WASHINGTON DC – The U.S. Department of Justice is accusing some of the most vocal opponents of federal marijuana rescheduling of trying to protect their own financial interests rather than public health.
In a court filing submitted this week, DOJ attorneys argued that the National Drug and Alcohol Screening Association (NDASA) and MMJ International Holdings, a company developing cannabinoid-based pharmaceuticals, have “pocketbook interests” in preserving marijuana’s classification as a Schedule I controlled substance. Both organizations are among the plaintiffs challenging the federal government’s proposal to move cannabis to Schedule III.
DOJ contends Congress did not enact the Controlled Substances Act to protect the profits of workplace drug-testing companies or preserve market opportunities for pharmaceutical developers. Instead, government attorneys argue those financial interests are unrelated to the legal question of whether marijuana meets the statutory criteria for placement in Schedule III.
For cannabis businesses in Michigan and Ohio, whe legal marijuana has become a multibillion-dollar industry, the filing could have significant financial implications. If marijuana is eventually moved to Schedule III, many operators believe it would eliminate one of their biggest federal tax burdens while opening the door to expanded medical research and greater institutional investment.
DOJ: Congress Didn’t Create Schedule I To Protect Private Industries
The Justice Department argued that Congress did not establish the Controlled Substances Act to guarantee profits for companies that perform workplace drug testing or to protect market opportunities for pharmaceutical companies developing cannabinoid-based medicines.
Instead, government attorneys wrote that the challengers are asserting economic interests that benefit from keeping marijuana classified as a Schedule I drug alongside heroin and LSD.
The filing responds to lawsuits challenging the Drug Enforcement Administration’s ongoing effort to reschedule marijuana following a recommendation by the U.S. Department of Health and Human Services. Administrative proceedings remain on hold while the litigation continues.
Why Michigan And Ohio Businesses Are Watching
Michigan remains one of the nation’s largest legal cannabis markets. Even as retail cannabis prices continue to fall because of oversupply, Michigan’s cannabis industry is on pace for another $3 billion-plus sales year in 2026, demonstrating that higher consumer demand has largely offset lower prices. That continued growth has kept Michigan among the nation’s largest legal cannabis markets while squeezing profit margins for many growers, processors and retailers.
Ohio’s adult-use cannabis market also continues to expand following voter approval of recreational marijuana, with many multi-state operators maintaining cultivation, processing and retail operations in both states.
For businesses on both sides of the state line, the outcome of the federal rescheduling battle could eventually influence taxes, investment, medical research and employment policies.
What Is Section 280E?
The federal tax rule cannabis companies want to eliminate
Internal Revenue Code Section 280E prevents businesses that sell Schedule I or Schedule II controlled substances from deducting most ordinary business expenses.
As a result, many licensed cannabis companies pay federal taxes on income that would normally be offset by payroll, rent, marketing and other operating costs. Industry executives have long argued the rule dramatically increases their effective tax rates and limits profitability.
If marijuana is ultimately moved to Schedule III, most legal analysts believe Section 280E would no longer apply to state-licensed cannabis businesses. Banking restrictions, interstate commerce and federal legalization issues, however, would still require additional congressional or regulatory action.
Industry Groups Say Schedule I Is Outdated
Supporters of marijuana reform argue the federal government has ignored both scientific evidence and the reality that most Americans now live in states where cannabis is legal in some form.
The National Organization for the Reform of Marijuana Laws (NORML) has repeatedly argued that marijuana no longer belongs in Schedule I and that federal policy should reflect current medical evidence and state legalization efforts.
The Marijuana Policy Project has likewise maintained that Schedule I unnecessarily restricts scientific research while imposing costly tax and regulatory burdens on legitimate state-licensed businesses.
Cannabis industry organizations have also argued that rescheduling would encourage investment, expand medical research and create a more rational federal regulatory framework.
Opponents Cite Workplace Safety And Drug Development
While the National Drug and Alcohol Screening Association argues that rescheduling could complicate workplace drug-testing programs, MMJ International Holdings has maintained that changes to marijuana’s federal classification could affect companies developing cannabinoid-based prescription medicines. The Justice Department responded that those economic interests—whatever their merits—are not part of the legal test governing whether marijuana should be moved to Schedule III.
What’s Next
The litigation is expected to continue for months before the DEA resumes formal administrative hearings on marijuana rescheduling.
Whether marijuana ultimately moves to Schedule III remains uncertain. But the Justice Department’s latest filing shifts part of the national debate away from science and public health and toward economics—raising the question of who benefits financially from keeping cannabis classified alongside heroin and LSD.
For Michigan and Ohio, where billions of dollars in annual cannabis sales support thousands of jobs, the answer could shape the industry’s future long after this latest courtroom battle is over.
