticipate applications for cannabis-based treatments for chronic pain, PTSD, and chemotherapy-induced nausea within the next 18 to 24 months. The approval timeline for these applications will follow standard FDA procedures, typically requiring three phases of clinical trials and comprehensive safety and efficacy data. Approval of the first whole-plant cannabis medication could occur as early as 2028. Congressional action on banking access and interstate commerce remains uncertain. The SAFE Banking Act, which would provide explicit legal protection for financial institutions serving state-legal cannabis businesses, has been introduced in multiple congressional sessions since 2019 but has not been enacted. Senate Majority Leader and House leadership have not indicated whether the bill will receive floor votes in 2026. The Cannabis Administration and Opportunity Act, which would remove marijuana from the Controlled Substances Act entirely and establish a federal regulatory framework, faces longer odds given divided congressional opinion on legalization. State legislatures in Kansas, Kentucky, North Carolina, and Wisconsin are considering medical marijuana legislation in 2026 sessions. Kansas's Senate Bill 135 would establish a medical cannabis program for patients with cancer, epilepsy, and PTSD, with a possession limit of 3 ounces. Kentucky's House Bill 302 would create a registry system and allow cultivation by licensed operators. Advocates in these states argue that federal rescheduling removes the primary objection that marijuana has no accepted medical use. Litigation challenging employment discrimination against medical marijuana patients is likely to increase. While most states with medical marijuana laws do not require employers to accommodate cannabis use, several state supreme courts are considering whether terminating employees for off-duty medical marijuana use violates disability discrimination laws. The New Jersey Supreme Court is expected to rule in 2026 on whether the state's medical marijuana law prohibits employment discrimination, a decision that could influence policy in other states. The Treasury Department and IRS must issue guidance on the application of standard tax provisions to cannabis businesses now that 280E no longer applies. Questions remain regarding the deductibility of certain expenses, the application of inventory accounting rules, and the treatment of state-level taxes paid by cannabis businesses. The IRS has indicated it will publish guidance by August 2026.

Further Reading

• Controlled Substances Act, 21 U.S.C. § 801 et seq. - https://www.govinfo.gov/content/pkg/USCODE-2021-title21/pdf/USCODE-2021-title21-chap13.pdf
• DEA Final Rule: Rescheduling of Marijuana, Federal Register Vol. 91, No. 12 (January 15, 2026) - https://www.federalregister.gov
• HHS Recommendation on Rescheduling Marijuana (August 2023) - https://www.hhs.gov/about/news/2023/08/29/hhs-recommendation-marijuana-scheduling.html
• FDA-Approved Cannabis and Cannabis-Derived Drug Products - https://www.fda.gov/news-events/public-health-focus/fda-regulation-cannabis-and-cannabis-derived-products
• Internal Revenue Code Section 280E, 26 U.S.C. § 280E - https://www.law.cornell.edu/uscode/text/26/280E
• National Conference of State Legislatures: State Medical Marijuana Laws - https://www.ncsl.org/health/state-medical-cannabis-laws
• FinCEN Guidance on Marijuana-Related Businesses (2014) - https://www.fincen.gov/resources/statutes-regulations/guidance/bsa-expectations-regarding-marijuana-related-businesses
• Conant v. Walters, 309 F.3d 629 (9th Cir. 2002) - https://caselaw.findlaw.com/court/us-9th-circuit/1463935.html
• United States v. McIntosh, 833 F.3d 1163 (9th Cir. 2016) - https://cdn.ca9.uscourts.gov/datastore/opinions/2016/08/16/15-10117.pdf
• NIDA Research on Cannabis - https://nida.nih.gov/research-topics/cannabis-marijuana
• Americans for Safe Access: Medical Marijuana Access in America - https://www.safeaccessnow.org
• Marijuana Policy Project: State Policy Reports - https://www.mpp.org/states

Update — June 15, 2026: Federal Government Formally Recognizes Medical Marijuana

The federal government officially embraced medical marijuana, marking a historic shift in U.S. drug policy after decades of prohibition. Federal recognition ended the longstanding conflict between state medical cannabis programs and federal law, which had classified marijuana as a Schedule I controlled substance with no accepted medical use since the Controlled Substances Act of 1970. The move followed years of advocacy from patient groups, state governments, and medical organizations.

The policy change immediately affected over 3.6 million registered medical marijuana patients across 38 states and four territories, according to data compiled by state health departments. Patients and caregivers no longer face theoretical federal prosecution for possession or cultivation in compliance with state programs. Interstate banking restrictions that prevented cannabis businesses from accessing FDIC-insured accounts were lifted, allowing dispensaries and cultivation facilities to operate standard business checking accounts and accept credit card payments.

The Department of Health and Human Services announced it would begin accepting applications for federally-approved clinical trials using state-licensed cannabis products rather than requiring researchers to use only government-grown marijuana from the University of Mississippi. Veterans Affairs hospitals received authorization to discuss medical marijuana recommendations with patients in states with legal programs, ending a prohibition that forced veterans to seek care outside the VA system. The IRS confirmed that cannabis businesses could now deduct ordinary business expenses under Section 280E of the tax code, potentially saving the industry billions in annual tax liability.

Industry analysts projected the regulatory clarity would accelerate institutional investment in multi-state operators and ancillary service providers. State regulators in Arizona, Florida, and Texas said they would expand their medical programs in response to the federal policy shift, with Texas announcing plans to add chronic pain and PTSD to its limited qualifying conditions list.