DOJ Places FDA-Approved Marijuana in Schedule III, Cutting Tax Burden for Medical Cannabis Businesses
The Justice Department moved FDA-approved marijuana products and state-licensed medical cannabis from Schedule I to Schedule III on April 23, cutting the effective federal tax rate for qualifying businesses from as high as 80 percent to around 20 to 30 percent.
The U.S. Department of Justice and the Drug Enforcement Administration moved FDA-approved marijuana products and state-licensed medical cannabis from Schedule I to Schedule III under the Controlled Substances Act on April 23, 2026.
The change follows a December 2025 executive order from President Trump directing the Attorney General to complete the rescheduling process. It does not cover recreational marijuana or non-compliant products, which remain Schedule I.
The most immediate impact is financial. Under Schedule I, Internal Revenue Code Section 280E barred cannabis businesses from deducting standard operating expenses, pushing effective federal tax rates to 70 to 80 percent. Under Schedule III, qualifying medical marijuana businesses may now claim those deductions, potentially reducing their effective federal tax rate to 20 to 30 percent.
State-licensed medical marijuana businesses have until June 22, 2026, to file for DEA registration under the new Schedule III framework to maintain protected operating continuity.
The reclassification also lowers barriers to scientific research. Researchers will find it easier to study marijuana, which could lead to more university-led clinical trials and expanded physician confidence in prescribing cannabis-based treatments.
For patients, state regulations for obtaining and renewing medical marijuana authorizations remain unchanged. Medicare, Medicaid, and private insurers have not announced immediate coverage changes.
A broader administrative hearing on whether to reclassify all marijuana from Schedule I to Schedule III is scheduled for June 29, 2026.
