DEA Rescheduling Hearing Is Underway: What Schedule III Would Actually Change for Dispensaries

The most consequential federal cannabis proceeding in more than half a century opened yesterday morning. At 9 a.m. ET on June 29, 2026, inside the DEA's hearing facility at 700 Army Navy Drive in Arlington, Virginia, an administrative law judge gaveled in the long-delayed hearing on whether marijuana should move from Schedule I to Schedule III of the Controlled Substances Act.

It is not a vote. It is not a trial. And it will not, by itself, make cannabis federally legal. But for the thousands of licensed retailers operating in legal states — and for the people who shop at them — what comes out of this hearing room over the next two weeks could reshape the economics of the entire industry. Here is what is actually happening, what the schedule looks like, and what a Schedule III outcome would and would not change for dispensaries.

What the hearing is — and what it is not

This is an administrative rulemaking hearing, the kind of proceeding required before a federal agency finalizes a major regulatory change. In May 2024, the Department of Justice formally proposed transferring marijuana from Schedule I — the category reserved for drugs with "no currently accepted medical use," alongside heroin — to Schedule III, which includes substances like ketamine and anabolic steroids that have accepted medical uses and a moderate-to-low potential for dependence.

That proposal followed a recommendation from the Department of Health and Human Services, which concluded that cannabis does have a currently accepted medical use and a lower abuse potential than its Schedule I status implies. The hearing now underway is the procedural step where designated participants present evidence to the record before the DEA issues a final rule.

Two things it is not:

• It is not legalization. Schedule III is still a controlled substance. State-licensed adult-use and medical programs would continue to operate in the same legal gray zone relative to federal law. Rescheduling changes the tax and research picture, not the basic federal-vs-state conflict.
• It is not a quick switch. Even after the hearing closes, the administrative law judge issues a recommended decision, the DEA administrator reviews it, and a final rule must be published — a process that can run months and invites litigation either way.

The schedule: two weeks, one holiday recess

The DEA has set an aggressive timeline. The hearing began June 29 and is scheduled to conclude no later than July 15, 2026. To let participants observe the nation's 250th Independence Day, the proceedings recess July 3 and reconvene July 6.

The government opened the proceedings on June 29. The witness calendar that follows is notable for what it contains — a roster drawn almost entirely from organizations and individuals opposed to rescheduling:

• July 2 — National Drug & Alcohol Screening Association (NDASA)
• July 6 — Smart Approaches to Marijuana (SAM)
• July 7 — DUID Victim Voices
• July 8 — Kenneth Finn, M.D.
• July 10 — Tennessee Bureau of Investigation
• July 13 — Phillip A. Drum, PharmD
• July 14 — the States of Nebraska, Idaho, Indiana, and Louisiana

Reform organizations including NORML and the National Cannabis Industry Association have sharply criticized the participant list, arguing the hearing is structured to amplify opposition while excluding the industry and patient voices that support rescheduling. "Schedule III is not the end of the road," NORML's Joseph Bondy said of the proceeding. "It is, at most, an interim correction." Supporters of a faster process counter that the scientific and medical evidence backing rescheduling has already been extensively evaluated by HHS, and that a leaner record could speed a final rule.

Whatever your read on the optics, the practical point for retailers is this: the hearing is moving, and a decision — in some direction — is now measurably closer than it has been at any point in the past two years.

The number that matters to every dispensary: 280E

If you own or work at a dispensary, the single most important consequence of a Schedule III reclassification has a name: Section 280E of the Internal Revenue Code.

Enacted in 1982 to stop drug traffickers from writing off business expenses, 280E bars any business "trafficking" in a Schedule I or Schedule II controlled substance from deducting ordinary operating expenses on its federal taxes. Rent, payroll, utilities, marketing, security, insurance — none of it is deductible for a state-legal cannabis retailer. The only thing a dispensary can subtract is its cost of goods sold.

The result is brutal and well documented: many dispensaries pay effective federal tax rates of 60% to 80% or more, on margins that are already thin. It is the reason a storefront can post healthy revenue and still bleed cash, and a major reason why so many operators carry crushing debt loads.

Here is the pivot point: 280E applies only to Schedule I and Schedule II. Move cannabis to Schedule III, and 280E stops applying. Dispensaries would, for the first time, be able to deduct normal business expenses like any other legal retailer.

Industry analysts have estimated this single change would free up hundreds of millions — by some estimates well over a billion — dollars annually across the sector. For an individual dispensary, it can be the difference between closing and expanding. That money tends to flow somewhere visible: lower prices, longer hours, more staff, better menus, and more locations. If you regularly find a dispensary near you through Budpedia, the post-280E landscape is one where the businesses behind those listings are simply healthier — and competition on price and selection gets sharper.

What Schedule III would not fix for dispensaries

It is just as important to be clear-eyed about the limits, because the gap between "rescheduling" and "legalization" is where a lot of confusion lives.

Banking would not automatically open. The lack of reliable banking and the cash-only reality at many shops stems from anti-money-laundering rules tied to cannabis's federal status as a controlled substance — Schedule III is still controlled. A separate measure, the kind of marijuana banking bill that bipartisan members of Congress filed again in late June 2026, is what would actually address financial-services access. Rescheduling helps the climate; it does not by itself give every dispensary a checking account.

Interstate commerce would stay closed. A dispensary in Michigan still could not ship to a customer in Ohio. State lines remain hard walls until Congress acts.

State licensing still governs the storefront. Who can open a dispensary, where, and under what rules remains entirely a function of state and local law. Rescheduling changes the federal tax math; it does not touch your state's license cap, zoning buffer, or local approval process.

FDA's role grows, with open questions. Schedule III substances generally require FDA approval to be marketed as medicines. How the FDA would treat the existing state-regulated product universe — flower, vapes, edibles, concentrates sold over a dispensary counter — is one of the genuinely unresolved questions, and a reason both supporters and skeptics are watching the final rule's language closely.

What this means if you're a cannabis shopper

For everyday customers, the near-term experience at the counter does not change because of a hearing. Your state's dispensaries operate today exactly as they did last week. But the medium-term trajectory matters.

A 280E repeal tends to ease the relentless price pressure that pushes some operators toward thinner products and higher markups just to survive their tax bill. Healthier operators reinvest. Historically, the markets that get breathing room see more storefronts open, more competitive deals, and more consistent hours and inventory. The practical takeaway: it is a good moment to know which shops near you are genuinely licensed and well run, because the field is about to get more dynamic.

That is exactly what a directory is for. Budpedia verifies dispensary listings against state license rolls before they go live, so when you compare menus, deals, and hours, you're comparing real, licensed retailers — not gray-market storefronts. Browsing your state or city hub is the fastest way to see who's actually operating near you and what they carry right now.

How to follow the hearing — and what to watch for

The proceedings are open to the public and press but are not being livestreamed, so coverage will come through the participants, reporters in the room, and the eventual written record. A few markers worth tracking over the next two weeks:

1. The strength of the government's evidentiary record (presented June 29). A robust HHS-backed scientific case makes a Schedule III recommendation harder to overturn on appeal.
2. Whether opposing testimony introduces anything the DEA administrator could lean on to deviate from the proposed rule, or merely restates known policy objections.
3. The administrative law judge's recommended decision after July 15 — the first real signal of which way the final rule is likely to break.
4. Litigation posture. Both supporters and opponents have signaled willingness to challenge an unfavorable outcome, which means even a clear hearing result may not be the last word in 2026.

The bottom line

The June 29 hearing does not end the long federal cannabis fight, and it does not make marijuana legal. What it does is push the question of Schedule III — and with it the fate of the 280E tax penalty that has strangled dispensary economics for decades — to the front of the line. For retailers, a favorable outcome is less a finish line than a release valve: the first real chance in a generation to be taxed like a normal business.

For shoppers, the smart move is the one that's always smart — know your options and stick to licensed, verified shops. Whether the federal picture shifts in July or drags into appeals, the dispensaries doing it right are the ones worth supporting, and the easiest way to spot them is to start from a directory that checks the license before the listing goes live.

Want to see which licensed retailers are operating near you right now? Find a dispensary near you on Budpedia — every listing is verified against state license rolls before it goes live, with current menus, deals, and hours.

Sources: DEA — Hearing on Proposed Marijuana Rescheduling Begins June 29 · Forbes — DEA Kicks Off Historic Hearing On Cannabis Rescheduling Proposal · Federal Register — Schedules of Controlled Substances: Rescheduling of Marijuana · Marijuana Moment — Cannabis banking legislation filed in Congress (June 26, 2026)