US Justice Department Downgrades Federal Risk Classification of State-Licensed Medicinal Marijuana, Affecting Washington and 39 Other States
Why It Matters
Washington State is among 40 states and the District of Columbia that permit medicinal marijuana, meaning Thursday’s federal reclassification order directly affects licensed dispensaries, patients, and researchers operating under state law. The shift promises tangible tax relief for medicinal cannabis businesses and could unlock broader scientific study of a substance that has long been restricted under the most severe federal drug scheduling category.
While the order stops short of the full federal legalization some advocates have pushed for, it represents the most significant rollback of federal cannabis restrictions in decades — and one that carries real consequences for businesses, patients, and state regulatory systems across the country.
What Happened
The U.S. Department of Justice published an order Thursday moving state-licensed medicinal marijuana products from Schedule I to Schedule III under the Controlled Substances Act. The order was signed by acting Attorney General Todd Blanche.
Schedule I is the Drug Enforcement Administration’s most restrictive category, reserved for substances deemed to have the greatest potential for abuse and no legitimate medical use — a category that has historically included heroin and cocaine. Schedule III includes highly regulated prescription drugs, such as acetaminophen with codeine.
The action follows an executive order issued by President Donald Trump directing the Justice Department to move toward rescheduling. “The Department of Justice is delivering on President Trump’s promise to expand Americans’ access to medical treatment options,” Blanche said in a statement. “This rescheduling action allows for research on the safety and efficacy of this substance, ultimately providing patients with better care and doctors with more reliable information.”
Separately, the DEA announced a hearing on broader reclassification — one that could potentially include recreational marijuana products — scheduled to begin June 29 and conclude no later than July 15.
By the Numbers
- 40 states plus the District of Columbia currently allow medicinal marijuana and are covered by the reclassification order.
- 24 states permit recreational adult use, where no immediate changes will result from Thursday’s order.
- June 29 – July 15: the window for the DEA’s upcoming hearing on broader marijuana reclassification, including possible recreational coverage.
- Medicinal cannabis businesses will now be able to deduct ordinary business expenses from federal taxes — a financial benefit previously blocked under Schedule I status.
- Previously, only cannabis grown in a federal facility could be used in research, severely limiting scientific study of the plant.
Zoom Out
Paul Armentano, deputy director of the National Organization for the Reform of Marijuana Laws, called the rescheduling order “historic,” noting that the federal government has for decades officially denied the legitimacy of medical cannabis even as a concept. “It finally acknowledges and recognizes not only the legitimacy of marijuana as a medicine, but also the legitimacy of these state programs,” Armentano said.
However, the order creates complications for the 24 states where both medicinal and recreational marijuana are legal. Businesses that sell both types of products — which is common across the Pacific Northwest and Mountain West — may face a confusing dual compliance environment. Chuck Smith, CEO of Colorado Leads, an industry group, said that for hybrid businesses, “federally covered medical activity and federally non-covered adult-use activity may be treated differently for registration, tax, and compliance purposes.”
Notably, the order does not resolve the persistent banking access problem for the cannabis industry. Financial institutions that provide services to cannabis businesses — even those operating legally under state law — remain exposed to potential federal money laundering prosecution. Washington lawmakers have long grappled with related state-level policy tensions, including recent legal challenges from Eastern Washington sheriffs over new eligibility requirements for elected officers and debates over the role of energy and regulatory frameworks in Washington’s economic future.
What’s Next
The DEA’s scheduled June 29 hearing will determine whether broader reclassification — potentially covering recreational marijuana — moves forward. Industry observers and cannabis executives say they expect the regulatory distinction between medicinal and recreational use to eventually narrow, though the timeline remains uncertain.
For Washington State and other states with active medicinal marijuana programs, the immediate next steps involve navigating the transitional compliance period as federal and state regulatory frameworks begin to align. Businesses that sell both medicinal and recreational products are advised to prepare for a period of differing treatment across their product lines.
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