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Federal cannabis policy is evolving quickly, and key details will turn on how the Department of Justice and the U.S. Drug Enforcement Agency finalize any Schedule III action, what accompanying guidance follows, and how litigation and Congress shape implementation. The discussion below reflects our current predictions based on today's federal and state regulatory schemes and their likely implications—and those predictions may change as new rules, enforcement priorities, or court decisions emerge.
1. State programs stay in charge—and the core regulatory architecture remains intact
Rescheduling would not replace state cannabis regulation with a federal licensing system for the existing commercial market. In practical terms, state autonomy would remain the organizing principle for day-to-day operations, including:
- Licensing and market structure: who can participate, ownership and control restrictions, vertical integration limits, caps, and local control.
- Product rules: permitted forms, potency limits, additives, packaging, labeling, testing standards, and recall frameworks.
- Compliance and enforcement: inspections, track-and-trace participation, waste procedures, security, advertising limits, and administrative penalties.
- Equity and community reinvestment: social equity eligibility, priority licensing, labor peace requirements (where applicable), and local benefit agreements.
Rescheduling also would not create a unified federal standard for state operators to follow. As a result, multi-state operators should still expect state-by-state fragmentation in product requirements, labeling, and operational controls—and continued complexity for compliance, supply chains, and branding.
2. Federal illegality continues (just under a different schedule)
Even at Schedule III, non–Food & Drug Administration (FDA)-approved cannabis activity remains federally unlawful. The federal/state tension persists: operators may be fully compliant under state law and still operate outside a federally sanctioned commercial framework. Rescheduling can reduce stigma and shift risk perceptions, but it does not convert dispensaries into federally recognized distribution channels.
3. The biggest operational impact: likely end of 280E
For most operators, the most immediate and financially significant consequence of Schedule III is that IRC § 280E should no longer apply, allowing deduction of ordinary business expenses (e.g., payroll, rent, marketing, professional fees). That can materially change cash flow, reinvestment capacity, pricing strategy, and valuation/M&A underwriting. A secondary effect to watch: states may revisit cannabis tax policy if federal burdens ease.
4. Interstate commerce still does not open
Rescheduling alone does not authorize interstate commerce for state-licensed products. Operators should not assume new lawful pathways for cross-border distribution, shared production, or unified product standards without additional federal action.
5. Banking may improve incrementally, but not "solve"
Schedule III could increase comfort for some banks, insurers, and vendors. But core constraints remain tied to Anti-Money Laundering (AML) and Bank Secrecy Act (BSA) compliance and the continued federal-law conflict. Without further legislative change, improvements are likely to be partial and uneven across institutions and markets.
6. Expect more compliance scrutiny—especially documentation and claims
A Schedule III environment may bring more federal attention, particularly around labeling, consumer protection, and health/wellness claims (including online marketing). Operators should expect increased emphasis on documented controls, audit readiness, and defensible compliance narratives for counterparties (banks, investors, landlords, acquirers).
7. Medical and research: meaningful signals, limited immediate commercial change
Schedule III reflects a federal acknowledgment of accepted medical use, which may reduce stigma and support more research. But state dispensaries do not become FDA-approved pharmacies, and products do not become federally prescribable absent FDA approval.
Planning takeaways: Schedule III could materially improve operator economics via 280E relief and strengthen the broader medical/research narrative, but it will not eliminate federal-law friction, open interstate commerce, or instantly normalize banking. The Sheppard Mullin Cannabis Industry Team can help operators and ancillary businesses evaluate post-280E scenarios, advise on compliance and contracting impacts, support transactions and diligence under shifting risk assumptions, and build implementation plans as rulemaking and litigation develop.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
