A federal appeals court has rejected an attempt to temporarily reverse one of the most consequential changes to federal marijuana policy in decades, allowing the Trump administration’s limited Schedule III marijuana order to remain in force while multiple legal challenges continue. On September 9, 2026, a three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit denied a request from the National Drug and Alcohol Screening Association and cannabis pharmaceutical developer MMJ International Holdings and its subsidiaries to stay the Justice Department’s April rescheduling action. The court said the challengers had failed to satisfy the demanding requirements necessary for emergency relief.
The decision is an important victory for the federal government, but it is not a final ruling that the Schedule III order is lawful. The underlying lawsuits remain alive, and the court will later consider arguments over whether the Justice Department possessed the authority to carry out the change through the procedure it selected. Equally important, the April action does not place every form of marijuana nationwide into Schedule III. It applies specifically to marijuana contained in FDA-approved drug products and marijuana covered by qualifying state medical-marijuana licenses. A separate DEA proceeding is considering whether marijuana more broadly should move from Schedule I to Schedule III.
What the Appeals Court Decided
The September 9 order came in three consolidated D.C. Circuit cases led by SAM, Inc. v. Department of Justice, No. 26-1106. Judges Robert Wilkins, Justin Walker and Bradley Garcia comprised the panel. Rather than writing an extended opinion analyzing every argument, the court issued the type of short order frequently used for emergency stay requests, concluding that the petitioners had not met the “stringent requirements” necessary to suspend the federal action during judicial review.
A stay is extraordinary interim relief. Courts generally consider whether the party requesting one is likely to prevail on the merits, whether it faces irreparable injury without a stay, how a stay would affect other parties and where the public interest lies. The D.C. Circuit’s refusal to issue one means the April rule continues operating while the much larger legal dispute proceeds. It does not mean the judges have already resolved whether the Attorney General correctly interpreted the Controlled Substances Act, complied with procedural requirements or lawfully relied on international treaty authority.
The April Order Created an Unusual Form of Schedule III Marijuana
The dispute traces back to an action announced by the Justice Department in April. Acting Attorney General Todd Blanche issued an order placing two defined categories of marijuana into Schedule III: FDA-approved products containing marijuana and marijuana products subject to qualifying state-issued medical-marijuana licenses. DOJ said the action was intended to recognize existing state medical systems while maintaining federal controls and improving access to cannabis research.
The accompanying Federal Register rule is unusually important because it creates a federal pathway specifically for state medical-marijuana licensees. DEA regulations now define a state medical-marijuana license and establish an expedited registration system for qualifying manufacturers, distributors and dispensers. Applicants can still be denied if registration would be inconsistent with the public interest, but federal regulators are now processing state-licensed medical operators under a controlled-substance framework that did not previously exist for conventional dispensary cannabis.
That structure makes the April action fundamentally different from simply declaring marijuana legal. Schedule III remains a controlled-substance classification, and manufacturers, distributors and dispensers generally face DEA registration, recordkeeping, security and other federal requirements. Adult-use marijuana that is not covered by the limited order remains outside this special treatment unless the broader DEA proceeding ultimately changes its classification.
The Government Relied on International Treaty Authority
The central legal controversy concerns how the administration accomplished the change. The Justice Department relied on 21 U.S.C. § 811(d)(1), a section of the Controlled Substances Act dealing with U.S. obligations under international drug-control treaties. Marijuana is covered by the Single Convention on Narcotic Drugs, while THC is also subject to the Convention on Psychotropic Substances. The April rule argues that Schedule III controls, combined with additional registration and import-export requirements, can satisfy those treaty obligations for the categories being rescheduled.
That matters because § 811(d)(1) contains language allowing the Attorney General, when treaty obligations require control of a drug, to issue scheduling orders without following certain findings and procedures normally associated with domestic rescheduling under § 811(a) and § 812(b). The Federal Register rule expressly relies on that language to explain why DOJ did not undertake an entirely new notice-and-comment process before immediately moving the covered medical-marijuana categories into Schedule III.
Opponents argue that this interpretation stretches the treaty provision far beyond what Congress intended. Their legal challenge contends that the administration effectively used an international-obligations provision to bypass procedural safeguards that ordinarily accompany a major change in drug scheduling. That question will be central when the appeals court eventually reaches the merits.
Drug Testing Companies Say Schedule III Creates New Costs and Risks
The National Drug and Alcohol Screening Association was one of the parties asking the court to freeze the order immediately. NDASA represents companies and professionals involved in workplace drug testing, and its lawyers argued that Schedule III medical marijuana could make positive THC results considerably more complicated to evaluate. According to the challengers, medical review officers could have to spend additional time determining whether a positive test resulted from federally recognized medical-marijuana use rather than prohibited consumption.
NDASA argued that those additional reviews could raise testing costs, cause some employers to stop marijuana testing and force companies to revise workplace policies. The organization also raised concerns about potential Americans with Disabilities Act and state-law consequences when employers respond to positive tests involving medical use. In its stay briefing, NDASA characterized those costs as irreparable harm that would occur before the court could issue a final ruling.
DOJ disputed that reasoning. Government lawyers characterized the projected losses as speculative, arguing that any decision by employers to stop testing would depend on independent choices by third parties rather than directly and inevitably flowing from the rescheduling order. DOJ also questioned whether the drug-testing industry falls within the group Congress intended the Controlled Substances Act’s scheduling provisions to protect.
A Cannabis Pharmaceutical Company Is Challenging Rescheduling Too
One of the more unusual aspects of the litigation is that opposition is not limited to anti-marijuana organizations. MMJ International Holdings and related pharmaceutical companies are also challenging the order. MMJ says it has spent years and millions of dollars pursuing traditional federal pathways to develop cannabis-derived pharmaceuticals through DEA registration and FDA drug approval. The company argues that the April order undermines that investment by giving state medical-marijuana businesses a federal pathway without requiring those operators to complete the same drug-development process.
Its lawyers characterized this as a competitive injury. Before the April change, MMJ argued, companies seeking federally lawful cannabis pharmaceuticals faced a demanding research and approval process while state-licensed cannabis products remained federally prohibited. The new system potentially gives state medical operators legal advantages that MMJ says diminish the commercial value of its years of federal compliance work.
DOJ countered that MMJ has not yet completed the FDA clinical-development process or placed an approved cannabis medicine on the market, weakening its claim of direct competitive injury. Government lawyers also argued that the Controlled Substances Act was enacted to protect public health and regulate controlled substances—not to preserve one pharmaceutical developer’s competitive position against future market entrants.
Three Separate Challenges Have Been Consolidated
The stay dispute sits inside a broader collection of lawsuits. One petition was filed by Smart Approaches to Marijuana and NDASA. Another came from New Directions Addiction Recovery Services, physicians, cannabis-policy organizations and the MMJ pharmaceutical companies. A third was filed by the attorneys general of Nebraska, Indiana and Louisiana, although Louisiana later withdrew. The D.C. Circuit consolidated the cases so overlapping legal questions can be addressed together.
The September 9 order also addressed an attempt by MedPharm Iowa, operating as Bud & Mary’s, and Tri-Mountain Pure to intervene in support of the government. Those medical-marijuana companies argued that the litigation threatened interests created by the Schedule III system. The appeals court denied formal intervention because their interests were considered adequately represented by existing parties, but it permitted them to participate as amici curiae, allowing them to submit arguments without becoming full parties.
The judges also ordered the parties to propose a coordinated briefing structure within 30 days and warned against repetitive filings. That instruction suggests the court intends to manage the consolidated litigation tightly before considering the underlying legality of the order.
Schedule III Could Carry Major Tax Consequences
The stakes extend well beyond scheduling terminology. Internal Revenue Code § 280E prevents businesses trafficking in Schedule I or II controlled substances from deducting many ordinary business expenses. Because Schedule III is outside those two categories, moving qualifying marijuana activity into Schedule III can fundamentally alter the federal tax treatment of affected cannabis businesses. Congressional Research Service analyses have long identified the disappearance of § 280E as one of the most economically important consequences of marijuana rescheduling.
For state-regulated cannabis companies, 280E has historically meant that expenses routinely deductible by other businesses—including payroll, rent, advertising and various operating costs—can be disallowed for federal tax purposes. That has produced effective tax burdens far higher than those faced by ordinary retailers. The financial implications help explain why both supporters and opponents describe the scheduling dispute as potentially worth billions of dollars to the cannabis industry.
The limited nature of the April rule complicates the picture, however. Businesses involved in both medical and adult-use cannabis may have to determine which portions of their activities fall within the Schedule III framework and which remain governed by other federal restrictions. Rescheduling also does not eliminate the extensive federal regulatory requirements that accompany controlled substances.
The Court Case Is Separate From the Broader DEA Rescheduling Hearing
Perhaps the most important distinction is between the April medical-marijuana order and the separate proceeding over marijuana generally. At the same time DOJ issued the limited Schedule III rule, it restarted and accelerated an administrative hearing examining whether the broader category of marijuana should also move from Schedule I to Schedule III. That proceeding traces back to the federal proposal first published in 2024 following a Department of Health and Human Services scientific and medical review.
The 2026 hearing has since concluded, and DEA has argued in its final briefing that marijuana no longer satisfies Schedule I because it has a currently accepted medical use in the United States and an accepted level of safety when used under medical supervision. DEA cited more than 30,000 practitioners treating more than six million medical-marijuana patients across 43 U.S. jurisdictions and argued that marijuana’s abuse and dependence profile fits Schedule III better than Schedule I or II. Opponents dispute those conclusions and continue to challenge the medical-use standard federal officials employed.
A final determination in that administrative process could therefore reach much further than the April order currently before the D.C. Circuit. The September 9 court ruling did not authorize or decide the outcome of broader rescheduling; it merely refused to freeze the already-effective limited order while judicial review proceeds.
Schedule III Would Still Not Equal Federal Legalization
Another persistent misconception is that Schedule III makes marijuana federally legal in the same sense as alcohol. Even broad rescheduling would leave cannabis within the Controlled Substances Act. Schedule III substances remain federally regulated, and prescription drugs generally must obtain FDA approval before they can be legally marketed through the conventional pharmaceutical system. A Congressional Research Service legal analysis has noted that moving marijuana to Schedule III by itself would not automatically bring every state recreational or medical cannabis business into complete compliance with federal drug law.
The April administration order is unusual precisely because it attempts to create a specific federal bridge for qualifying state medical-marijuana systems through DEA registration. It recognizes state licensing in ways federal cannabis policy historically did not, but it does not broadly erase federal restrictions on possession, production or distribution outside the categories covered by the rule.
That nuance is important when evaluating both sides of the lawsuit. Opponents describe the policy as greatly expanding federally lawful marijuana activity, while supporters emphasize that Schedule III still imposes substantial controls and does not legalize the unregulated cannabis market.
The Biggest Legal Question Has Yet to Be Decided
For now, the federal government has cleared an important procedural hurdle. The D.C. Circuit declined to freeze the limited Schedule III framework, which means qualifying state medical-marijuana operations and covered FDA-approved products can continue under the new system while the litigation advances. DEA can also continue administering the registration structure established by the April rule.
But the September 9 ruling should not be described as a final judicial endorsement of marijuana rescheduling. The court has not yet decided whether DOJ lawfully used treaty authority to bypass ordinary scheduling procedures, whether the challengers have standing to pursue all their claims or whether the administration’s interpretation of the Controlled Substances Act will survive full judicial review. Those issues now move to the merits stage.
The immediate significance is narrower but still substantial: opponents tried to return affected medical marijuana to Schedule I while their lawsuits proceed, and the federal appeals court refused. Unless a later court order changes the situation, the April Schedule III framework remains in effect while one of the most consequential federal marijuana cases in years continues toward a full decision.
