DEA Marijuana Rescheduling Pause Delays Schedule III Decision as Cannabis Businesses Face More Federal Uncertainty
Why thousands of mom and pops are hit not only with a rough economy, they are waiting on the administration to make the long promised move on marijuana. But now the DEA pauses marijuana rescheduling hearings in another agonizing delay and it creates fresh uncertainty for the c industry just as businesses, investors and advocates were watching for a potential move from Schedule I to Schedule III under the Controlled Substances Act.
On September 29, 2026, Drug Enforcement Administration Administrative Law Judge Derek C. Julius issued a stay in the ongoing marijuana rescheduling proceeding. The pause came after parties opposing rescheduling asked a newly released Government Accountability Office (GAO) report be added to the hearing record and additional briefing be allowed. The federal government has until October 13 to respond.
The hearing itself had already concluded. Formal proceedings were held from June 29 through July 15, 2026, and participants subsequently filed post-hearing briefs. The next major step had been an administrative law judge’s recommended decision on whether marijuana should be moved from Schedule I to Schedule III.
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Why did they pause? The immediate issue is a 23 September GAO report examining how federal agencies evaluate and schedule controlled substances.
The GAO found the DEA and Food and Drug Administration have gaps in their written procedures for conducting drug-scheduling evaluations and developing recommendations. The report examined federal scheduling activity involving 208 substances between 2020 and 2025. Importantly, the GAO findings address the agencies’ broader processes and do not constitute a scientific determination the marijuana rescheduling analysis is incorrect.
The parties seeking the pause argue the report could be relevant to the marijuana proceeding and should therefore be considered before the administrative law judge issues his recommendation.
This does not mean marijuana rescheduling has been rejected. It also does not mean marijuana has been moved to Schedule III.
Marijuana remains federally classified as a Schedule I substance unless and until the broader rulemaking process produces a final change.
Republicans control the White House, Senate and House – yet polling shows roughly 80% to 83% of Republicans favor legalizing marijuana for medical use either exclusively or alongside recreational use. But for the cannabis industry – the party has left thousands of mom and pop companies and hundreds of thousands of employees barely holding on. The complexity of the how the government treats the industry, even in legal states, this places a huge financial strain on businesses. The biggest immediate consequence is delay which experts say hurts the businesses barely holding on.
A move to Schedule III has been closely watched because of its potential tax implications. Section 280E of the Internal Revenue Code currently restricts businesses trafficking in Schedule I or II controlled substances from taking many ordinary business deductions. If marijuana ultimately moves to Schedule III, marijuana businesses would generally fall outside the statutory language of 280E, potentially changing the industry’s federal tax picture.
Rescheduling could also affect research, investment and the broader federal treatment of cannabis. However, Schedule III would not equal federal legalization. Cannabis would remain a controlled substance, and many federal restrictions would continue.
The pause therefore creates two competing realities for the industry.
For businesses who have been planning around an eventual Schedule III designation, the delay means more uncertainty and potentially more time operating under the existing federal tax and regulatory framework. This will lead to more closures and layoffs in a volatile US economy.
For opponents of rescheduling, the pause provides an opportunity to challenge the underlying administrative process and potentially introduce additional evidence into the record.
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The answer depends largely on which part of the industry—and which timeframe—is being considered.
In the short term, the pause adds uncertainty. Companies who have been anticipating changes associated with Schedule III cannot yet rely on those changes. Investors also reacted negatively to the news, with several publicly traded cannabis companies experiencing significant share-price declines following the announcement.
From a regulatory-process perspective, however, the pause could provide additional scrutiny. The GAO report raises questions about federal procedures for scheduling controlled substances, and the judge has not yet decided whether the report will be formally added to the marijuana record.
The pause also does not affect the separate federal action taken in April 2026 involving FDA-approved marijuana products and marijuana subject to qualifying state medical-marijuana licenses. This action placed those categories in Schedule III, while the broader question involving marijuana generally remains unresolved.
The next important date is October 13, when the government and other participants are due to respond to the motion involving the GAO report. After that, Judge Julius will determine whether the report should be considered and whether additional briefing is warranted.
Until those questions are resolved, cannabis companies, investors and consumers are left waiting for the next step in one of the most consequential federal marijuana policy decisions in decades.
