A byline by Cameron Clarke, Co-Founder and CEO, Sunderstorm Inc.
For much of the past decade, cannabis operators have learned to build businesses in an environment defined by uncertainty. Companies have adapted to fragmented regulations, limited banking access, punitive tax treatment and the persistent disconnect between state legalization and federal prohibition. That experience has made the cannabis industry resilient, but it has also made many stakeholders cautious about predicting what comes next.
Here in the U.S., the road to Schedule III is no longer hypothetical. On April 28, 2026, a federal order took effect moving two categories of cannabis — products contained in FDA-approved drugs and products regulated under a state medical marijuana license — from Schedule I to Schedule III of the Controlled Substances Act. And from June 29 through July 15, the Drug Enforcement Administration held its long-awaited formal hearing on whether cannabis more broadly, including the adult-use market, should follow. The question facing operators, investors and international observers is no longer whether the process will begin. It is how far rescheduling will extend, how quickly the remaining steps unfold, and whether the changes already made will withstand the legal challenges now underway.
As a U.S. operator actively expanding into international markets, including Germany, we view rescheduling as an important milestone rather than a finish line. It has the potential to accelerate industry maturation across the globe, but the path forward remains complex.
How We Got Here
The recommendation to move cannabis to Schedule III followed a review initiated by the Biden administration and conducted by the U.S. Department of Health and Human Services. After evaluating available scientific and medical evidence, HHS concluded in 2023 that cannabis no longer meets the criteria for Schedule I classification. The Drug Enforcement Administration proposed the rule change in May 2024, drawing more than 42,000 public comments.
What initially appeared to be a relatively predictable process then experienced exactly the kind of friction the industry has come to expect: procedural disputes, an interlocutory appeal and administrative delays that stalled hearings through 2024 and 2025. Those developments serve as a reminder that regulatory change at the federal level often moves more slowly than market expectations.
The pace changed in December 2025, when President Trump signed an executive order directing the Attorney General to complete the rescheduling process in the most expeditious manner consistent with federal law. In April 2026, Acting Attorney General Todd Blanche issued the order placing FDA-approved and state-licensed medical cannabis products in Schedule III, invoking his authority to align U.S. scheduling with the country’s obligations under the Single Convention on Narcotic Drugs — the same international treaty framework that shapes cannabis regulation in Germany and across Europe. At the same time, he directed the DEA to convene a new, expedited hearing on the broader rescheduling question.
A Two-Track Reality
The result, for now, is a two-track federal system. Medical cannabis regulated under a qualifying state license — a framework that now exists in roughly 40 U.S. states — sits in Schedule III, alongside an expedited pathway for state-licensed operators to register with the DEA and integrate into the federal rules governing recordkeeping, security, disposal and labeling. Adult-use cannabis, by contrast, remains in Schedule I pending the outcome of the broader rulemaking.
That distinction carries real financial consequences. Section 280E of the Internal Revenue Code, which prevents businesses trafficking in Schedule I substances from deducting ordinary operating expenses, no longer applies to activity involving Schedule III substances. For state-licensed medical operations, meaningful tax relief has arrived. For adult-use operations, it has not yet been formally implemented. However, many stakeholders are acting as though it has.
The hearing that concluded on July 15 will determine whether that gap closes. Over more than two weeks of testimony at DEA headquarters, the government presented scientific and clinical evidence in support of the proposed rule, while designated opponents — the only outside parties permitted to participate under the hearing’s structure — made their case against it. That structure drew criticism from advocates who were excluded, but many observers who followed the proceedings closely left cautiously optimistic about the strength of the record. Post-hearing briefs are due August 17, after which the administrative law judge will issue a non-binding recommendation. The final decision rests with the DEA Administrator, and neither step carries a deadline. At this point, we remain optimistic that recreational cannabis will get rescheduled, but we also know that anything can happen in this volatile industry.
Potential Sources of Delay
Several factors could still influence the timeline, and litigation now sits at the top of the list. Three separate petitions challenging the April order have been consolidated before the U.S. Court of Appeals for the D.C. Circuit, brought by a mix of state attorneys general, prohibition-oriented advocacy groups and a pharmaceutical company pursuing the FDA drug-development pathway. The petitioners argue, among other things, that the order exceeded the Attorney General’s statutory authority and created an unauthorized hybrid regulatory regime. A motion to stay the order while the case proceeds is pending. If the court were to vacate the order, the medical rescheduling already in effect could be unwound.
The open-ended administrative timeline is a second variable. If post-hearing briefing, the judge’s recommendation and the Administrator’s review proceed on an accelerated schedule, a final rule covering cannabis more broadly could conceivably arrive by late 2026 or early 2027. But no deadline compels that outcome, and any final rule would likely face its own legal challenges — including, potentially, objections to the hearing structure itself.
A third consideration is the regulatory framework that follows any scheduling change. Moving cannabis to Schedule III raises new questions regarding DEA registration, production quotas, import and export controls, and the treatment of intoxicating hemp-derived products, whose federal definition is radically restricted in late 2026. Regulators may seek additional clarity before implementing significant policy changes, particularly for an industry as large and rapidly evolving as cannabis.
None of these factors necessarily prevent broader rescheduling from occurring. However, they highlight why businesses should prepare for multiple scenarios rather than relying on a single timeline. This makes planning complex for any company in the industry.
The Opportunities Ahead
Despite these challenges, the potential benefits of Schedule III are substantial — and, for the first time, partially realized.
The most immediate impact is relief from Section 280E. For many operators, particularly those focused on long-term growth and profitability, this change can significantly improve financial performance. Medical operations are seeing that relief now; extending it to the adult-use market, where the majority of U.S. cannabis commerce takes place, is what makes the pending rulemaking so consequential.
Rescheduling is also contributing to greater institutional confidence. Investors, lenders and strategic partners often view federal policy as a key indicator of industry stability. While Schedule III does not legalize cannabis federally as it remains a controlled substance, the actions taken this year signal a meaningful shift in how the federal government views the plant and its accepted medical use.
For international markets, the implications are equally important. Germany and other emerging cannabis markets closely monitor developments in the United States, and federal policy changes in the world’s largest cannabis economy often influence investor sentiment, business planning and regulatory conversations globally. The fact that the April order was grounded explicitly in the Single Convention is notable: it places U.S. federal policy in dialogue with the same treaty architecture under which Germany’s medical cannabis market operates. As companies evaluate cross-border opportunities, greater regulatory consistency in the U.S. can strengthen confidence among international stakeholders seeking long-term partnerships.
What Rescheduling Does Not Solve
At the same time, expectations should remain grounded.
Schedule III does not create a federally legal adult-use cannabis market. It does not automatically resolve interstate commerce restrictions. It does not establish a national regulatory framework for consumer products. State-level regulations will continue to shape the operational realities of the industry.
For operators like ourselves, compliance, product quality, consumer education and responsible business practices will remain critical regardless of scheduling status. The companies best positioned for future success are already investing in those areas today. They are building brands, developing scalable operations and preparing for a more sophisticated regulatory environment rather than waiting for a single policy change to transform the market.
A Long-Term Perspective
The cannabis industry has always evolved through incremental progress. State legalization, medical cannabis programs, expanded research and international reform efforts have each contributed to broader acceptance over time.
Rescheduling is another step in that progression — one that is now partially complete and partially contested. It is a meaningful development that has already unlocked new opportunities for businesses, investors and consumers, and it is also part of a larger process that will continue to unfold through the courts, the DEA and the coming rulemaking decisions.
For industry leaders, the most productive approach is to remain informed, stay adaptable and continue building businesses designed for long-term sustainability. Regulatory milestones matter, but lasting success has always depended on execution.
Whether the remaining road to Schedule III moves quickly or slowly, the broader direction of the industry remains clear. Cannabis continues to gain legitimacy as a regulated consumer and wellness category, and the businesses that focus on brand, quality, compliance and innovation will be best positioned to participate in its next chapter.
Disclaimer: Bylines by external contributors must not reflect the opinion of the editorial team. If you want to contribute as an external expert please reach out to redaktion AT krautinvest DOT de.