The Drug Enforcement Administration made the case for the first time that marijuana has a medical use, a stark reversal that aligns with the view of most Americans and could reshape the legal landscape for the cannabis industry.
In a modest courtroom in Virginia this month, lawyers for the DEA called two witnesses in a renewed Trump administration push to remove weed from being included among the nation’s most heavily regulated drugs. Previously, the agency has sought to keep the plant listed in federal law alongside heroin, LSD and ecstasy, as it has been since 1970.
The DEA approach at the regulatory hearing came across as less than vigorous. A floor below, visitors to a DEA museum can see exhibits touting operations involving hippie head shops, South American drug kingpins and plane-smuggled drug bales that floated in the ocean.
But it was a key step on the federal government’s long, strange trip to catch up with the vast majority of states where millions of people already use the plant and bring some clarity to the nation’s patchwork regulatory approach to cannabis.
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Opposing that were lawyers for a mix of activists against driving under the influence of drugs, law enforcement, conservative states and the business that arguably stands to lose the most: employment drug-screening clinics.
This year the Trump administration has taken a bifurcated approach to medical and recreational uses that’s already has invited legal challenges, as billions of dollars in extra costs and taxes for the weed industry hang in the balance.
In April, acting Attorney General Todd Blanche signed an order shifting medical marijuana products approved by the Food and Drug Administration or regulated by states from a plainly illegal Schedule I drug — meaning no medical use and a high potential for abuse — to a Schedule III drug, equivalent to prescription-only Tylenol with codeine.
But that left out the rest of legally defined marijuana. And a DEA administrative judge will soon recommend whether recreational weed will get knocked down to Schedule III as well.
The approach left the judge to explore the kind of awkwardly constructed question more expected during stoner philosophy musings: What’s the medical value of nonmedical marijuana?
“It is a deeply confusing question. It’s a shit show. None of this makes sense,” said Emily Dufton, a historian and author of “Grass Roots: The Rise and Fall and Rise of Marijuana in America,” who attended the hearings.
To reschedule marijuana under the Controlled Substances Act, and to protect it from legal challenges, the government first must go through a regulatory process, including a hearing.
On one side were DEA lawyers, who made the case that all marijuana that isn’t hemp — even nonmedical — should be no longer be classified as a Schedule I drug because it has “currently accepted medical use.” To change it to a Schedule III drug, they’d also need to address the potential for abuse and addiction.
They called two witnesses: An FDA official to speak about the agency’s determination in 2023 that cannabis has a currently accepted medical use, and a pain management doctor with clinical experience in the use of medical marijuana.
The judge, Derek C. Julius, who spent most of his career as a Justice Department immigration lawyer and was made an immigration judge two years ago, allowed testimony from 13 witnesses who opposed the rescheduling.
The final day in court, July 15, featured the naysayers’ last two witnesses. Yale University psychiatry professor Deepak D’Souza tuned in from an office computer to warn that “people who are at risk for mental illness are at greater risk using cannabis,” calling marijuana a “harbinger for psychosis” — especially now that strains are so much stronger than in the free-loving 1960s.
Sheriff William F. Honsal III showed up in his neatly pressed, forest green uniform to discuss the way Northern California’s Humboldt County — part of the famed “Emerald Triangle” that once produced the bulk of the nation’s illegal marijuana — still struggles to free itself from the grasp of the Bulgarian mob, Chinese criminal organizations and Mexican drug cartels.
“We still have a lot of illicit grows,” he testified. “The track-and-trace system has failed … they are diverting legal marijuana to these illegal channels.”
When the sheriff wrapped up two hours of testimony on the many negative effects of partial legalization fueling crime, DEA lawyers didn’t address the substance of his testimony, asking only whether his jurisdiction included the four states that had filed challenges. Those monitoring the case noted that DEA lawyers did not bother to cross-examine several opposing witnesses.
Julius gave his “solemn promise” that Wednesday that he would fairly consider the DEA and critics’ arguments about the medical nature of cannabis before making a ruling that would merely serve as a recommendation to DEA head Terry Cole, who will decide whether to move marijuana down to a Schedule III drug.
Americans have overwhelmingly backed the medical use of marijuana for years. States began legalization efforts in 1996, and it’s been more than 10 years since Congress prohibited the Justice Department from using funds to fight state laws allowing medical marijuana.
The 21.4 million near-daily cannabis users now outnumber the number of daily cigarette smokers and alcohol drinkers, according to data released last year by the Health and Human Services Department’s Substance Abuse and Mental Health Services Administration.
The rescheduling push first started back in 2022, when then-President Joe Biden ordered the Department of Health and Human Services and DEA to review the move. In 2023, HHS recommended the change to Schedule III, and in 2024, the Justice Department started the rulemaking process.
That regulatory push stalled in 2025 amid legal challenges. President Donald Trump moved the ball forward when he signed a Dec. 18 executive order directing the attorney general to reschedule marijuana “in the most expeditious manner.”
Blanche’s follow-up order in April applied only to certain types of medical cannabis and has since been challenged in federal appellate court, with the drug-screening industry arguing that Blanche does not have “carte blanche” to act on his own — and should have gone through the regular agency rulemaking process. And despite no judicial intervention yet, the DEA has begun that review process to include both medical and nonmedical marijuana.
Proponents of legalization hope it’ll happen, but they called the entire affair a frustrating continuation of the country’s clumsy approach to that sparkling aromatic flower — this time, trying to fit the complex profile of an herbaceous plant into FDA definitions better suited for a single chemical compound made in a lab.
“We’ve drawn a line on a plant where no line scientifically exists,” Charlotte Cathro, an accountant for cannabis businesses in Massachusetts, said.
Kyle Sosebee, an attorney at a cannabis specialty firm in Northampton, Massachusetts, said Blanche could have simply extended that reclassification to all marijuana, and his decision not to has fueled suspicions that Trump is simply paying lip service to the recreational pot crowd.
“He knows this can take a long time. He can say he did what he could,” Sosebee said.
Although 40 states allow for medical marijuana, and just over half the states permit some form of recreational use, federal illegality makes doing everyday business difficult. Major banks won’t touch it, leaving that up to state-chartered financial institutions willing to take on the extra due diligence. Loans are hard to come by. And anyone involved in the business — even tangentially — is perceived to come saddled with legal risks.
Cathro sold three condos she owned in an up-and-coming working-class suburb of Boston last year for the express purpose of finally starting a college fund for her two teenage boys. But when she tried to hire an investment adviser for guidance, three turned her down.
“Its just because I have the cannabis stink on me, because I’m an accountant for cannabis businesses,” she said. “It feels gross. This is what my clients deal with every day. There shouldn’t be this stigma. These are not cartels. These are mom-and-pop businesses.”
No companies involved with Schedule I drugs can deduct standard business expenses from their corporate taxes. Blanche’s reclassification decision in April means that medical pot companies could rake in billions of dollars in forgone taxes.
Applying the same rule to the rest of legally defined marijuana would do the same for growers, chemists, bakers, and dispensaries that service a much greater consumer base — and can’t currently deduct advertising or general business costs and sometimes find themselves with a tax bill even in years when they’ve taken a loss.
Cathro provided this example: A marijuana shop could make $100,000 in revenue, spend half of that on acquiring products and the other half on typical costs like retail salaries, rent and ads. At tax time, the shop would only be able to deduct the cost of goods sold — the first half — but have to pay corporate taxes on roughly 21 percent of the second half. That would amount to a $10,000 tax bill, even though it made no profit at all.
Sosebee said the tax situation has become so cumbersome that some businesses have essentially turned outstanding bills into massive temporary loans. He knows of one small company that is currently floating an Internal Revenue Service bill of $200,000 — but says that’s nothing compared to what larger firms owe.
“Large cannabis companies use the IRS as cheap loans. They have these massive unpaid tax bills in the millions of dollars, and they go into these payment plans with the IRS. The interest IRS charges are vastly smaller than what these businesses can get a loan for, so they can effectively borrow these huge sums of money from the IRS at exceedingly low interest rates,” Sosebee said.
Trulieve, the vertically integrated behemoth that grows its own cannabis and sells at its 206 retail stores all over the country, made financial filings to the Security and Exchange Commission in March that listed $696 million in “uncertain tax position liabilities” — a whopping sum that outnumbered its total current assets.
The company stands to benefit handsomely from better tax treatment following the DOJ’s recent rescheduling of medical marijuana. Its CEO, Kim Rivers, was at the White House when President Donald Trump set that into motion — and even received as a gift the sharpie pen he used to sign the executive order. Forbes has been dubbed the cannabis industry’s only “Trump whisperer.”
Cat Packer, who monitors regulation for the progressive nonprofit Drug Policy Alliance and attended some of the hearings in Arlington, was struck by the narrow scope of the conversation about marijuana: nothing about the racist motivations for making it illegal in the first place and no mention of the outsize effect of law enforcement on minority communities.
“We have this hearing to consider the future of marijuana, and nowhere are these histories being considered,” she told NOTUS.
Max Jackson, a marijuana industry consultant, was one of the few people who attended most of the hearing — although he was the only one who camped on South Hayes Street outside the DEA building with his dog inside a large dark van featuring a colorful, conspicuous surfboard on the roof.
He had mixed feelings about how it went, because he thinks the entire administrative process is wrong. But when the final hearing was over, he knew he had to stop by the DEA museum gift shop downstairs.
Jackson couldn’t leave without an ironic token: a military patch of the DEA’s “Marijuana Unit Intelligence Division,” something that may soon seem like a relic of the past.
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