DETROIT – A new legal challenge seeking to halt federal marijuana rescheduling is creating uncertainty for cannabis businesses nationwide, including in Michigan, where operators have been hoping federal reform would ease tax burdens and improve profitability.
A coalition led by the National Drug and Alcohol Screening Association and a cannabis-focused pharmaceutical company has asked a federal appeals court to pause the Trump Administration’s effort to move marijuana from Schedule I to Schedule III of the federal Controlled Substances Act while broader legal challenges proceed.
The filing represents the latest attempt by opponents of cannabis reform to stop what many industry observers view as the most significant federal marijuana policy change in decades.
For Michigan’s cannabis industry, however, legal experts say the bigger issue may not be whether the lawsuit succeeds, but how long it takes federal agencies to fully implement any changes.
“The odds of the court issuing a stay are moderate to low. I would say less than a 30 percent chance,” said Mohamed Ghaith, an attorney with Oak Law. “The federal government has already started taking steps to formalize the rescheduling and the DOJ and DEA are both pushing the rescheduling effort with formal hearings scheduled for June 29, 2026.”
Why Rescheduling Matters
The cannabis industry has closely watched the rescheduling process because moving marijuana to Schedule III could eventually eliminate the federal tax burden created by Internal Revenue Code Section 280E.
Under current federal law, cannabis businesses cannot deduct many ordinary business expenses because marijuana remains classified as a Schedule I controlled substance. As a result, many operators pay significantly higher effective tax rates than traditional businesses.
Industry advocates argue that eliminating the 280E penalty would provide much-needed financial relief at a time when many cannabis companies are struggling with falling wholesale prices, increasing competition and shrinking profit margins.
Michigan’s cannabis market generated more than $3 billion in sales in 2025, making it one of the nation’s largest legal marijuana markets. Yet many operators continue to face financial pressure as retail prices remain among the lowest in the country.
Several Michigan cannabis companies have announced layoffs, facility closures and cost-cutting measures over the past year as market conditions remain challenging.
Delays May Be More Likely Than A Court Victory
While Ghaith believes the court is unlikely to issue a stay, he cautioned that Michigan cannabis businesses should not expect immediate benefits even if the rescheduling effort ultimately succeeds.
“The odds of delay are high,” Ghaith said. “This is ultimately a bureaucratic process and even without legal challenges, the gears of the federal government will move slowly on implementing actual change that affects local operators.”
He noted that many Michigan cannabis companies have already shifted their focus away from the medical marijuana market, which could further complicate how quickly any federal changes affect business operations.
“Many operators have ditched medical operations altogether given the state of the Michigan market,” Ghaith said.
According to Ghaith, it may take one to two years before federal policy changes result in meaningful operational or financial benefits for many cannabis businesses.
“It may take a year or two before implementation actually affects the operators,” he said. “Finally, this is entirely subject to the findings of the DEA hearing. While the hearing makes a stay unlikely, it does not equal a quick approval process for operators.”
Opponents Raise Concerns
The groups seeking to halt rescheduling argue that marijuana continues to present public health and safety concerns and contend federal agencies failed to follow proper procedures in advancing the rescheduling effort.
Supporters of reform counter that the Department of Justice and Drug Enforcement Administration have already begun formal rulemaking procedures and that scientific reviews conducted by federal health agencies support moving marijuana to Schedule III.
The challenge comes as federal regulators continue preparations for a key DEA hearing scheduled for June 29, where additional testimony and evidence regarding marijuana’s classification will be considered.
What Happens Next
The appeals court must decide whether to grant the requested stay while the broader legal challenge proceeds.
If the request is denied, the federal rescheduling process would continue moving forward while litigation continues.
Regardless of the court’s decision, cannabis businesses across Michigan will be closely watching developments in Washington as federal regulators determine the future of marijuana policy.
For many operators, the ultimate question is not whether reform is coming, but how long they will have to wait before it translates into meaningful financial relief.
