S64 in the News: Medical marijuana rescheduled by Feds, could open up research and tax breaks
Strategies 64 leaders hit the airwaves to discuss the Justice Department’s announcement that Acting Attorney General Todd Blanche issued a final order reclassifying medical marijuana from Schedule I to Schedule III of the Controlled Substances Act.
S64’s Christian Sederberg was interviewed for a story on Colorado Public Radio, where he discussed the road ahead for implementation of rescheduling medical marijuana and for upcoming hearings on the prospect of expanding rescheduling to include marijuana regulated for adult use.
While legalization advocates welcomed the move, there’s concern of legal challenges to the medical rescheduling and potential recreational rescheduling.
“So a lot of advocacy work to be done,” said Christian Sederberg, an attorney who helped draft marijuana legalization in Colorado. “It’s going to be a rapid and furious a couple months here for the folks that have been working on this.”
Meanwhile, S64’s Mason Tvert represented Colorado’s cannabis industry trade association, Colorado Leads, in a story on KOAA NBC Colorado Springs and an interview on KOA 850 news radio.
Federal Rescheduling of Medical Marijuana Advances, Hearings Set for Potential Expansion to Adult-use
Federal cannabis policy took a historic and significant step forward on April 23 when the Department of Justice announced Acting Attorney General Todd Blanche signed a final order placing two specific categories of marijuana — FDA-approved drug products containing marijuana, and marijuana subject to a qualifying state medical marijuana license — into Schedule III of the Controlled Substances Act. The order is effective immediately.
But the move is narrower than many industry observers expected. The final order does not reschedule all marijuana. Adult-use cannabis, unlicensed bulk marijuana, and marijuana extracts not tied to an FDA-approved product or a state medical license remain in Schedule I. Instead, those categories are now subject to a separate, expedited administrative hearing process scheduled to convene on June 29 and conclude no later than July 15.
In other words: what the Department of Justice has delivered is not one rescheduling action, but the beginning of two parallel tracks with very different legal authorities, very different timelines, and, for dual-licensed state operators, some very thorny operational questions.
What the Final Order Actually Does
The final order leans on a specific and somewhat unusual legal authority: 21 U.S.C. § 811(d)(1), which directs the Attorney General to schedule (or reschedule) substances as needed to satisfy U.S. obligations under international drug treaties, most notably the 1961 Single Convention on Narcotic Drugs. Critically, this authority bypasses the normal notice-and-comment rulemaking procedures of § 811(a) and (b) and does not require an HHS scientific and medical evaluation (though, as the order notes, HHS provided one anyway in August 2023 recommending Schedule III).
Because § 811(d)(1) is tethered to treaty obligations, which in turn limit cannabis use “exclusively to medical and scientific purposes,” the order’s reach is necessarily constrained to the medical context. That is why only state-licensed medical marijuana and FDA-approved products made the cut, and why adult-use cannabis requires a separate legal pathway altogether.
The order is explicit on this point:
“Any form of marijuana other than in an FDA-approved drug product or marijuana subject to a state medical marijuana license remains a schedule I controlled substance.” (pg. 18)
That sentence should be the starting point for every conversation operators and investors have in the coming weeks.
A New Federal Registration Pathway for State-Licensed Medical Operators
The most operationally significant element of the final order is a new expedited federal registration process for state-licensed medical marijuana entities. For the first time, state medical marijuana manufacturers, distributors, and dispensers can become federally registered to handle a Schedule III controlled substance without first having to clear the full gauntlet of DEA’s standard application review.
From the order:
“The proposed amendments to Part 1301 establish a new registration pathway for state-licensed medical marijuana entities seeking federal DEA registration as manufacturers, distributors, and/or dispensers. The regulation creates an expedited review process under which applicants holding state medical marijuana licenses may submit their existing state credentials as conclusive evidence of state-law authorization … early applicants may lawfully operate under their state-issued licenses during the pendency of review.” (pg. 21)
Practically, this means:
Applications submitted within 60 days of publication must be processed within six months.
A state-issued medical marijuana license is treated as conclusive evidence of state-law authorization for purposes of DEA registration.
Early applicants can continue operating under state authority while DEA review is pending — no operational gap.
State-law labeling, packaging, disposal, and physical-security requirements can substitute for federal requirements (with one carve-out: the statutory warning label required under 21 U.S.C. § 825(c) must still appear).
If the underlying state license is suspended, revoked, or expires, the federal DEA registration is automatically suspended as well.
This is a meaningful federalism move. It effectively incorporates state medical licensing infrastructure into the federal registration system rather than forcing operators through a parallel and duplicative review. DEA retains authority to deny or revoke registration for public-interest reasons or for non-compliance with the Single Convention, but the default presumption runs toward approval.
Single Convention Compliance: DEA Becomes a (Nominal) Market Participant
To keep the United States aligned with its treaty obligations, the order establishes an unusual compliance mechanism under Article 23 of the Single Convention, which requires a government agency to serve as the exclusive purchaser of cannabis production:
“To address Single Convention compliance under Article 23, the rule establishes a nominal price purchase-and-resale mechanism through which the Administration acquires and resells registered manufacturers’ marijuana crops, thereby satisfying the Convention’s requirement that a government agency serve as the exclusive purchaser of cannabis production.” (pg. 22)
In practice, DEA will purchase registered manufacturers’ marijuana crops at a nominal price and resell them back to the same entity (or a related entity) at that same price plus an administrative fee. Registrants must store crops in a DEA-accessible facility until the transaction is complete, and each manufacturer registration must specify the areas in which cultivation is permitted.
Whether this machinery works smoothly in practice, particularly at the scale of existing state medical markets, is an open question and one worth watching. The order is silent on logistical specifics that industry will need to navigate quickly.
Tax Treatment: The End of 280E (for Medical Operators)
One of the most consequential, and most widely anticipated, downstream effects of Schedule III placement is the inapplicability of Internal Revenue Code Section 280E, which disallows ordinary business deductions for any trade or business “trafficking in controlled substances … in schedule I or II.” Because the order places qualifying medical marijuana in Schedule III, Section 280E no longer applies to those activities.
The order goes a step further and encourages retrospective relief:
“The Administrator encourages the Secretary of the Treasury to consider providing retrospective relief from Section 280E liability for taxable years in which a state licensee operated under a state medical marijuana license. Nothing in this rule constitutes a determination regarding federal tax liability …” (pg. 23)
The order is careful to disclaim any binding tax effect, and operators should consult tax counsel about their specific facts. But the policy signal is significant, and it comes as the cannabis industry has paid an estimated $15 billion in excess 280E-related taxes since 2018.
Important caveat: In states where adult-use and medical marijuana operate under dual licenses, often with commingled inventory and shared books, the 280E relief becomes genuinely complicated. Only the medical side of a dual-licensed operation qualifies. Operators who cannot cleanly separate their medical inventory, sales, and records from their adult-use activities may find themselves unable to claim the relief they were expecting. In states like Arizona, where a product’s medical-versus-adult-use designation isn’t determined until the point of sale, this creates immediate accounting and compliance pressure.
The Severability Provision — a Signal That Litigation Is Coming
DEA plainly anticipates legal challenges, and the order includes a severability clause that is worth reading closely:
“It is DEA’s intention that the provisions of this final order shall operate independently of each other. If this final order, or any portion of this final order, is ultimately declared invalid or stayed as to a particular provision, it is DEA’s intent that the final order nonetheless be severable and remain valid with respect to those provisions not affected by a declaration of invalidity or stayed.” (footnote 39)
That kind of clause doesn’t appear by accident. Opponents of rescheduling, most notably Smart Approaches to Marijuana, have already signaled they intend to seek injunctive relief. A particular point of legal vulnerability is not the scheduling action itself (which enjoys a relatively clear statutory basis under § 811(d)(1)) but the operational and registration regulations that accompany it. Whether the treaty-compliance authority extends to the substantial regulatory architecture DEA has built around it will likely be a central issue in any litigation.
The severability clause is DEA’s effort to ensure that if a court strikes down one component, say, the expedited registration pathway, or the nominal-price purchase mechanism, the broader Schedule III placement survives.
How We Got Here
This action follows President Donald Trump’s December 2025 executive order directing federal agencies to expeditiously reschedule marijuana to Schedule III. Marijuana has been classified as a Schedule I substance for decades despite widespread adoption of state-regulated medical marijuana and adult-use marijuana markets.
Rescheduling of marijuana has been underway since the Biden Administration. In 2023, the Department of Health and Human Services formally recommended rescheduling marijuana after concluding that it has a currently accepted medical use. However, the administrative hearings on the proposal to federally reschedule marijuana were postponed earlier this year due to an interlocutory appeal, following allegations that the DEA inappropriately engaged in ex parte communications with opponents of rescheduling. DOJ and DEA are withdrawing prior hearing proceedings from 2024 to expedite a revised process with new deadlines.
Schedule III status recognizes accepted medical use, allows businesses to claim standard business deductions currently disallowed by 280E, and reduces barriers to scientific and medical research. It does not change federal criminal laws and penalties.
What Rescheduling Does Not Do
It’s worth being clear about the things this final order does not accomplish:
It does not legalize marijuana at the federal level. Possession, cultivation, distribution, and sale of marijuana outside the covered medical categories remain federal crimes.
It does not affect anyone currently incarcerated on federal marijuana charges.
It does not cover adult-use (recreational) marijuana, even in states where it is legal.
It does not apply to synthetically derived THC (such as delta-10-tetrahydrocannabinol), which remains in Schedule I.
It does not alter the legal status of hemp as defined in 7 U.S.C. § 1639o, though a separate statutory change to the hemp definition takes effect November 12, 2026.
It does not change SAFE Banking, interstate commerce restrictions, or the federal-state conflict for adult-use operators.
Next Steps and What Stakeholders Should Know
The practical implications of the rescheduling order remain uncertain, particularly for businesses involved in both medical and adult-use activities. The DEA is expected to publish a new hearing notice in the Federal Register to “fully remove marijuana from Schedule I and place it into Schedule III under the Controlled Substances Act.” The anticipated timeline has been released for the new administrative hearings:
The new hearing will convene on June 29, 2026, and will conclude no later than July 15, 2026.
Every “interested person” who wishes to participate in the hearing will need to file a written notice of intention to participate on or before May 24, 2026.
Interested persons selected to participate will be notified on June 22, 2026.
That is a compressed timeline by administrative hearing standards, a signal that DOJ and DEA intend to move decisively, and an opportunity for stakeholders who want a seat at the table to prepare their filings now.
Takeaways for Operators, Investors, and Policymakers
A few observations as the dust settles:
State medical marijuana operators should evaluate the expedited registration pathway now. The 60-day application window matters: filing within it triggers the six-month processing deadline and allows lawful operation under state authority during DEA review. Operators who wait risk losing that bridging protection.
Dual-licensed operators face real operational pressure. If a single facility handles both medical and adult-use inventory under a single set of books, the medical-only benefits of Schedule III placement, including 280E relief and federal DEA registration, may be difficult to capture cleanly. Now is the time to assess whether operations, inventory, and accounting can be segregated.
The June 29 hearing is where the broader question gets decided. Whether adult-use marijuana ultimately moves to Schedule III depends on that administrative process and any subsequent litigation. Stakeholders with a view on the outcome should consider whether to file a notice of intent to participate by May 24.
Litigation risk is real and acknowledged. DEA’s severability provision is a tell. Expect at least one court challenge to the operational and registration components of the order in the coming weeks.
This is still not legalization, and it is not a fix for the two-track problem. Federal criminal law continues to apply to non-covered marijuana activity. The continued fragmentation between “medical” and “adult-use,” and between marijuana and hemp, remains the most significant structural flaw in federal cannabis policy. Today’s action narrows that fragmentation in one direction while preserving it in another.
We will continue to track developments, including the Federal Register hearing notice, any legal challenges filed against the final order, Treasury guidance on retrospective 280E relief, and the progression of the June 29 hearing process, and will share updates as they emerge.
S64 in the News: How Trump’s order to reclassify marijuana could affect Colorado’s industry
Strategies 64 partner Mason Tvert was featured in multiple media outlets, including the Denver Post and talk radio stations 850 KOA and 630 KHOW, speaking on behalf of Colorado Leads regarding President Donald Trump’s executive order to reclassify cannabis from Schedule I to Schedule III.
President Donald Trump’s executive order to legally reclassify marijuana as a less dangerous drug stands to benefit Colorado cannabis businesses’ bottom lines at a time when the industry in this state is struggling, local proprietors and advocates said Thursday. … Mason Tvert, spokesperson for Colorado Leads, said the change “represents an extremely meaningful step toward aligning federal policy with scientific evidence, public opinion and decades of our state’s experience with cannabis. It acknowledges what many experts have known for decades, which is that cannabis does not belong on Schedule I.” … Tvert noted that critical issues would remain unsolved, including access to banking, lines of credit and traditional merchant processing. “It just comes down to, is marijuana federally illegal? And under Schedule III, it is still federally illegal,” Tvert said, so the incentive for banks to get involved in the industry wouldn’t necessarily change.
Audio and a transcript of Mason’s interview on 630 KHOW is available here.
S64 in the News: Colorado officials react to marijuana, AI executive orders
Amid reports that President Donald Trump is expected to advance cannabis rescheduling, Denver Fox affiliate KDVR interviewed Strategies 64 partner Mason Tvert, who spoke on behalf of Colorado Leads about the impact it would have on Colorado cannabis businesses. Watch a video of the news story below.
Mason highlighted how reclassifying cannabis from Schedule I to Schedule III would greatly improve tax fairness, as state-regulated cannabis businesses would no longer be subject to Section 280E of the Internal Revenue Code, which currently prohibits them from deducting ordinary business expenses like other businesses can.
The president signed an executive order on A.I. last week, and he could be signing an order dealing with marijuana soon. The two moves are getting different reactions here at home.
“Marijuana would still be illegal (at the federal level), but it would simply be treated differently under the law. And that has significant political and policy implications down the line,” said Mason Tvert of Colorado Leads.
The president said he is strongly considering rescheduling marijuana from a Schedule I to a Schedule III, classifying it as a less dangerous drug. Tvert, a marijuana industry group, said the proposed change could allow cannabis businesses to be treated more fairly under federal tax policy, pave the way for more research and signify a shift.
“The most significant change for cannabis businesses would be the tax relief it provides. Currently, legal cannabis businesses are paying 70% or more in an effective tax rate, which is far greater than other legal businesses. They might see some relief if cannabis is rescheduled,” Tvert said.
S64 in the News: ‘Secret shopper’ study finds a lot of Colorado’s weed is weaker than advertised
Strategies 64 partner Mason Tvert spoke to Colorado Public Radio on behalf of Colorado Leads for its coverage of a study that found THC was inaccurately labeled on many regulated cannabis flower products.
Mason Tvert, a spokesperson for the marijuana industry group Colorado Leads, said there is no federal standard for testing labs since marijuana is federally illegal. And consumer preferences may be leading to higher cannabis potency labeling.
“The market tends to be driven by a desire for higher potency. Companies are incentivized to submit for testing the part of the plant that is most likely to have the highest level potency,” said Tvert, who added that it’s better to have the upper level of potency on the label for consumers.
S64 in the News: The Future of Cannabis Labeling Is Digital
Cannabis Equipment News published a guest column by Strategies 64 Vice President Dan Smith summarizing the white paper he recently authored on cannabis labeling policy.
Just about everyone agrees that labeling requirements are a critical benefit of cannabis regulation, ensuring consumers are provided with important product information, instructions, and warnings. But a lack of consensus on what information should be included and how it should be displayed has resulted in excessive label content, lack of standardization, and constant changes that create confusion among consumers, unsustainable costs for businesses, and headaches for regulators.
S64 in the News: Printed and dyed marijuana rolling papers could pose health risks
MJBizDaily reached out to Strategies 64 managing partner Jordan Wellington for a story on the potential health risks associated with certain types of rolling papers. Specifically, they looked to him for insights on how papers are (or are not) regulated.
Jordan Wellington, a partner in Colorado-based cannabis policy and public affairs firm Strategies 64, said state regulators typically require pre-rolls to be tested but typically do not require the rolling papers themselves to be tested.
After receiving reports in 2021 from licensed testing facilities that some rolling papers contained metals, the Colorado Marijuana Enforcement Division encouraged licensees to work with the testing facilities to evaluate the materials being used to create pre-rolled joints.
“Outside of pre-rolls, Colorado state cannabis regulators are not provided with authority to regulate ancillary consumption devices because they’re not cannabis,” Wellington said.
“States may start looking at creating specific requirements around printed papers in the regulated market.”
Labels are packed with information few can read or understand, laws change faster than businesses can print new packaging, and inconsistent standards across state lines only deepen the confusion. But a new white paper from policy consulting firm Strategies 64 suggests a solution is already in the hands of most consumers: the QR code.
In a comprehensive analysis titled The Future of Cannabis Labeling Is Digital, Strategies 64 dives deep into the policy failures plaguing marijuana labeling and argues that embracing QR code technology may be the most effective and politically feasible path forward.
“There is a general consensus among stakeholders that current cannabis labeling policies are neither optimal nor efficient,” said S64 Vice President Daniel Smith, who authored the report. “QR codes and similar technologies offer a practical solution for streamlining regulatory compliance and promoting informed consumer choice. They may also be the key to achieving much-needed standardization across product types and among legal cannabis markets.”
S64 in the News: Cannabis fundraiser planned in Somerville
The Boston Globe spoke with Strategies 64 partner Mason Tvert for its coverage of a local mayoral candidate who is holding fundraiser featuring a cannabis-infused meal.
Mason Tvert, a cannabis consultant and longtime evangelist for cannabis legalization, said he could see campaigns hosting more THC-laced meals in the future. Cannabis has gained more social acceptance alongside its new ubiquity in the public square, a trend he thinks would continue if and when it is legalized at the federal level.
With time, more people of voting age will have grown up in a time when cannabis sales have been legal, and for whom the chance to pop an edible in the company of a local politician is enticing.
“As it becomes more legal and more widely accepted, we’re sure to see candidates or businesses or organizations take steps to reach out to that audience,” he said. “There are some people who might be attracted to an open bar. Some might be attracted to a cannabis- infused meal.”
