Justice Department moves marijuana and medical cannabis to Schedule III

The Justice Department moved only a narrow slice of cannabis into Schedule III, covering FDA-approved drug products containing marijuana and state-regulated medical marijuana products tied to a qualifying state-issued license. The distinction matters: the federal change does not sweep in the broader adult-use market, even as it signals a major shift in how Washington classifies cannabis.

Acting Attorney General Todd Blanche said the department was acting under its authority to reschedule drugs and carry out the United States’ obligations under the Single Convention on Narcotic Drugs. The move recognizes what state governments have done for years, legalizing and regulating medical marijuana even as federal law kept it in Schedule I, the category reserved for substances the government says have no currently accepted medical use and a high potential for abuse.

The shift followed a long federal review. The Department of Health and Human Services recommended rescheduling cannabis to Schedule III in August 2023. The Justice Department then published a notice on May 21, 2024, proposing to transfer marijuana from Schedule I to Schedule III, and the Drug Enforcement Administration later set a hearing process in motion for December 2, 2024. The Controlled Substances Act dates to 1970, and marijuana’s placement in Schedule I has sat at the center of the conflict between federal prohibition and state legalization ever since.

Still, the change was not a full legalization. Federal officials have said Schedule III would acknowledge medical use, but it would not legalize marijuana nationwide or erase the remaining federal restrictions that shape how cannabis is grown, sold, studied and financed. That leaves a sharp divide between patients who use cannabis as medicine and the much larger recreational market, which would remain outside the federal green light.

Tax treatment was one of the clearest examples of that gap. On June 28, 2024, the Internal Revenue Service said marijuana remained a Schedule I controlled substance for tax purposes until a final federal rule was published, meaning Internal Revenue Code Section 280E still applied. For cannabis businesses, that meant the rescheduling debate could move forward without immediately fixing the tax burden that has squeezed margins across the industry.

The international dimension also shaped the decision. The Justice Department’s Office of Legal Counsel said in 2024 that placing marijuana in Schedule III, alongside additional Controlled Substances Act restrictions, could satisfy the United States’ obligations under the Single Convention. That treaty limits controlled drugs to medical and scientific purposes, and the broader global debate has echoed in Vienna, where the United Nations Commission on Narcotic Drugs voted on World Health Organization-backed cannabis scheduling recommendations in 2020. For patients, manufacturers and state operators, the result is a federal step forward that still leaves the biggest conflicts unresolved.