Last week’s rescheduling announcement came as a surprise to many, not least to us here at Business of Cannabis.
Despite the flurry of reporting from multiple sources that an announcement was imminent, the last two years of stock swings, ambiguous or outright hollow promises, and bureaucratic red tape meant it was a bet we were reluctant to take.
But the surprise wasn’t just because it had finally happened, but, perhaps naively, because it wasn’t what we were expecting.
Acting Attorney General Todd Blanche’s order rescheduling state-licensed medical cannabis to Schedule III is a genuine, durable legal development, but reading the commentary that has flooded in from lawyers, analysts and compliance professionals in the days since, it’s clear that the battle is far from over.
The most immediate practical reality for state-licensed medical operators is a deadline that has received almost no coverage in the initial wave of reporting.
Operators who file for DEA registration within 60 days of the order’s publication in the Federal Register, a window that closes around June 22, qualify for an expedited review process and, critically, may continue operating under their existing state licences while that federal application is pending.
The DEA has committed to processing early applications within six months. CRB Monitor analyst Paul Cheveriat noted that there are currently 18,444 active medical cannabis licences across the US.
Processing all of them within six months would be, as Cheveriat puts it, ‘a major feat.’
What’s more, not all state medical cannabis programmes are created equal, and it remains unclear whether the DEA will treat all state licensing regimes as meeting its standard for ‘robust protections against diversion, requirements for record-keeping and reporting, and safety and inspection measures.’
CRB Monitor’s market analysis shows that only 32% of active licences are medical-only. The remaining 68%, covering operators in adult-use states, are entirely unchanged by Thursday’s order.
For those operators, and for the large MSOs that hold both medical and recreational licences in the same states, the question of how to separate medical and recreational revenues for 280E purposes is unresolved and will require IRS guidance that has not yet arrived.
While much of the commentary has focused on the tax and market implications of rescheduling, regular Business of Cannabis contributor Deb Tharp highlights a compliance issue that has, so far, flown under the radar.
By validating state medical cannabis certifications at the federal level, Tharp argues, the order has simultaneously brought them under federal jurisdiction, and with that comes the ‘corresponding responsibility’ doctrine, the same enforcement mechanism the DEA used to dismantle telehealth platforms in the ADHD medication space.
Under Schedule III, a cannabis sale only has federal protection if it serves a ‘legitimate medical purpose.’ The order preserves the existing state recommendation model for now, but the DEA’s data pipeline, connecting federal registrant records, state seed-to-sale systems, and certification records, creates exactly the kind of audit infrastructure the agency has used previously to identify and prosecute what it considers ‘pill mills.’
“The ‘Wild West’ of medical recommendations is over,” Tharp writes. “The federal sheriff is in town, and he’s using your own data to track you.”
For dispensaries with high-volume telehealth platform relationships, for practitioners issuing certifications at scale, and for operators who claimed 280E relief on revenues that might not survive scrutiny as genuinely medical, the coming months are likely to be a compliance sprint rather than a victory lap.
For investors, the timing of Thursday’s announcement produced a rare natural experiment. ATB Cormark Capital Markets’ Spring 2026 Cannabis Investor Sentiment Survey, conducted April 13-21, the day before rescheduling was first reported as imminent, provides a clean pre-announcement baseline against which to measure market expectations.
The survey found investors had assigned only a 55% probability to rescheduling occurring in the next twelve months, down from 60% in the previous survey and representing the second-lowest probability recorded across six surveys conducted since 2023.
Just 17.6% of respondents had increased their net exposure to MSOs in the previous six months, while 35.3% had decreased it. The ATB analysts described this dynamic as ‘fatigue increasing as regulatory catalysts have yet to materialise.’
ATB’s analysis suggests that with full rescheduling, Tier 1 MSO EV/EBITDA multiples could trend toward 14.1x from a current average of 5.8x. The firm’s equity fair value modelling, combining tax savings from 2026 to 2030 and a two percentage point reduction in discount rates, suggests potential upside to current market prices, averaging 240% across the major MSOs, with Ascend and Verano showing the most dramatic potential moves given their current depressed multiples.
The MSOS ETF closed Wednesday at $5.11. ATB’s survey found 46.2% of investors expected it to reach $10 or above upon rescheduling. But those projections were based on full rescheduling, and what has been delivered is partial.
With a hearing now set for June 29 to discuss Phase 2 of rescheduling, expected to explore expansion of rescheduling to the adult-use market, we’re likely to see continued turbulence in the markets as projections are recalculated based on the latest developments and sentiment.
Foley Hoag‘s Jeff Schultz, whose analysis of the order is among the most rigorous published so far, notes that opposition has been organised and well-resourced.
More than 20 Republican senators and 26 House Republicans have formally urged the administration to abandon rescheduling before the December executive order, and Smart Approaches to Marijuana (SAM) has reportedly retained former Attorney General Bill Barr to litigate against any final rescheduling action.
The treaty pathway Blanche used to bypass notice-and-comment rulemaking, while legally grounded in DEA precedent, is likely to face challenges on Administrative Procedure Act grounds.
Opponents may argue that the treaty exception was improperly invoked or that the evidentiary record is insufficient. Courts may be asked for stays or injunctions, and the order’s express severability provision signals that DOJ anticipated partial challenges and structured the document to survive judicial narrowing.
There is also the Congressional Review Act to consider. Following publication of a final ruling in the Federal Register, there is a 60-day period before it becomes fully effective, during which time Congress could, in theory, act to block it, though that would require a majority in both chambers and a presidential signature.
The broader question hanging over everything is what the June 29 hearing can actually achieve for the 68% of the industry that is not yet covered by Thursday’s order. The answer, as the Foley Hoag analysis makes clear, depends on whether the Phase 2 process follows the full rulemaking route rather than the treaty pathway used for Phase 1.
The Single Convention’s limitation of cannabis to medical and scientific purposes is precisely why Phase 1 could only reach state-licensed medical operators, extending Schedule III to recreational cannabis sits outside what the treaty mechanism can do. A second final rule covering adult-use cannabis would require the full administrative process, with all the litigation exposure that entails.
If that process proceeds on the DOJ’s stated timeline, a final rule could be published as soon as late 2026. Litigation could extend that horizon materially. As such, the fight for the majority of US cannabis operators is far from over.
The post The Fight for Cannabis Rescheduling Is Far From Over appeared first on Business of Cannabis.
Continue reading...
Despite the flurry of reporting from multiple sources that an announcement was imminent, the last two years of stock swings, ambiguous or outright hollow promises, and bureaucratic red tape meant it was a bet we were reluctant to take.
But the surprise wasn’t just because it had finally happened, but, perhaps naively, because it wasn’t what we were expecting.
Acting Attorney General Todd Blanche’s order rescheduling state-licensed medical cannabis to Schedule III is a genuine, durable legal development, but reading the commentary that has flooded in from lawyers, analysts and compliance professionals in the days since, it’s clear that the battle is far from over.
The clock is already ticking
The most immediate practical reality for state-licensed medical operators is a deadline that has received almost no coverage in the initial wave of reporting.
Operators who file for DEA registration within 60 days of the order’s publication in the Federal Register, a window that closes around June 22, qualify for an expedited review process and, critically, may continue operating under their existing state licences while that federal application is pending.
The DEA has committed to processing early applications within six months. CRB Monitor analyst Paul Cheveriat noted that there are currently 18,444 active medical cannabis licences across the US.
Processing all of them within six months would be, as Cheveriat puts it, ‘a major feat.’
What’s more, not all state medical cannabis programmes are created equal, and it remains unclear whether the DEA will treat all state licensing regimes as meeting its standard for ‘robust protections against diversion, requirements for record-keeping and reporting, and safety and inspection measures.’
CRB Monitor’s market analysis shows that only 32% of active licences are medical-only. The remaining 68%, covering operators in adult-use states, are entirely unchanged by Thursday’s order.
For those operators, and for the large MSOs that hold both medical and recreational licences in the same states, the question of how to separate medical and recreational revenues for 280E purposes is unresolved and will require IRS guidance that has not yet arrived.
READ MORE…
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The compliance trap no one is talking about
While much of the commentary has focused on the tax and market implications of rescheduling, regular Business of Cannabis contributor Deb Tharp highlights a compliance issue that has, so far, flown under the radar.
By validating state medical cannabis certifications at the federal level, Tharp argues, the order has simultaneously brought them under federal jurisdiction, and with that comes the ‘corresponding responsibility’ doctrine, the same enforcement mechanism the DEA used to dismantle telehealth platforms in the ADHD medication space.
Under Schedule III, a cannabis sale only has federal protection if it serves a ‘legitimate medical purpose.’ The order preserves the existing state recommendation model for now, but the DEA’s data pipeline, connecting federal registrant records, state seed-to-sale systems, and certification records, creates exactly the kind of audit infrastructure the agency has used previously to identify and prosecute what it considers ‘pill mills.’
“The ‘Wild West’ of medical recommendations is over,” Tharp writes. “The federal sheriff is in town, and he’s using your own data to track you.”
For dispensaries with high-volume telehealth platform relationships, for practitioners issuing certifications at scale, and for operators who claimed 280E relief on revenues that might not survive scrutiny as genuinely medical, the coming months are likely to be a compliance sprint rather than a victory lap.
What the investors think, and what the data says
For investors, the timing of Thursday’s announcement produced a rare natural experiment. ATB Cormark Capital Markets’ Spring 2026 Cannabis Investor Sentiment Survey, conducted April 13-21, the day before rescheduling was first reported as imminent, provides a clean pre-announcement baseline against which to measure market expectations.
The survey found investors had assigned only a 55% probability to rescheduling occurring in the next twelve months, down from 60% in the previous survey and representing the second-lowest probability recorded across six surveys conducted since 2023.
Just 17.6% of respondents had increased their net exposure to MSOs in the previous six months, while 35.3% had decreased it. The ATB analysts described this dynamic as ‘fatigue increasing as regulatory catalysts have yet to materialise.’
ATB’s analysis suggests that with full rescheduling, Tier 1 MSO EV/EBITDA multiples could trend toward 14.1x from a current average of 5.8x. The firm’s equity fair value modelling, combining tax savings from 2026 to 2030 and a two percentage point reduction in discount rates, suggests potential upside to current market prices, averaging 240% across the major MSOs, with Ascend and Verano showing the most dramatic potential moves given their current depressed multiples.
The MSOS ETF closed Wednesday at $5.11. ATB’s survey found 46.2% of investors expected it to reach $10 or above upon rescheduling. But those projections were based on full rescheduling, and what has been delivered is partial.
With a hearing now set for June 29 to discuss Phase 2 of rescheduling, expected to explore expansion of rescheduling to the adult-use market, we’re likely to see continued turbulence in the markets as projections are recalculated based on the latest developments and sentiment.
The litigation picture
Foley Hoag‘s Jeff Schultz, whose analysis of the order is among the most rigorous published so far, notes that opposition has been organised and well-resourced.
More than 20 Republican senators and 26 House Republicans have formally urged the administration to abandon rescheduling before the December executive order, and Smart Approaches to Marijuana (SAM) has reportedly retained former Attorney General Bill Barr to litigate against any final rescheduling action.
The treaty pathway Blanche used to bypass notice-and-comment rulemaking, while legally grounded in DEA precedent, is likely to face challenges on Administrative Procedure Act grounds.
Opponents may argue that the treaty exception was improperly invoked or that the evidentiary record is insufficient. Courts may be asked for stays or injunctions, and the order’s express severability provision signals that DOJ anticipated partial challenges and structured the document to survive judicial narrowing.
There is also the Congressional Review Act to consider. Following publication of a final ruling in the Federal Register, there is a 60-day period before it becomes fully effective, during which time Congress could, in theory, act to block it, though that would require a majority in both chambers and a presidential signature.
Phase 2 and what it can actually deliver
The broader question hanging over everything is what the June 29 hearing can actually achieve for the 68% of the industry that is not yet covered by Thursday’s order. The answer, as the Foley Hoag analysis makes clear, depends on whether the Phase 2 process follows the full rulemaking route rather than the treaty pathway used for Phase 1.
The Single Convention’s limitation of cannabis to medical and scientific purposes is precisely why Phase 1 could only reach state-licensed medical operators, extending Schedule III to recreational cannabis sits outside what the treaty mechanism can do. A second final rule covering adult-use cannabis would require the full administrative process, with all the litigation exposure that entails.
If that process proceeds on the DOJ’s stated timeline, a final rule could be published as soon as late 2026. Litigation could extend that horizon materially. As such, the fight for the majority of US cannabis operators is far from over.
The post The Fight for Cannabis Rescheduling Is Far From Over appeared first on Business of Cannabis.
Continue reading...
