The U.S. Department of Justice has proposed moving cannabis from Schedule I to Schedule III. If finalized, this would not legalize adult-use federally—but it would likely remove the punishing 280E tax burden going forward and could gradually lower patient costs in New York alongside the state’s newer 3.15% medical excise tax. The rule is not final as of September 4, 2025.
Where things stand right now
- The proposal: DOJ published a proposed rule to transfer marijuana to Schedule III on May 21, 2024. That kicked off the public comment and hearing process under federal rulemaking.
- Hearings & comments: DEA noticed a hearing in August 2024; tens of thousands of comments were filed. This is significant but not a final decision.
- Today: As of Sept 4, 2025, rescheduling is still pending—meaning federal law still treats cannabis as Schedule I until a final rule takes effect.
What Schedule III actually means
- Recognized medical use: Schedule III substances have a lower abuse potential than Schedules I/II and have a currently accepted medical use. This would acknowledge cannabis’ medical value at the federal level, but only FDA-approved cannabis medicines would be prescribable like other Schedule III drugs. State medical programs would continue operating under state law.
- Not legalization: Rescheduling does not create federal adult-use legality, interstate commerce, or automatic expungements. It primarily affects research, federal enforcement posture, and—critically—taxation.
The 280E effect: Why Schedule III matters for prices
- What 280E does: Internal Revenue Code §280E forbids normal business deductions for companies trafficking in Schedule I or II substances. That has driven effective tax rates sky-high for compliant cannabis operators.
- What changes under Schedule III: If marijuana moves to Schedule III and a final rule takes effect, §280E would no longer apply going forward because it only applies to Schedules I/II. Operators could deduct rent, payroll, marketing, etc., like any other business—potentially improving margins and allowing more competitive patient pricing.
- Caveat: Until any rule is finalized, the IRS says 280E still applies. Also note: some lawmakers proposed keeping 280E in place even if cannabis is rescheduled—so watch Congress.
New York pricing context (medical vs. adult-use)
- Medical: NY cut the medical excise to 3.15% on June 1, 2024. That’s imposed on the registered organization’s gross receipts and can’t be added as a separate line item to patients’ receipts.
- Adult-use: From June 1, 2024, NY charges a 9% distributor tax on wholesale transfers and a 13% retail excise on dispensary sales (adult-use products are exempt from sales tax). Those rates shape out-the-door pricing for consumers.
- Implication: If 280E goes away nationally, operators’ tax costs drop. Paired with NY’s lower medical excise, the environment becomes more favorable for sustainable patient pricing—though retail prices also depend on supply, compliance costs, and local competition. (Inference based on 280E removal and NY tax rules.)
Practical takeaways for patients & providers
- Patients should expect incremental price relief—more like steady compression than an overnight drop—if/when a final Schedule III rule takes effect.
- Providers can prepare by tightening cost accounting now (so they can realize 280E relief the moment it’s available), and by communicating clearly that medical excise in NY is already lower than before.
What to watch next
- Final rule timing and any litigation that could delay implementation.
- IRS guidance on transition years once/if a final rule lands.
- Potential congressional action that could override 280E relief or, alternatively, widen banking access.
Medical disclaimer: This article is educational and not medical or legal advice. Speak with a licensed clinician about your care.
