Cannabis rescheduling finally happened in 2026, but only halfway. Since April 28, marijuana sold under a state medical license has been a Schedule III drug under federal law. Adult-use cannabis is still Schedule I, and the hearing to move it is stalled. That split changes your tax bill, your compliance workload and your growth plan depending on which licenses you hold. Here is where things stand in October 2026 and what cannabis operators should do about it now.
This article covers business strategy, not legal or tax advice. Rescheduling is still being litigated and the IRS has not issued its guidance yet, so confirm your situation with a qualified cannabis attorney and tax professional.
Where cannabis rescheduling stands in October 2026
Rescheduling is running on two separate tracks, and they have landed in very different places:
| Medical cannabis | Adult-use cannabis | |
|---|---|---|
| Federal schedule | Schedule III since April 28, 2026 | Still Schedule I |
| How it got there | DOJ final order, published in the Federal Register | Proposed rule still in a DEA hearing |
| Section 280E | No longer applies, per the order | Still applies |
| Status today | In effect; a court challenge continues | Hearing paused since September 29 |
Track 1: medical cannabis is already Schedule III
The final rule published in the Federal Register on April 28, 2026 places two things in Schedule III: FDA-approved drug products that contain marijuana, and marijuana, marijuana extracts and plant-derived THC that are "subject to a state-issued license to manufacture, distribute, and/or dispense marijuana or products containing marijuana for medical purposes." It took effect the same day.
The key word is medical. The order follows the license, not the plant. Product made and sold under a state medical license moved; the same flower sold under an adult-use license did not. According to a status summary from THCA Group, the rule also states that it does not change the status of hemp, and that THC which can only be made by artificial synthesis stays in Schedule I. The same summary reports that on September 9 the U.S. Court of Appeals for the D.C. Circuit refused to pause the order while opponents challenge it, so the rule remains in force while that case continues.
What it means for 280E, the biggest money question
Section 280E of the tax code blocks ordinary business deductions for any business "trafficking in controlled substances" in Schedule I or II. It is the reason many cannabis operators pay federal tax on gross profit instead of net income. Because medical marijuana is now Schedule III, the final rule says state medical licensees "will no longer be subject to" the 280E deduction ban. It also encourages Treasury to consider retroactive relief for past years, and adds that nothing in the rule "constitutes a determination regarding federal tax liability."
On April 23, the U.S. Treasury and IRS announced they will issue guidance on the tax consequences. Treasury said that guidance is expected to:
- Apply 280E by activity. For businesses with multiple activities, 280E would apply only to the activities still tied to Schedule I or II substances, for example by apportioning expenses.
- Include a transition rule. Rescheduling would generally first apply for a business's full taxable year that includes the order's effective date, for activities no longer involving Schedule I or II substances.
That guidance has not arrived yet. Treasury's 2026-2027 Priority Guidance Plan, released September 29, lists "Guidance under ยง280E" with no scope or date, as Policy, Decoded reported.
The dual-license problem
If you only hold medical licenses, the direction of travel is fairly clear. If you sell to both patients and adult-use customers, you are in the gray zone. There is no IRS-approved method yet for splitting revenue and shared costs between medical and adult-use activity. A guide from a Maryland cannabis CPA firm makes the practical point well: until guidance lands, this is "a documentation problem before it is a tax position," and allocations reconstructed at year-end are the most common reason a position falls apart under examination.
DEA registration is now part of the job
Schedule III comes with federal registration. The final rule created an expedited DEA registration process for state medical licensees, and the details have been rolling out since. As Cannabis Business Times reported on October 5:
- Dispensaries register on DEA Form 224. The 60-day expedited window, which guaranteed review within six months, closed in June, but the form is still available.
- Manufacturers, distributors and testing labs got a new online application on DEA Form 225 on October 5, 2026. Businesses that already applied do not need to reapply.
- Under the administration's order, the DEA "must grant registration unless doing so would be inconsistent with public interest."
Registration is not a box to tick once. It brings federal recordkeeping, security and reporting expectations on top of your state seed-to-sale rules, so budget staff time and get counsel involved before you file.
Track 2: why adult-use is still waiting
Full rescheduling of all marijuana runs through a separate proposed rule and a formal DEA hearing. According to Cannabis Business Times, that hearing wrapped up on July 15 and post-hearing briefs were filed August 17. The last step was for the DEA's chief administrative law judge to certify the record and send a nonbinding recommendation to the DEA Administrator.
Then a September 23 Government Accountability Office report found "gaps" in the DEA's drug scheduling policies. Three anti-rescheduling parties asked to reopen the record, the judge granted a brief stay on September 29, and on October 14 he let those parties reply to the DEA's opposition and ordered the DEA to respond to their request to reopen the hearing. Nobody can tell you when, or whether, adult-use cannabis reaches Schedule III. Plan as if 280E stays on adult-use sales through at least the 2026 tax year.
A five-step game plan for cannabis operators
1. Map every license to its track. List each entity, license type and revenue stream, and mark which ones are medical, adult-use or both. That map drives your tax position, your DEA filings and your banking conversations.
2. Build books that can support two tax treatments. Split revenue by channel, code direct costs directly, isolate shared costs, and track payroll by function. Pull POS and seed-to-sale reports monthly so the record is contemporaneous, not rebuilt in April.
3. Model your 2026 return and past years with your tax advisor. Treasury's planned transition rule points to relief for the full taxable year that includes April 28, 2026, but nothing is final. Ask your CPA to model both outcomes and talk through whether, when and how to approach earlier years.
4. Handle DEA registration deliberately. Confirm which form applies to each medical license, whether you already filed, and what new federal obligations come with registration.
5. Put the savings to work, carefully. If 280E relief frees up cash on the medical side, decide in advance where it goes: debt, inventory, marketing or better wholesale pricing. Retail buyers will notice who can support sell-through, as we cover in how to get your cannabis brand on dispensary shelves. And if you also run a hemp-derived THC line, remember rescheduling does not help it; the separate federal hemp THC ban hits December 11.
The bottom line
Cannabis rescheduling is real for medical operators and still a waiting game for adult-use. The businesses that benefit most will be the ones that sort their licenses, clean up their books and plan for both outcomes now, instead of waiting for the IRS or the DEA to finish.
Justin Cifelli has spent 20 years building cannabis businesses across cultivation, hardware, retail and direct-to-consumer. If you need help rethinking pricing, channel strategy or growth plans around rescheduling, Hempioneers can work through it with you.
Sources
- Federal Register, "Schedules of Controlled Substances: Rescheduling of Food and Drug Administration Approved Products Containing Marijuana From Schedule I to Schedule III" (final rule, April 28, 2026)
- U.S. Department of the Treasury, "Treasury, IRS Announce Process for Tax Guidance Following DOJ Final Order on Medical Marijuana Rescheduling" (April 23, 2026)
- Cannabis Business Times, "DEA Opens New Schedule III Registration Portal for Medical Cannabis Manufacturers, Distributors, Labs" (October 5, 2026)
- Cannabis Business Times, "Cannabis Rescheduling Process Remains Sidelined, DEA Judge Orders New Replies" (October 14, 2026)
- THCA Group, "Marijuana Rescheduling: Schedule III Status" (October 2026)
- Policy, Decoded, "IRS Lists 280E Guidance, and Dual Licensees Keep Waiting" (October 5, 2026)
- Maryland Cannabis CPA, "Does 280E Still Apply in 2026? Medical vs. Adult-Use Cannabis After Schedule III"
