Last week →  Schedule III is here — and the hemp clock is ticking

Three AGs sue to block rescheduling — what changes now.

Indiana, Nebraska, and Louisiana filed a 15-page petition in the D.C. Circuit on May 22 seeking to vacate the April 23 Schedule III order — consolidated with the prohibitionist and drug-testing-industry challenges already pending. This is the first serious legal threat to the partial rescheduling. Operators now have to factor litigation overhang into §280E filing posture, DEA registration timing, and bank-account conversations on top of the existing June 22 expedited-registration deadline and the June 29 broader-rescheduling hearing.

Why it matters: Operators have to plan around a parallel federal court challenge to the order they spent April and May positioning around. §280E filing posture for 2025 returns, DEA expedited-registration applications in the queue against the June 22 window, and bank-account conversations all gain a new layer of uncertainty. The D.C. Circuit's typical briefing-to-oral-argument window is six to nine months — so merits will likely not be decided until late 2026 or early 2027, but interim orders are possible.

The petition was filed May 22 in the U.S. Court of Appeals for the D.C. Circuit, naming Acting Attorney General Todd Blanche and DEA Administrator Terrance Cole as respondents. The 15-page filing argues the April 23 order bypassed mandatory APA notice-and-comment rulemaking and exceeded statutory authority. The court consolidated the AGs' petition with an earlier prohibitionist-coalition challenge and a drug-testing industry trade-association challenge.

Why it matters: The participant slate for the broader Schedule I → Schedule III hearing is now largely fixed. Whatever record the ALJ builds in June will be the foundation of the eventual broader rule. If the parallel AG lawsuit succeeds in vacating the April 23 partial rescheduling, this hearing's record becomes the only path forward.

NORML, Smart Approaches to Marijuana (SAM), MMJ International Holdings, and others filed Notices of Intent to Participate by the May 28 deadline. The hearing begins June 29 at 9:00 a.m. ET.

Why it matters: Operators are filing 2025 returns now without IRS guidance on whether to take ordinary business deductions under Schedule III. The §280E ambiguity is the largest unresolved tax issue post-rescheduling.

A group of congressional lawmakers sent a letter to Treasury Secretary and the IRS on May 29 urging "swift and clear" tax guidance for the cannabis industry — specifically on §280E applicability for state-licensed medical operators.

Why it matters: Veteran-focused dispensaries and MMJ programs have spent two years marketing on the assumption that Schedule III would unlock VA participation. The internal documents show that assumption was overstated. VHA Directive 1315 remains in force; VA providers still cannot recommend or prescribe cannabis; benefits and disability determinations are unaffected.

Marijuana Moment obtained internal VA documents and FOIA records detailing which parts of VHA Directive 1315 change under Schedule III and which do not.

Why it matters: Three first-in-the-nation moves in one bill. The supply-chain merger is the model NY, MD, and IL are watching. The macrobusiness category reshapes Minnesota's competitive landscape from 2027. The "ratio hemp-infused" product class is purpose-built as a state-channel bridge for hemp operators before the November 12 federal 0.4 mg per-container cap.

Governor Tim Walz signed the bill May 26. It merges Minnesota's medical and adult-use supply chains, creates a new macrobusiness license effective January 1, 2027 (38,000 sq ft indoor canopy, up to eight retail locations), and authorizes a "ratio hemp-infused cannabis product" class capped at 10 mg THC per serving, 200 mg per package for edibles, and 20 mg per beverage container. Most provisions take effect August 1, 2026.

Why it matters: Connecticut is the first state to fully abandon a milligram-of-THC-based cannabis tax. The shift effectively raises taxes on lower-potency products and lowers them on high-potency ones. Operators need POS and ERP reconfiguration before October 1.

Governor Ned Lamont signed the FY 2027 state budget on May 14. The tax title abolishes the existing THC potency tax and replaces it with a flat 10.75% excise on cannabis gross receipts, effective for sales on or after October 1, 2026. The new excise sits on top of the existing 3% municipal tax.

Why it matters: Texas THCA flower, vapes, pre-rolls, and concentrates remain legal to sell and ship in Texas through at least July 27. The injunction is the legal scaffolding holding the Texas hemp retail market together.

Travis County District Judge Daniella DeSeta Lyttle's temporary injunction blocking enforcement of the Texas DSHS "total THC" rule — which would have counted THCA toward the legal THC limit for consumable hemp — remains in effect through July 27, 2026. After that date, the case may settle, be appealed by DSHS, or proceed to the merits.

Why it matters: Largest NYC unlicensed-storefront enforcement action of 2026 to date. The joint NY OCM / NYPD / Queens DA model first deployed in late 2025 is escalating into multi-million-dollar incidents.

The Queens District Attorney executed a court-authorized search on May 14 at an unlicensed storefront dispensary on Bell Boulevard in Bayside, seizing approximately 1,000 pounds of illicit cannabis and tobacco products with an estimated street value of $10 million. Two individuals were arrested on felony-level charges.

Why it matters: Germany's medical cannabis market is the largest in Europe (~€400–600 million annually) and is now under formal Bundestag expert testimony on enforceability. US operators with EU subsidiaries should track whether the framework tightens prescription/import standards.

Bundestag hearings continued this week with expert witnesses warning the existing Cannabisgesetz (CanG) medical framework is unenforceable in current form. No statutory change this week — included as ongoing context for operators planning EU exposure.

Limited additional international developments this week. Fuller international coverage resumes when the Bundestag pillar-2 vote or the next EMCDDA update lands.

Two ways to get answers — instant AI for interpretation questions, or a real attorney for matters that need counsel.

For operators trying to disentangle what the April 23 partial rescheduling actually changes day-to-day — and what it doesn't — Marijuana Moment's May 26 reporting on the VA's internal documents is the most useful operator read of the week. Read the summary →

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