At DEA headquarters in Arlington, Virginia, the formal hearing on whether adult-use marijuana should move from Schedule I to Schedule III of the Controlled Substances Act is entering its final days. It opened June 29 before Chief Administrative Law Judge Derek Julius, paused for the July 4 holiday — the country’s 250th — and must conclude by July 15.
If you have been following our coverage since the June hearing announcement, the structural facts haven’t changed. What the past two weeks added is a clear picture of who got to talk — and it was not the industry.
A hearing built from the opposition’s witness list
The testimony schedule set by Judge Julius in late June reads like a roll call of rescheduling’s most committed opponents: the National Drug & Alcohol Screening Association on July 2, Smart Approaches to Marijuana on July 6, DUID Victim Voices on July 7, Dr. Kenneth Finn on July 8, the Tennessee Bureau of Investigation on July 10, pharmacist Phillip Drum on July 13, and — closing the proceedings on July 14 — the states of Nebraska, Idaho, Indiana, and Louisiana appearing jointly against the proposal.
Industry and reform organizations, including NORML and the National Cannabis Industry Association, were not granted testimony slots and have said so loudly. Whatever one thinks of the merits, the record being built at this hearing is a record of objections. DEA leadership, for its part, has come out swinging in defense of the proposal it published on May 21 — an inversion of the agency’s posture in the last rescheduling round that has left longtime observers describing the proceedings as the upside-down.
The procedural history explains some of the strangeness. The previous attempt at this hearing collapsed in January 2025, when then-Chief ALJ John Mulrooney granted an interlocutory appeal over alleged improper ex parte contacts between DEA officials and anti-rescheduling advocates, freezing the process. Mulrooney retired that August; Julius inherited the docket; a December 2025 executive order restarted the clock; and here we are.
The part that already happened: medical is in Schedule III now
Lost in the hearing drama is the fact that, for a large slice of the industry, rescheduling is not a proposal — it is the law in force. On April 23, 2026, Acting Attorney General Todd Blanche issued an order immediately placing FDA-approved marijuana products and marijuana products regulated under a qualifying state-issued medical license in Schedule III. We walked through the operational fallout in our analysis of the order and the state-level uncertainty it created.
That means the question before Judge Julius is narrower than headlines suggest: whether adult-use marijuana joins medical in Schedule III, or whether the industry’s split-schedule reality — medical in III, adult-use in I — becomes the durable status quo.
Both outcomes have concrete consequences for how operators run their compliance and data programs. That is the part we care about here.
What Schedule III for adult-use would actually change
Tax relief becomes a security budget — if you let it. The reason operators watch this docket is Section 280E: businesses trafficking in Schedule I or II substances cannot deduct ordinary business expenses. Adult-use in Schedule III ends 280E’s application to that side of the business, and for a mid-sized operator that is often a seven-figure annual swing. Our standing advice from the medical-side transition applies double: the first marginal dollar of 280E relief should go to the security and compliance debt you deferred while paying confiscatory effective tax rates — the unpatched camera VLANs, the unencrypted POS databases, the retention policies that exist on paper only.
Federal recordkeeping gets real. Schedule III is not descheduling. It is a regulated schedule, with CSA registration, inventory, and recordkeeping obligations for entities in the distribution chain. The April order’s framing — Schedule III status attaches to products under a qualifying state license — makes your state-license compliance record a federal predicate. Auditable inventory records, chain-of-custody documentation, and the integrity of your seed-to-sale data stop being merely a state audit concern and start being evidence of federal lawfulness. If your track-and-trace data is wrong, incomplete, or manipulable, that is now a federal-grade problem.
The research and clinical pipeline widens. The Justice Department pitched April’s order as strengthening medical research. More research means more clinical data, more patient registries, and more health-data flows attached to cannabis — all landing in the regulatory void we mapped in the HIPAA gap. Operators partnering with researchers should treat study data with clinical-grade controls even where no law yet forces them to.
And if adult-use stays in Schedule I?
Then the split-schedule era hardens, and vertically integrated operators live indefinitely with two federal postures inside one company. That has its own data-architecture implication: segmentation between medical and adult-use records stops being a courtesy and becomes a survival trait. If your medical side is federally Schedule III — with the registration and records posture that implies — and your adult-use side remains federally illegal, commingled customer databases, shared loyalty programs that blur patient and consumer records, and unified purchase histories are all structures a federal auditor, an insurer, or opposing counsel can use against you. Design so that each side of the house can be examined without exposing the other.
Either way, the hearing record built by NDASA, SAM, the TBI, and four opposing states previews the arguments that will follow the industry into litigation and future rulemakings: diversion, impaired driving, youth access, interstate leakage. Every one of those arguments is, at bottom, a claim that the industry cannot control its product and its records. The rebuttal is not a press release. It is clean data: age-verification logs that show discipline without hoarding IDs (see Verify, Don’t Store), track-and-trace records that reconcile, and security programs that survive an audit.
What to do between now and the ruling
- Do nothing rash on July 16. The hearing’s close starts the decision process; it does not end it. Post-hearing briefing, the ALJ’s recommended decision, and the Administrator’s final order — plus near-certain litigation from the states that testified July 14 — all lie between here and a change in adult-use status.
- Build the 280E contingency budget now. Model your tax position under adult-use Schedule III and pre-commit a defined share of the relief to security and compliance remediation. The operators who did this on the medical side in April moved in weeks; the ones who didn’t are still debating it.
- Audit your seed-to-sale data integrity this quarter. Under either outcome, your track-and-trace records are becoming federal-grade evidence. Reconcile them, control who can edit them, and log every change.
- Segment medical from adult-use data. Required if the split persists; harmless if it doesn’t.
- Keep your records boring. The opposition’s case is that this industry leaks. The best answer any single operator can give is a records posture with nothing exciting in it: minimal identity data, clean inventories, documented controls.
The bottom line
By July 15 the testimony will be done, and the industry that has the most at stake will not have said a word of it on the record. That is worth being angry about — and it is also beside the point for what you control. Medical cannabis is already federally rescheduled. Adult-use will either join it or be defined against it. In both futures, the operators who win are the ones whose records, inventories, and identity-data practices look the way the hearing’s opponents insist this industry’s never do.
Two weeks of hostile testimony wrote the prosecution’s theory of the case. Your compliance stack is the defense exhibit. Build it accordingly.
This article is provided for informational purposes only and does not constitute legal advice.
