DEA Schedule III Hearing: Cannabis Rescheduling Could Finalize This Week

After nearly two years of procedural drift, the long-promised move of marijuana from Schedule I to Schedule III appears to be entering its final phase. The U.S. Department of Justice is expected to ease federal controls on marijuana as soon as Wednesday, April 22, 2026, according to reporting from Bloomberg and The Washington Post, with the Drug Enforcement Administration preparing a new administrative hearing that could clear the remaining obstacle in the rescheduling appeal process.

If the hearing produces the outcome the administration wants, cannabis will be reclassified under the Controlled Substances Act for the first time since 1970 — a change that will not legalize marijuana, but will quietly rewrite the economics of the legal U.S. industry.

What the Schedule III Rescheduling Actually Does

The headline change is straightforward: marijuana moves from Schedule I, a category reserved for substances with "no currently accepted medical use" and which includes heroin and LSD, to Schedule III, the category that covers ketamine, Tylenol with codeine, and anabolic steroids. Schedule III substances are recognized as having accepted medical use and may be dispensed by prescription.

The federal government would, in effect, be conceding that cannabis is medicine. That is a meaningful symbolic shift, but the practical effects are narrower than most headlines suggest. State-legal recreational dispensaries do not operate by prescription, and rescheduling does not preempt state law. California, Colorado, New York, and Michigan will continue to run their own adult-use programs as they do today. Nothing about possession, criminal enforcement, or state licensing changes on the day the Federal Register prints the new classification.

What does change is Internal Revenue Code Section 280E. That provision bars any business trafficking in a Schedule I or II substance from deducting ordinary business expenses on federal taxes — so a dispensary can deduct cost of goods sold, but not rent, payroll, marketing, utilities, or security. Schedule III businesses are not subject to 280E. For state-licensed cannabis operators, who have effectively been taxed on gross profit for a decade, the tax swing is potentially transformative.

Why the Hearing Matters

President Trump's December 18, 2025 executive order directed the Attorney General to "expeditiously" finish the rescheduling process started by the DEA's May 2024 proposed rule. Four months later, that process was still frozen inside the agency, with the DEA telling Marijuana Moment as recently as April that the rescheduling appeal "remains pending."

The reason is procedural. The original DEA rulemaking hearing was stayed in early 2025 after disputes over which parties would be allowed to participate. Without a hearing, the Administrative Law Judge cannot issue a recommended decision, and without a recommended decision, the DEA Administrator cannot finalize the rule. Opening a new hearing, with a new date and a clean set of participants, is the mechanical step that has been missing.

Bloomberg and The Washington Post both reported that DOJ leadership — now under Acting Attorney General Todd Blanche following the dismissal of Pam Bondi earlier this spring — has signaled it is ready to push the hearing forward. Industry lobbyists close to the process told MJBizDaily they expect the hearing announcement to come by the end of April, with a final rule plausibly published in the second half of 2026.

Who Wins, Who Waits

The cleanest winners are multi-state operators and publicly traded cannabis companies. Analysts at Stifel and Viridian have estimated the 280E relief alone is worth roughly $1.5 to $2 billion a year in aggregate cash flow for the industry. Tilray, Curaleaf, Green Thumb Industries, and Trulieve have all cited Schedule III modeling in recent earnings calls, and cannabis-sector ETFs rallied sharply on the April 22 reports.

Small operators, paradoxically, may benefit proportionally more. A single-state dispensary chain paying 70% or 80% effective federal tax rates because of 280E has been the industry's quiet bankruptcy story for years; removing that penalty is the difference between operating at a loss and operating profitably for a meaningful cohort of independent retailers.

Patients in the 38 states with medical cannabis programs see less direct change. Because Schedule III drugs require a prescription and FDA-approved marketing, the existing state-level medical card system does not automatically convert to prescription access. The FDA-approval question for whole-plant cannabis is a multi-year path, not a next-quarter event. Consumers in adult-use states, similarly, will mostly notice nothing at the dispensary counter.

Banking is the other partial win. While the SAFER Banking Act remains separately stalled in Congress, Schedule III status is expected to make regional banks meaningfully more willing to open depository accounts for cannabis companies, even in advance of formal legislation.

What Still Needs to Happen

A DEA hearing announcement is the starting gun, not the finish line. The sequence from here is roughly: hearing scheduled, parties admitted, hearing conducted (typically two to eight weeks of testimony), ALJ recommended decision, DEA Administrator final decision, Federal Register publication, and a 30-day effective-date window. Litigation is likely at multiple steps — Smart Approaches to Marijuana and several state attorneys general have already signaled legal challenges.

Members of Congress, meanwhile, continue to argue that rescheduling is the wrong tool. The bipartisan STATES 2.0 Act, referred to the House Committee on Energy and Commerce in April, would remove cannabis from the Controlled Substances Act entirely and defer to state law — a descheduling, not a rescheduling, approach. Supporters argue Schedule III still leaves cannabis federally illegal for anything other than FDA-approved prescription use, which describes almost none of the current U.S. market.

What This Means

For the legal cannabis industry, the expected DEA hearing is the most consequential federal policy event since the Cole Memo. For consumers, the immediate impact is largely invisible. For federal-state tension, Schedule III is a partial truce rather than a resolution — the country would still be operating two cannabis markets, one federal and medical, one state and recreational, governed by incompatible rules.

Anyone buying cannabis stocks, watching a state legalization vote, or counting on prescription access should read past the "legalization" headlines this week. What is likely happening is narrower, more technical, and — if it actually lands — still meaningful enough to remake the economics of a $35 billion industry.

Key Takeaways

• DOJ is expected to move marijuana from Schedule I to Schedule III as soon as this week, with a new DEA administrative hearing reportedly imminent.
• Rescheduling is not legalization: state laws, criminal enforcement, and dispensary operations are not preempted.
• The major industry impact is elimination of IRC 280E, estimated at $1.5–$2 billion a year in cash-flow relief.
• Prescription access for whole-plant cannabis remains a multi-year FDA process, not an immediate change.
• Litigation and the STATES 2.0 descheduling bill will both shape how durable the rescheduling outcome ultimately is.

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