DEA Urges Judge to Recommend Schedule III Move, Citing Tax Relief for Ohio Cannabis Firms

A federal brief filed Aug. 17 pushes for rescheduling marijuana, a shift that would not legalize cannabis nationally but could erase a costly IRS tax rule for Ohio operators.

FILE — statehouse · B.D. Gilfry / CC BY-SA 2.0

The Drug Enforcement Administration has filed its final brief urging Chief Administrative Law Judge Derek Julius to recommend moving marijuana from Schedule I to Schedule III of the Controlled Substances Act, according to MITechNews. The filing, submitted Aug. 17, argues that evidence from an 11-day hearing supports removing cannabis from the government's most restrictive drug category.

What The Filing Does — And Doesn't — Change

Julius has no deadline to issue a recommendation, and his conclusion would not be final; the DEA administrator retains ultimate authority over any rescheduling decision, MITechNews reported. Moving marijuana to Schedule III would not legalize recreational use nationally and would not make it legal to transport marijuana across state lines, the outlet noted.

The Tax Stakes For Cannabis Operators

For state-licensed cannabis businesses, the practical significance of rescheduling centers on Section 280E of the federal tax code, which bars businesses trafficking in Schedule I or II substances from deducting ordinary expenses such as payroll, rent and advertising, according to MITechNews. The outlet cited an IRS Taxpayer Advocate Service illustration in which a hypothetical marijuana retailer with $1 million in revenue and $200,000 in ordinary expenses would owe tax on $250,000 in income under 280E, versus $50,000 if those deductions were allowed. Robin Schneider, executive director of the Michigan Cannabis Industry Association, previously told Bridge Michigan — as cited by MITechNews — that eliminating the 280E liability would be the “biggest impact” of rescheduling for the group's members.

An Ohio Market Growing Amid Price Pressure

MITechNews reported that Ohio's recreational flower has recently averaged roughly $6.60 per gram, which converts to about $187 an ounce — more than three times the sub-$60 average ounce price reported in neighboring Michigan. A separate report from ohiocapitaljournal.com, cited in Cannabis Newz's database, corroborates that Ohio prices run higher than Michigan's. MITechNews noted the price gap has helped turn Michigan border communities such as Monroe into shopping destinations for Ohio consumers, even though carrying marijuana across state lines remains illegal under federal law.

Ohio's adult-use market, which launched in August 2024, has expanded rapidly. Cleveland.com reported the state's recreational sales have topped $1.5 billion, according to our database of related coverage. State licensing records show Ohio currently has 222 open adult-use retail locations. Recent license activity tracked in our records includes new retail approvals for Parkland Ventures, Certified Dispensary, Story Dispensary and Greenstock, an ownership change renaming an INSA-linked licensee to Zips Dispensaries, and Vireo Growth's acquisition of four Ohio cannabis businesses with plans for eight dispensaries. Cannabis Business Times also reported CERTIFIED opening a fifth Ohio dispensary in East Columbus, and the Canton Repository reported Curaleaf is planning a dispensary opening in Canton.

What To Watch

Whether rescheduling would meaningfully change Ohio's price dynamics is unclear from the available reporting; MITechNews's analysis focused primarily on Michigan operators potentially using 280E relief to offset thin margins or a disputed 24% wholesale tax, while noting that Ohio companies could instead choose to reinvest savings into expansion or price competition. Because Julius's recommendation carries no deadline and does not bind the DEA administrator, the timeline for any final rescheduling decision — and its ultimate effect on Ohio's tax treatment — remains uncertain, according to MITechNews. Separately, Ohio regulators and lawmakers continue to address other cannabis-adjacent policy matters, including a Shaker Heights dispensary ordinance reported by Cleveland.com and a lawsuit from Great Lakes Brewing and Rhinegeist over THC drink restrictions reported by Crain's Cleveland Business, though neither is tied to the federal rescheduling proceeding.