by Brandon Moore, Phenominal Consulting

The Department of Cannabis Control publishes every recall and every enforcement action it issues on two public web pages.¹ No login, no records request, no fee. Anyone can read them, search them by license number, and walk the entire history. Almost nobody in the industry does.

That is the strange part. For the operator named in a recall, those pages are the worst day of the quarter. For everyone else, the same pages are the regulator quietly telling you, in advance, where it has been looking and what it has been finding. That is useful to anyone with a partner to vet, which is to say almost everyone in the chain: the distributor deciding whose product to carry, the brand vetting a co-packer, the cultivator or retailer weighing the distributor who will take their product to market. The cited party reads the record too late. There is nothing stopping the rest of the industry from reading it early, except that hardly anyone thinks to.

So read it. Here is what falls out when you do.

The first thing is that recall risk is not spread evenly, and it is not where most people brace for it. Of California’s roughly 7,630 active licenses, only about 140 have been named in a recall since the start of 2024.² That is under 2% of the active universe; recalls are rare. But within that small group, the concentration is extreme: 86% of the recalled licenses are distributors or manufacturers. Count microbusinesses, which carry distribution privileges, and the share climbs past 98%. Cultivators and retailers together account for under 2% of the entire recall record.

That is not the regulator picking on distributors. It is structural, and it follows the supply chain. A cultivator sits upstream of the Certificate of Analysis. By the time a lab result becomes a printed label and that label reaches a shelf, the flower has already left the cultivator’s hands and passed through the distributor’s quality-assurance hold. That hold is the statutory checkpoint where a batch is supposed to be verified against its COA before it moves, and it is not a courtesy. California Code of Regulations Title 4, section 15307,³ puts the quality-assurance review on the distributor. Before any product moves to a retailer, the section requires the distributor to confirm that the label is “consistent with the certificate of analysis… regarding cannabinoid content,” with the labeled amounts “accurate” against the COA. The recall lands at the point of release, not the point of origin. In California’s chain, that release happens at the distributor’s quality-assurance review and on the manufacturer’s packaging line. So the recall record is, in effect, a map of where the regulated act of releasing a product happens. A distributor who has never read it is the one party in the chain least informed about its own exposure.

The second thing the record shows is a single failure that repeats, and it is not the one the language suggests.

About a third of California cannabis recalls since the start of 2024 are for a label or data failure rather than a contaminant. Inside that group, one phrase appears over and over: Inaccurate Labeling (Cannabinoid inflation). It is cited in 21 separate recalls, roughly 40% of every label-and-data recall in the record. The phrase reads like an accusation. It sounds like someone in a back office was padding a potency number to move more product.

The record points at something quieter. For dried flower, the figure the label is required to carry is Total THC, expressed as a percentage. What the citation describes is a different number landing in that spot: the value for Total Cannabinoids, printed where Total THC is supposed to be. Total Cannabinoids is the bigger figure. It is THC plus everything else the panel detected, so when it lands in the Total THC field the label overstates potency. The two numbers come from the same lab panel, which is why the pattern reads less like a lab error than like a transcription slip, something that happens between the COA and the label artwork. The recall, in any case, lands on the licensee whose name is on the package. The regulation names the figure that has to be right: section 17407⁴ requires Total THC as a percentage on the label of nonmanufactured cannabis goods, and section 15307 makes it the distributor’s job to confirm that labeled figure is accurate against the COA before the product moves. The mismatch lives in exactly that gap, the one the regulation assigns the distributor to close.

The check that would catch it is simple: Total THC on the label has to equal Total THC on the COA. Not the bigger number. Where that check belongs, whether in software, in a packaging proof, or in a person’s hands, depends on how an operation is built. But the thing to look for never changes, and knowing what to look for is most of the job.

This is not a pattern you have to take on faith. Here are the 21 recalls where the phrase has been cited, in date order, each linked to its entry on the DCC recall page.⁵ Open a handful and read what the record says across different operators, different brands, 18 months apart:

• 2024-03-29 — Malibu Gold, LLC / Blem Flower — https://recalls.cannabis.ca.gov/recalls/6761b4b3449a15805975dafe
• 2024-04-25 — UC Advisor Corporation / C CREME Infused Pre-Roll — https://recalls.cannabis.ca.gov/recalls/6761bc23449a15805975db04
• 2024-04-30 — RWC Manufacturing / Mary’s Medicinal Transdermal Topical — https://recalls.cannabis.ca.gov/recalls/67608862141ebf4b23e92750
• 2024-05-06 — TBP Indoor Facilities, Inc. / Canndescent Whole Flower Pre-Roll — https://recalls.cannabis.ca.gov/recalls/6760919a141ebf4b23e9275e
• 2024-05-09 — JDI Farms / Cali Kosher Flower — https://recalls.cannabis.ca.gov/recalls/676090aa141ebf4b23e9275c
• 2024-05-17 — Crafted Canopy Co., LLC / LAX Packs Premium Flower — https://recalls.cannabis.ca.gov/recalls/67608ef1141ebf4b23e92759
• 2024-06-03 — Paet Real Estate LLC / BloomBox & Pat’s Flower — https://recalls.cannabis.ca.gov/recalls/676075d467bff701781d9596
• 2024-06-12 — Shield Management Group, LLC / West Coast Cure Flower — https://recalls.cannabis.ca.gov/recalls/67608282141ebf4b23e92734
• 2024-09-12 — LVLUP Manufacturing LLC / Lime Ultra Infused Pre-Roll — https://recalls.cannabis.ca.gov/recalls/676062d92dec600a5fdab858
• 2024-09-27 — Higher Ground Holdings, LLC / Flower — https://recalls.cannabis.ca.gov/recalls/676321559f9bcc32fed462a9
• 2024-12-13 — Hypeereon Corporation / Connected Flower — https://recalls.cannabis.ca.gov/recalls/6761f90394a546fcd1a8843a
• 2024-12-16 — 2JC LLC / Connected Flower & Pre-Roll — https://recalls.cannabis.ca.gov/recalls/6761c1de449a15805975db10
• 2024-12-31 — NLT NCA LC-5851, LLC / Cream of the Crop Flower — https://recalls.cannabis.ca.gov/recalls/67743be120de76de169418b0
• 2025-01-06 — 2JC LLC / Alien Labs Flower — https://recalls.cannabis.ca.gov/recalls/677c1ce27b818645f37d81b5
• 2025-01-30 — Med for America Inc. / Jeeter & Baby Jeeter Pre-Roll — https://recalls.cannabis.ca.gov/recalls/679aa03c6c2cf8a3a782d944
• 2025-02-28 — 2JC LLC / Connected Flower & Pre-Roll — https://recalls.cannabis.ca.gov/recalls/67c0a8966a1df8e2aab2a805
• 2025-03-28 — Hypeereon Corporation / Connected & Alien Labs Flower — https://recalls.cannabis.ca.gov/recalls/67d9a58bee53fc0e4a85cfd0
• 2025-04-24 — Artisan Canna Cigars LLC / Hi Pre-Roll — https://recalls.cannabis.ca.gov/recalls/68080bb50a02d94b409051c1
• 2025-05-21 — Full Spectrum Group Inc. / Legion of Dank Delights Edible — https://recalls.cannabis.ca.gov/recalls/6826696d651df98cac943a90
• 2025-06-26 — Natura Distribution LLC / Sluggers Flower & Pre-Roll — https://recalls.cannabis.ca.gov/recalls/6859b52b6240f323aa90f91f
• 2025-09-18 — Crème de Canna Collective / Terpys Infused Flower — https://recalls.cannabis.ca.gov/recalls/68c9eaf9ee3f253d00cfa2be

Those 21 are not 21 unrelated mistakes. They are one workflow gap, repeating, in plain view, on a page the regulator has been publishing the whole time.

Which brings up the third thing, the one underneath the other two: the record only works if you can read it, and reading it means learning a vocabulary. The DCC writes its recalls and citations in a small, controlled set of phrases, and they are not interchangeable, however much they sound like it. The phrases are not evenly used, either. Counted across the recall record, the distribution is steep:⁶

The shape of that table is the point. Misbranded dominates because it is the catch-all, cited 3 times more than anything else. Inaccurate Labeling and the Cannabinoid inflation cases nested inside it are the next tier. Attractive to Children sits just below, and it is a different track entirely: it has nothing to do with whether the printed numbers are right, and a reader who lumps it in with the labeling phrases will miss what it actually triggers, which is scrutiny of how a product is packaged and sold, not how it is tested.

The distinction most people miss is the first two. Misbranded and Inaccurate Labeling sound like synonyms and are not, and a reader who treats them as the same phrase will misread half the record. The vocabulary is small enough to learn in an afternoon, and learning it is the difference between skimming a list of other people’s problems and seeing the shape of what the regulator keeps finding.

The record carries one more signal, in when the actions land rather than what they say. Recalls and enforcement actions are not spread evenly across the license year. They cluster late in the license year: a license is about 50% more likely to draw a recall or enforcement action in the 60 days before its renewal than in the 60 days after.⁷ Some of that is the calendar, since California’s annual licenses concentrate their renewals in late spring and summer. But the direction holds. When you read a partner’s history, the weeks right before their renewal are where the record is most likely to have something to say.

The pages themselves are plain to use once you know what you are after. The recall page is at recalls.cannabis.ca.gov; the enforcement page, the second public record, is at cannabis.ca.gov under the department’s enforcement actions, carrying over 800 actions.⁸ Neither comes with a guide, and neither is built to be browsed for insight, but both let you search by license number, which is the search that matters: put in a partner’s license and read its history straight off the page. The two pages together are not a list of other people’s bad luck. They are a standing record of what the regulator checks and what it keeps finding, published in advance, free, for anyone who thinks to read it. The operators in the recall list above likely did not. The only thing separating them from everyone who comes after is that the record was already there, and they learned what it said the slow way.

You can read it the other way. A distributor can check a brand before carrying it. A brand can check a co-packer before handing over a formulation. A cultivator or a retailer can check the distributor about to take their product to market, which is the partner whose QA hold decides whether their name ends up in the record alongside someone else’s mistake. The check runs the same in every direction: pull the license number, read its history, decide with the record in front of you instead of after it.

The commercial case for spending the half hour is obvious enough. The one underneath it is simpler. Every recall in those pages is a product that reached a shelf with something wrong on it, and a consumer who bought it on the strength of a number the label could not back up. The record is the DCC’s best public account of how that happens. Reading it before any major purchase is, in the end, the cheapest thing any operator can do. It keeps their own product out of the record, while protecting the people who buy that product.

Sources and notes

1. California Department of Cannabis Control, public records. Recalls: recalls.cannabis.ca.gov. Enforcement actions: cannabis.ca.gov (Enforcement Actions).
2. Recall and license figures in this article are the author’s own counts, compiled from the DCC public recall record and the department’s license data, current as of June 2026. Because the DCC records update continuously, exact counts will drift over time; the figures here are rounded and reflect the record as it stood when this was written.
3. Cal. Code Regs. tit. 4, § 15307 (Quality-Assurance Review): law.cornell.edu/regulations/california/4-CCR-15307. Subsection (c) requires the distributor to ensure the label “is consistent with the certificate of analysis for regulatory compliance testing regarding cannabinoid content,” with labeled amounts “accurate,” before transporting cannabis goods to a retailer.
4. Cal. Code Regs. tit. 4, § 17407 (Cannabinoid Content Labeling): law.cornell.edu/regulations/california/4-CCR-17407. Subsection (b)(3) requires that nonmanufactured cannabis goods be labeled with “Total THC content expressed as a percentage.”
5. The 21 recalls listed above, each citing “Inaccurate Labeling (Cannabinoid inflation),” with their entries on the DCC recall page at recalls.cannabis.ca.gov. Compiled by the author from the public recall record, current as of June 2026.
6. Citation-phrase counts compiled by the author from the DCC public recall record, current as of June 2026. Counts reflect how often each phrase appears across the recalls in the record and will change as new recalls are published.
7. Timing observation compiled by the author from the DCC public recall and enforcement records together with the department’s license-expiration data, current as of June 2026. For each action, the gap between the action date and the license’s next annual renewal was measured across the full record. In the 60 days before renewal there were about 50% more actions than in the 60 days after (roughly 170 versus 115); because every license passes through both its own before-window and after-window each year, that count ratio is also the per-license rate ratio. The same lean holds at the 90-day window. The “50%” figure compares the 60 days before renewal with the 60 days after, not with the yearly average, which is a smaller difference. California’s annual licenses concentrate their renewal dates in late spring and summer, so part of the distribution reflects the renewal calendar rather than enforcement timing; the figure is offered as an observed pattern in the record, not a causal claim about how the regulator times its actions.
8. DCC Enforcement Actions, cannabis.ca.gov (Enforcement Actions). Action count current as of June 2026.

Brandon Moore is the owner of Phenominal Consulting, where he works with California cannabis businesses on compliance and the operational details that keep the over regulated industry viable.

Phenominal Consulting is a proud business member of California NORML. See their Cannabis Marketplace listing for more information.

by  The Law Office of Shay Aaron Gilmore

On April 22, 2026, Acting Attorney General Todd Blanche signed the most consequential federal cannabis order in more than five decades. The order immediately moves both FDA-approved cannabis products and state-regulated medical cannabis products from Schedule I to Schedule III of the Controlled Substances Act (CSA). At the same time, it launches an expedited administrative hearing — beginning June 29, 2026 — to determine whether broader rescheduling of all marijuana, including adult-use products, should follow.

For California medical cannabis licensees and investors, this is not an abstract federal development. It is a live, operational event with immediate legal, tax, corporate, and compliance consequences. This post breaks down what changed, what did not, what is still unresolved — and specifically what California M-license operators and their advisors need to do right now.

As discussed in our prior post Marijuana Rescheduling, If It Happens, Will Be Incremental Progress — Still Not the Answer, and followed up in California Cannabis M&A in 2026: Rescheduling Momentum, Hemp Bans, and State Integration Collide, rescheduling was never going to be a cure-all. What April 22, 2026 delivered is real but narrow — and the narrowness is exactly what California operators need to understand.

How We Got Here

The rescheduling process dates back to October 2022, when President Biden directed HHS and the DEA to review marijuana’s CSA scheduling. In August 2023, HHS recommended Schedule III, finding that marijuana has a currently accepted medical use and a lower abuse potential than Schedule I or II substances. The DEA published a Notice of Proposed Rulemaking in May 2024, attracting more than 42,000 public comments. Hearings were postponed multiple times — first due to procedural challenges, then due to a stay pending interlocutory appeal.

The process appeared stalled until December 18, 2025, when President Trump signed Executive Order 14370 directing the Attorney General to “expedite and complete” the rescheduling process. Rather than restart the cumbersome notice-and-comment rulemaking, Acting AG Blanche invoked 21 U.S.C. § 811(d)(1), which permits the Attorney General to schedule substances by order when necessary to comply with U.S. obligations under the 1961 Single Convention on Narcotic Drugs — without the full procedural requirements otherwise imposed by the CSA. This treaty-based authority allowed the administration to act immediately.

Critically, the order does not cover all marijuana. It covers two categories only: FDA-approved drug products containing delta-9-THC, and marijuana handled under a qualifying state-issued medical marijuana license. All other marijuana — including adult-use cannabis sold under a state recreational license — remains Schedule I pending the outcome of the June 29 hearing. Hemp and synthetically derived THC are expressly excluded.

California’s Dual-License Structure: The Essential Starting Point

To appreciate what this order does and does not do for California operators, the state’s parallel license structure under the Medicinal and Adult Use Cannabis Regulation and Safety Act (MAUCRSA) is the essential starting point.

Under MAUCRSA, the Department of Cannabis Control (DCC) issues two parallel license designations across all activity categories — cultivation, manufacturing, distribution, retail, testing, and event organizers. An M-license (medicinal designation) authorizes a licensee to engage only in medicinal commercial cannabis activity. An A-license (adult-use designation) authorizes activity only in the adult-use market. A business may hold both designations on the same licensed premises, provided it holds both designations for the identical type of activity.

This bifurcation — maintained since MAUCRSA’s 2017 enactment — turns out to be precisely the distinction that determines who receives federal relief under the April 22 order. The federal order tracks state-licensing categories: it reschedules marijuana products subject to a qualifying state-issued medical marijuana license, and a California M-license fits squarely within that definition. A California A-license does not.

Pure M-license operators — those holding only medical designations across their operations — are unambiguously covered. Dual-license operators, sometimes referred to as mixed-use or MSO-affiliated entities, occupy far more complicated ground, addressed in detail below.

The Tax Transformation: Section 280E Relief Is Real and Effective January 1, 2026

The single largest immediate benefit of rescheduling for California M-license operators is the elimination of the Section 280E deduction disallowance.

Internal Revenue Code § 280E prohibits any deduction or credit for ordinary and necessary business expenses incurred in the “trafficking” of a Schedule I or II controlled substance. Because the IRS treated state-licensed cannabis businesses as traffickers in a Schedule I substance, California operators could not deduct payroll, rent, utilities, marketing, professional services, or any other standard operating expense at the federal level — only cost of goods sold (COGS) remained deductible. The result was effective federal tax rates commonly exceeding 70% for California dispensaries and supply-chain operators.

California partially addressed this disparity through Assembly Bill 37 in 2019, which decoupled state tax law from IRC § 280E, allowing MAUCRSA licensees to take ordinary deductions on their California returns. But the federal burden remained crushing — particularly for California operators who also face some of the highest combined state and local cannabis taxes in the country.

The April 22 order eliminates 280E’s reach over qualifying medical operators. The Treasury Department and IRS confirmed the same day that rescheduling “removes section 280E as a bar to claiming deductions and credits” for qualifying businesses and announced forthcoming guidance. Treasury further confirmed that for § 280E purposes, rescheduling applies for a business’s full taxable year that includes the effective date — meaning January 1, 2026 for calendar-year filers.

This is not a future benefit contingent on further rulemaking. For California M-license operators, the 280E burden has been lifted for the full 2026 tax year. The practical cash-flow impact is substantial: the broader industry is estimated to have been absorbing $2.3 billion in excess federal taxes annually above what it would pay as an ordinary business.

Retroactive Relief: Possible but Not Guaranteed

The order also includes precatory language encouraging — though not mandating — the Secretary of the Treasury to consider retrospective relief from § 280E for taxable years in which a state licensee operated under a state medical marijuana license. This language is aspirational, not legally binding. As one detailed analysis notes, the IRS is not obligated to comply, and operators should not amend prior returns or book corresponding assets until the IRS formally confirms the availability, scope, and mechanics of any look-back period. That said, California M-license operators should begin documenting prior-year expenses now to move quickly if Treasury guidance confirms retroactive applicability.

DEA Registration: A New Federal Compliance Obligation with Teeth

The DEA registration requirement is where this order becomes both the most operationally transformative and the most legally technical for California operators. It is not a benefit layered on top of existing operations. It is a new federal compliance obligation that determines whether an operator can legitimately access Schedule III status — and all of the benefits that accompany it.

What the Requirement Actually Means

The CSA has always required registration with the DEA Diversion Control Division for manufacturers, distributors, and dispensers of any controlled substance, including those in Schedule III. Before April 22, 2026, this requirement had no practical enforcement path against state-licensed medical cannabis operators — their activity was federally illegal under Schedule I, and the DEA’s accommodation of state cannabis markets was purely a matter of prosecutorial discretion. Rescheduling changes the legal architecture fundamentally: state-licensed medical operators are now engaged in a federally recognized activity, and federal law requires that recognized activity to be registered.

The order codifies a new registration pathway under 21 C.F.R. § 1301.13(k) — titled “Medical marijuana registrations” — which directs the DEA to establish an expedited review process for entities holding state medical marijuana licenses seeking registration as manufacturers, distributors, or dispensers. This is not aspirational guidance. It is now codified in the Code of Federal Regulations. And critically, the order is explicit: operating without DEA registration while handling Schedule III-controlled substances is a federal violation.

The practical implication for California operators is significant: to be entitled to the benefits of Schedule III status — most importantly, 280E relief — an M-license operator must obtain and maintain federal DEA registration. An operator who continues business-as-usual under their DCC M-license without filing for DEA registration is not simply missing an optional federal benefit; they are operating outside federal law in a newly codified way.

The 60-Day Window: Why It Is Critical

State-licensed medical marijuana licensees that submit DEA registration applications within 60 days of Federal Register publication — by approximately June 22, 2026 — may continue operating under their state license while the DEA processes the application. This “interim operating authority” provision protects operators from the disruption of having to cease operations while awaiting federal processing. Operators who miss this window forfeit the protection and face the risk that their Schedule III activity may be federally unauthorized during any gap between application and approval.

The DEA has committed to processing applications filed within the 60-day window within six months of receipt. For applications filed after that window, no such processing timeline commitment applies. The practical message: file within 60 days, or accept the risk of an uncertain processing timeline during which your federal compliance status is ambiguous.

Why a California M-License Is Uniquely Valuable — and the Public-Interest Factors That Can Still Block You

The new regulation provides that a state medical marijuana license “shall constitute conclusive evidence that the applicant is authorized under state law to engage in the activity for which registration is sought.” This is a significant legal accommodation. Under standard DEA registration procedures, an applicant must independently establish state-law authorization, and the DEA has substantial discretion to investigate and question that showing. The April 22 order eliminates that ambiguity for California M-license holders: the license is, by regulation, conclusive.

However, conclusive state authorization does not guarantee federal registration. The DEA must register the applicant unless doing so would be inconsistent with the public interest under 21 U.S.C. § 823 or with the requirements of the Single Convention. The § 823 public interest factors include:

• Maintenance of effective controls against diversion of controlled substances;
• Compliance with applicable state and local laws;
• Prior conviction record relating to manufacture, distribution, or dispensing of controlled substances;
• Lack of experience in the distribution of controlled substances; and
• Other factors relevant to and consistent with public health and safety.

For California operators, the most significant factor is compliance with applicable state and local laws. A DCC license with a clean compliance history — no suspensions, no enforcement actions, no unresolved violations — satisfies this factor readily. But operators with prior DCC disciplinary history, unresolved local permit violations, or any federal criminal exposure should carefully assess their § 823 posture before filing, not after. A denial triggered by public-interest concerns creates a federal record that is substantially more damaging than simply not filing.

Historical DEA precedent on this point is sobering: when the DEA reviewed manufacturer registrations for research cannabis in 2021, it noted that conducting cannabis activities compliant with state law but in violation of the CSA “may constitute grounds to deny an applicant’s registration” under the public-interest factors — citing such activity as relevant to the “promotion and protection of public health and safety.” While the new framework is designed to accommodate qualifying state licensees, the public interest factors remain live legal criteria that operators must treat as such.

Registration Is Location-Specific

A frequently overlooked aspect of DEA registration mechanics is that registration is tied to each principal place of business — each licensed premises where controlled substances are stored, administered, or dispensed requires a separate DEA registration. For California operators with multiple licensed locations — a common structure among vertically integrated businesses and those holding cultivator and retailer licenses at separate premises — this means a separate DEA registration application for each location.

This has direct compliance budget implications. A California operator with a licensed cultivation facility in Humboldt County and two licensed retail dispensaries in the Bay Area must file three separate DEA registration applications, each tied to the DCC license for that specific premises. Operators with multi-site portfolios need to inventory their licensed locations and plan registration filings accordingly — and within the 60-day window.

The Automatic Suspension Linkage: A New Federal Risk Tied to DCC Compliance

The April 22 order includes a provision that the DEA registration issued under the § 1301.13(k) expedited pathway is automatically suspended if the underlying California M-license is suspended, revoked, or expires. This is one of the most practically significant provisions in the entire order for California operators and their compliance counsel.

Before rescheduling, a DCC enforcement action — a license suspension, a notice of violation, or even an administrative lapse in renewal — was a purely state-level event. Federal law provided no corresponding benefit to suspend; the operator was already in a legally ambiguous federal position regardless of state compliance status. After rescheduling, the calculus is fundamentally different. A California M-license holder who obtains DEA registration now has a federal benefit that tracks DCC license status in real time. A state enforcement action that results in even a temporary DCC suspension triggers automatic federal registration suspension — meaning the operator’s Schedule III status and entitlement to 280E relief are simultaneously interrupted.

The implications for DCC regulatory compliance are substantial:

• License renewals must be timely. A DCC license that lapses due to a missed renewal filing, a bond coverage gap, or a delayed local permit renewal can trigger automatic federal suspension of the DEA registration. California operators are accustomed to state license renewals as administrative calendar items. They are now federal compliance events.
• DCC enforcement actions have federal consequences. An operator facing a DCC notice of proposed action, a license suspension, or a regulatory investigation must now assess the potential federal fallout in addition to the state consequences. Regulatory compliance counsel must communicate the federal suspension risk to clients engaged in DCC proceedings.
• Ownership change compliance has heightened stakes. DCC regulations require notification of ownership changes within 14 days and impose compliance obligations throughout the change process. If a change-of-ownership process creates a lapse or ambiguity in the DCC license during which the license could be deemed suspended, the DEA registration may be affected. Operators and counsel should structure ownership transitions to avoid any gap in DCC license status.

The automatic suspension linkage makes DCC license compliance not just a state business-preservation issue, but a federal one. For California M-license operators who have obtained DEA registration, the quality and currency of their DCC compliance program is now directly tied to their federal regulatory status.

Schedule III Compliance Obligations That Come with Registration

Obtaining DEA registration does not simply confer federal authorization — it subjects registrants to Schedule III compliance requirements under the CSA and DEA regulations. The April 22 order incorporates state compliance systems where possible, but federal requirements are additive, not displaced. Under the order, registered California M-license operators must comply with:

• Recordkeeping: Schedule III registrants are subject to DEA recordkeeping requirements, though the order directs the Administrator to accept state-required records, forms, and reports to the maximum extent permissible under federal law. California DCC recordkeeping systems — track-and-trace via Metrc — should substantially satisfy federal requirements, but operators should verify that their Metrc records are current and audit-ready before filing.
• Security standards: Registrants may generally rely on state-law physical-security requirements in lieu of otherwise applicable federal standards, subject to limited qualifications. California DCC security regulations are generally consistent with CSA Schedule III standards, but operators should confirm that any pending security upgrades or DCC compliance notices are resolved.
• Labeling and packaging: Registered operators must include the federal warning required by 21 U.S.C. § 825(c) where applicable, in addition to California DCC labeling requirements. Review of product labels for compliance with both state and federal requirements is now required for all M-licensed products.
• Disposal: State-authorized disposal procedures generally suffice under the order, but operators should document their disposal protocols to demonstrate compliance with both DCC and federal standards.
• Import/export permits: The order amends 21 C.F.R. Part 1312 to add an import/export permit requirement for Schedule III marijuana. Any California operator currently contemplating international product movement must account for this permit requirement.
• The Single Convention nominal-price mechanism: State-licensed registrants are subject to a nominal-price purchase-and-resale arrangement designed to satisfy Article 23 of the Single Convention on Narcotic Drugs. Cultivators registering as manufacturers should understand this mechanism and its operational implications before completing registration.

The “Practitioner” Registration Category for Dispensaries

The order introduces an additional registration category relevant to California dispensaries. Entities that transfer Schedule III marijuana to patients — including California M-licensed retail dispensaries — must register with the DEA as “practitioners” under 21 U.S.C. § 823(g). This is a distinct registration category from the manufacturer or distributor registration, and the order makes clear that a practitioner registration does not authorize possession or dispensing of Schedule I controlled substances — meaning it does not extend to the adult-use inventory a dual-license dispensary also holds.

For California dual-license retail operators, this creates a layered registration question: the dispensary entity needs a practitioner DEA registration to cover its M-license dispensing activity, and continued state-only authorization (with no DEA registration) for its A-license adult-use activity. Inventory, recordkeeping, and physical custody of product must be maintained consistent with these different legal statuses simultaneously.

The Dual-License Problem: California’s Most Complex Compliance Challenge

Perhaps the most practically urgent compliance question in California concerns operators who hold both M-license and A-license designations. Many California dispensaries, cultivators, manufacturers, and distributors operate in exactly this structure — serving both medical patients and adult-use consumers, often on the same licensed premises.

The April 22 order creates a bifurcated federal schedule for these operators’ activities. Their M-licensed operations are now Schedule III. Their A-licensed operations remain Schedule I. They operate across two federal schedules simultaneously, with no precedent for this kind of split classification at the entity level.

Treasury has announced that forthcoming guidance will address expense apportionment — allocating costs between medical and adult-use activities, with only the former eligible for § 280E relief. From a regulatory compliance standpoint, dual operators need to examine their accounting systems immediately to determine:

• Whether revenue, payroll, inventory, and overhead are tracked separately by license type or commingled;
• Whether existing management agreements, intercompany allocations, or shared-service arrangements satisfy the “genuine separation” standard applied by the IRS and U.S. Tax Court;
• Whether entity structures put in place under prior 280E-minimization strategies remain optimal in a bifurcated Schedule III/Schedule I world;
• What additional documentation and accounting controls should be implemented now, before Treasury guidance issues, to ensure maximum defensibility.

Many California MSO structures were specifically architected to reduce 280E exposure through entity separation. Some of those structures may be redundant for the medical side of the business, or could inadvertently complicate expense allocation for the adult-use side. A comprehensive structural review — the kind of analysis that lives at the intersection of corporate law and regulatory compliance counsel — is not optional for California dual operators. It is urgent.

Capital Markets and Investment: What Investors Need to Know

The order has immediate implications for investors in California medical cannabis operations — both in ongoing cannabis M&A transactions and for those evaluating new positions.

Valuation and Cash Flow

The elimination of 280E for medical operators is the most direct valuation lever. For any California operator with meaningful M-license revenue, 280E removal translates directly to improved cash flow, stronger EBITDA, and lower effective tax rates. Verano Holdings, a major MSO, estimated that rescheduling would save it approximately $80 million annually in 280E expenses. California-specific operators and single-state businesses operate at different scale, but the directional impact is consistent: M-designated revenue streams are materially more valuable post-order than they were on April 21, 2026.

M&A Due Diligence Has Changed

The order “draws a line through the middle of the industry.” For California buyers and sellers in ongoing M&A processes, the regulatory compliance picture is fundamentally different for M-license positions than for A-license positions. Diligence on a California target that holds both designation types now requires separate analysis of each license category. As reflected in our Cannabis M&A Transactions practice, deals must now account for:

• The adequacy of the target’s M-license compliance infrastructure, since that license is now the gateway to DEA registration and 280E relief;
• Whether the target’s DCC license history is clean enough to support federal registration under the § 823 public-interest factors — a clean enforcement record is now a material deal term, not just a background diligence item;
• The DEA registration gap in change-of-control transactions. When a California cannabis business changes ownership, the DCC requires the new owner to submit all information under 4 CCR § 15003, including a background check, and the business may continue operating during the approval process. However, a change of ownership may affect the underlying state license status in ways that trigger the automatic DEA registration suspension provision — particularly if there is any period during which the DCC treats the existing license as having undergone a material change. Buyers and sellers must structure change-of-control provisions to address this risk, including whether responsibility for maintaining uninterrupted DEA registration vests with the seller, buyer, or is addressed through escrow or closing condition mechanics;
• Indemnification structures that explicitly address which party bears the risk if retroactive § 280E relief is or is not granted, and for which license categories.

Representations and warranties in cannabis M&A agreements must now be license-type-specific. A blanket representation that the company is in “regulatory compliance” is insufficient — it must distinguish M-license and A-license compliance postures, address DEA registration status, and account for the automatic suspension risk going forward.

Diligence Matrix for California Cannabis M&A Post-April 22

Banking: Improvement at the Margins

The cannabis banking problem has not been solved by rescheduling. Financial institutions remain subject to the Bank Secrecy Act and the 2014 FinCEN guidance, neither of which is eliminated by Schedule III status. Major banks are unlikely to fundamentally change their posture until the SAFER Banking Act passes or explicit federal safe harbors are legislated. For California cannabis investors and venture capital advisors evaluating debt-financed transactions, the practical takeaway is improved debt service capacity for medical operators and a somewhat more favorable lending environment at cannabis-specialist lenders — but not a transformed one.

Legal Risks: What Could Unwind This

The April 22 order is consequential, but not legally bulletproof. California operators and counsel should understand the primary vulnerabilities.

The Treaty Authority Question

The DOJ bypassed ordinary notice-and-comment rulemaking by invoking 21 U.S.C. § 811(d)(1). Legal commentators have noted that the order relies heavily on a 2024 Office of Legal Counsel opinion regarding treaty compliance — an interpretation not beyond challenge, particularly under the Supreme Court’s Loper Bright framework, which has increased judicial scrutiny of agency statutory interpretations. Whether the treaty-implementation authority extends to the full range of regulatory amendments accompanying the order — including new DEA registration requirements under 21 C.F.R. § 1301.13(k) — is a narrower but potentially significant legal question.

The order includes an express severability clause, acknowledging that individual provisions might be struck down without invalidating the whole. A registered operator who has affirmatively integrated into the federal framework is better positioned to argue for preservation of their status under a severability analysis than an operator who has not yet filed — another reason to act within the 60-day window.

The Ongoing Administrative Hearing

The expedited DEA hearing beginning June 29, 2026 will consider broader rescheduling of all marijuana. If that process results in comprehensive rescheduling, the adult-use gap closes and the current bifurcated structure becomes transitional. If the hearing produces delays — as the prior Biden-era process did — the two-tier system could persist for years, embedding competitive asymmetry between medical and adult-use operators. As analyzed in A Spring 2026 Field Report for California Cannabis Operators and Investors, the legal and market landscape is in genuine flux, and strategic decisions should be made with that uncertainty priced in.

Competitive Dynamics and the Illicit Market

One under-discussed consequence of partial rescheduling is its effect on California’s persistent illicit market problem. Licensed cultivators in California produced approximately 1.4 million pounds in 2024, while unlicensed operations produced an estimated 11.4 million pounds — a ratio that reflects the illicit market’s continued dominance, according to the DCC-commissioned ERA Economics report. The DCC’s head of enforcement has acknowledged the black market remains “very pervasive, and definitely larger than the legal market.”

By eliminating the 280E burden from licensed medical operators, rescheduling directly reduces one of the largest structural cost disadvantages that licensed operators face relative to the illicit market. The limitation, however, is that adult-use operators serve the far larger share of California’s consumer market and remain subject to 280E, limiting the aggregate competitive effect until broader rescheduling follows.

What California M-License Operators Must Do Now

This section is directed at California operators who hold active M-license designations — either as pure medical operators or as part of a dual M/A-license structure.

Immediate Actions (Next 60 Days):

1. File your DEA registration application — by approximately June 22, 2026. This is the most time-sensitive action item. The 60-day window is the critical window for securing interim operating authority and a committed six-month DEA processing timeline. File a separate application for each licensed premises. Work with regulatory compliance counsel to assemble your DCC license documentation, confirm your license is current and in good standing, and assess your § 823 public-interest factor exposure before filing.
2. Engage your tax counsel on 280E planning now. The effective date is January 1, 2026. Your accountant and tax attorney should immediately assess whether your entity structure, cost accounting systems, and expense tracking are positioned to capture the full benefit of post-280E deductibility. If you are a dual operator, this analysis must address expense apportionment between your medical and adult-use activities before Treasury guidance issues.
3. Audit your DCC license compliance status. Federal registration automatically suspends if your California DCC license is suspended, revoked, or expires. Ensure all renewal filings, bond requirements, local permit renewals, and DCC compliance obligations are current. This is now a federal issue.

Near-Term Strategic Actions (Next 90–180 Days):

1. Review your corporate structure. Many California operators built multi-entity structures specifically to mitigate 280E exposure — separating plant-touching and non-plant-touching entities, establishing management companies, and structuring brand licensing arrangements to shift deductible expenses upstream. Some of those structures may be redundant for the medical side of the business and may create unnecessary complexity in the new environment. A corporate restructuring review with both corporate counsel and regulatory compliance counsel is warranted.
2. Revisit existing transaction documents. If you are party to a pending acquisition, earn-out, management agreement, or lease that was negotiated under the prior 280E economics, review it for provisions that need updating. Allocation of retroactive § 280E relief, representations about regulatory compliance, change-of-control triggers affecting DEA registration, and indemnification carve-outs are live issues in every California cannabis M&A transaction being negotiated today.
3. Monitor the June 29 hearing. The outcome of the expedited DEA administrative hearing on broader rescheduling has direct implications for your competitive position, corporate structure, and transaction strategy. If adult-use cannabis moves to Schedule III through the hearing process, the calculus for restructuring and deal-making changes substantially.

The Bigger Picture for California

California was the first state to legalize medical cannabis in 1996 under the Compassionate Use Act, and it has operated the world’s largest legal cannabis market for nearly a decade. The state’s MAUCRSA framework, which created parallel M and A designation categories, inadvertently positioned California’s medical-designated operators as the first beneficiaries of federal rescheduling — provided they hold M-licenses and take the compliance steps required by the April 22 order.

The irony is not lost that adult-use operators — who serve by far the larger consumer segment in California — are excluded from the immediate order and continue under the crushing weight of Schedule I federal treatment. This creates a bifurcated competitive environment within the California market itself, with medical operators potentially achieving sustainable economics while adult-use operators continue under structurally punitive tax treatment. As anticipated in Marijuana Rescheduling, If It Happens, Will Be Incremental Progress — Still Not the Answer, rescheduling was never going to resolve every structural problem the California cannabis industry faces. But for California M-license operators who act quickly and competently, it is the most significant shift in federal cannabis law in a generation — and the compliance window is narrow.

This post is for informational purposes only and does not constitute legal advice or create an attorney-client relationship. If you hold a California cannabis license and have questions about how the DOJ’s rescheduling order affects your regulatory compliance obligations, corporate structure, or any pending transaction, contact the Law Office of Shay Aaron Gilmore for a consultation.

Shay Aaron Gilmore is a member of California NORML’s Board and Legal Committee. See his Cannabis Marketplace listing for more information 

Introduction: Returning To India With Purpose

 When I first visited India in 1981, cannabis cultivation was still legal in certain regions. During that trip, I photographed a large, government-regulated ganja farm—an experience that left a lasting impression. The plants were grown openly, harvested responsibly, and taxed by the state.

Today, cultivation is no longer legal anywhere in India. Yet cannabis remains widely available throughout the country—typically of poor quality, harvested prematurely before flowering, and sold through unregulated channels. Prohibition has not eliminated cannabis use; it has simply ensured inferior products while generating no public benefit.

On earlier trips, I came to India as a tourist. This time, I returned with a purpose: to support the growing re-legalization movement and to help spark what civil rights leader John Lewis once called “good trouble.” At a recent meeting with activists, I was asked to outline clear reasons why India should re-legalize ganja. That outline is now circulating throughout the country.

What follows is a practical, historically grounded case for reform.

Cannabis And India — A Deep Historical Relationship

Cannabis is not foreign to India. The plant originated in Central and South Asia and has grown naturally in the Himalayan foothills for millions of years. Humans have used cannabis on the subcontinent for at least 10,000 years—for food, fiber, medicine, ritual, and pleasure.

For centuries, ganja and charas were cultivated, traded, regulated, and taxed. Cannabis use was woven into daily life, Ayurvedic medicine, and religious practice long before modern drug laws existed.

Why India’s Cannabis Laws Are Ineffective

Cannabis Is Widely Available Despite Prohibition

After nearly four decades of prohibition, ganja and charas remain easy to obtain across India. Criminalization has failed to reduce demand or supply. Instead, it has pushed cannabis into an unregulated underground market.

Poor Quality And Premature Harvesting

Because cultivation is illegal, growers often harvest plants early to reduce risk. The result is cannabis of poor quality, low potency, and inconsistent effects. Prohibition has degraded the plant itself.

Enforcement Encourages Corruption

When a widely used plant is illegal, enforcement becomes selective. This fosters bribery and corruption while diverting law enforcement resources away from serious crimes. Over time, the law loses credibility.

Public Health And Safety Considerations

In legal cannabis markets, products are tested for pesticides, heavy metals, and microbial contamination. In India’s unregulated market, consumers have no such protections.

Prohibition also produces unintended consequences. When cannabis becomes scarce due to enforcement actions, some users turn to alcohol—an intoxicant associated with greater social and health harms.

Regulation allows risk to be managed responsibly.

Economic And Scientific Opportunities

Lost Tax Revenue And Rural Opportunity

India forfeits significant revenue by keeping cannabis illegal. A regulated market could generate tax income, create agricultural jobs, and support rural economies—especially in regions where cannabis grows naturally.

Protecting India’s Landrace Cannabis Genetics

India is home to unique landrace cannabis varieties—genetically distinct plants shaped by geography, climate, and centuries of open pollination. These landraces contain rare cannabinoid and terpene profiles with potential medical and scientific value.

Under prohibition, these genetics are neither studied nor protected—and are often exported illegally with no benefit to India.

Barriers To Medical Research

Indian pharmaceutical companies are currently restricted to immature cannabis plants with low cannabinoid content. Legal access to mature flowers would enable meaningful research and allow India to compete globally in cannabis-based medicine.

Cultural And Religious Significance

Cannabis has long played a role in Indian religious traditions, particularly in connection with Shiva and festivals such as Holi and Shivaratri. While bhang remains legal, the continued prohibition of ganja forces traditional users into unsafe, unregulated markets.

Re-legalization would acknowledge cultural reality rather than deny it.

What Sensible Cannabis Regulation Could Look Like

A practical regulatory framework could include:

• Licensed cultivation and distribution
• Mandatory testing and labeling
• Age-restricted sales
• Taxation to support public health and education
• Protection for traditional and religious use
• Inclusion of small farmers and cooperatives

This is not radical policy—it is responsible governance.

Ganja In India — A Historical Record

Ganja in India is a photographic and historical record of a legal cannabis farm during my 1981 visit. At that time, ganja was cultivated openly, regulated by the government, and taxed.

The book documents a moment in Indian history that is now largely forgotten—a reminder that legalization is not a new idea, but a return to a system that once worked.

Conclusion — A Return To Reason

India’s cannabis prohibition has failed to eliminate use, protect public health, or reduce harm. Instead, it has produced inferior products, empowered illegal markets, and erased economic opportunity.

Re-legalizing ganja would not be a leap into the unknown. It would be a return to regulation, tradition, and common sense—guided by history, science, and lived experience.

FAQ — Cannabis Legalization In India

Is Cannabis Completely Illegal In India?

Cannabis flowers and resin are illegal under the NDPS Act, but bhang made from leaves remains legal in many states.

Why Was Ganja Banned In India?

India criminalized ganja primarily due to international pressure following the 1961 UN Single Convention on Narcotic Drugs.

What Are Landrace Cannabis Varieties?

Landraces are genetically distinct cannabis plants that evolved naturally in specific regions over centuries. India’s Himalayan landraces are among the most unique in the world.

Could Legalization Benefit India’s Economy?

Yes. Regulation could generate tax revenue, support rural agriculture, reduce enforcement costs, and enable scientific research.

Did India Ever Regulate Cannabis Legally?

Yes. Cannabis cultivation was legal and taxed in parts of India until the mid-1980s, including during Ed Rosenthal’s 1981 visit.

Ed Rosenthal’s expert advice has advanced marijuana cultivation and know-how for decades, helping gardeners achieve his strategy of over-growing the government to propel marijuana normalization. At the same time, he was active in the legalization movement. Now he is interested in classic varieties, breeding strategies, and landrace research. His books have sold over 1 million copies, including his latest grow guide “Cannabis Grower’s Handbook.” Ed’s warning: “Marijuana may not be addictive, but growing it is.”

EdRosenthal.com is a proud member of California NORML. See their Cannabis Marketplace listing here. 

Winning a cannabis license can feel like the hardest part: months (sometimes years) of applications, capital outlays, community positioning, and regulatory scrutiny distilled into a single approval. In limited-license states, that approval is scarce by design. It carries value the moment it’s issued.

But a license is not yet a business. It’s a permission slip with a timeline, and the next choice you make (build it out or sell it now) will largely determine whether you capture a quick premium or create a larger, more durable asset.

At Green Life Business Group®, Inc., we work with operators and investors nationwide who reach this fork in the road. The “right” answer isn’t universal, and it’s rarely ideological. It usually comes down to one decisive factor: capitalization, paired with a clear-eyed strategy.

When to Build-Out

If you have meaningful capital reserves and access to funding and you can withstand the time it takes to construct, clear inspections, secure final approvals, and ramp operations—building before selling can expand what a buyer is willing to pay. In this industry, buyers pay up for reduced execution risk. A license on paper is potential; a compliant facility with systems, staffing, and real operating traction is certainty. When the heavy lifting is done: buildout, municipal signoffs, regulatory inspections, early hiring, and initial revenue an acquirer is no longer buying a plan. They’re buying a functioning enterprise with far fewer unknowns.

That premium can be substantial, but it’s not “free money.” The build-first path asks you to carry the business through its most vulnerable phase, when delays are common, cash burn is steady, and a single compliance miss can set the timeline back. In many jurisdictions, the practical runway from approval to stable operations can stretch from six months to eighteen, depending on local processes, construction realities, and how quickly your team can operationalize compliance. The operational burden is also real: cannabis is heavily regulated, and early-stage execution requires experience, discipline, and a willingness to manage details most industries never face.

For well-capitalized license holders who want to maximize long-term value, that effort can be worth it. If your aim is to build an asset that commands a higher multiple—because it is already operating, already compliant, and already de-risked—then building out can be the strategic move.

When to Simply Sell

The opposite strategy can be just as rational (and sometimes more profitable) when the goal is speed, liquidity, and risk reduction. If you prefer to avoid construction exposure, permitting drag, cost overruns, staffing complexity, and the day-to-day grind of compliance, selling the license prior to buildout may be the smarter business decision. In that scenario, you’re monetizing scarcity and the work you’ve already completed: the approval itself, the credibility required to win it, and the buyer’s urgency to enter the market. Instead of spending months converting the license into an operating company, you transfer the opportunity to someone else who has the balance sheet and operating appetite to finish the job.

This approach limits downside in a market where timing matters. Cannabis valuations are not static. They rise and fall with licensing scarcity, competitive intensity, pricing conditions, and capital availability. A build that looks sensible on day one can become far less attractive if the market softens while you’re mid-construction, or if new entrants flood the category and compress margins. Selling earlier can protect you from that cycle—and from the risk of becoming a forced seller if timelines slip and reserves thin out.

There’s also a market-timing layer that many license holders underestimate. If you’re pursuing multiple applications across states with an “asset strategy” (winning approvals with the intent to monetize them) the highest premiums often appear in newly legalized or newly regulated markets. Early licenses can trade at outsized values when supply is limited and demand is urgent, particularly from groups racing to establish footprint and brand presence. Over time, that premium often narrows. More licenses enter the market, competition intensifies, pricing pressure builds, and capital becomes more selective. Distressed operators begin to surface, and “last year’s multiples” stop applying. In other words, the value of a license can be as much about when you act as what you won.

So how do you decide?

Start by asking the questions most people avoid. Do you have the capital to build properly (not minimally) without cutting corners that later undermine inspections or operations? Can you carry twelve months or more without meaningful revenue if approvals take longer than expected? Do you actually want to operate a cannabis business, with all the compliance and execution that entails, or do you want to exit while the asset is still simple and scarce? And what does buyer demand look like in your specific state and license category right now not in theory, but in the deals actually closing?

When you answer those honestly, the strategy usually becomes clear. If you’re well-capitalized and positioned to execute, converting a license into a compliant, operating business can materially increase what you can command in an exit because you’re selling certainty and performance. If you want a lower-risk, faster liquidity event, selling pre-buildout may be the most strategic move. And if you’re playing across multiple emerging markets, early-cycle timing can often generate the highest returns: before competitive saturation and valuation compression take hold.

At Green Life Business Group®, Inc., we help license holders evaluate market cycles, buyer demand, capitalization plans, and execution timelines to determine which path is most likely to maximize outcomes. Winning the license was the milestone. Now the work is making sure you extract its full value.

This article is for informational purposes only and does not constitute legal, tax, or investment advice. Regulations and transfer rules vary by jurisdiction.

Green Life Business Group has SOLD over 400 Cannabis Licenses/Businesses all across the Country. Green Life Business Group currently has over 200 Active exclusive cannabis businesses or licenses on the Market Today.

Green Life Business Group is pleased to support California NORML as a Business Member — learn more about their services in their Cannabis Marketplace listing.

The new tariffs have undoubtedly hurt the cannabis industry when it comes to manufacturing, packaging materials, and finished goods. However, as Q3 unfolds, we’re also seeing how tariffs have, perhaps surprisingly, been beneficial to other aspects of the cannabis industry — namely, the infused-beverage sector. Other developments include ever-evolving consumer tastes — and as always, state policies are keeping many in the industry guessing.

Hemp-Derived Beverages Surge as Alcohol Tariffs Bite

A defining trend this quarter is the rapid growth of hemp-derived beverages, propelled by steep tariffs on imported alcohol. With U.S. tariffs reaching up to 60% on European and Asian alcohol, prices for traditional spirits and beer have soared.

Nationally, the functional beverage sector is booming, with hemp drinks now positioned alongside alcohol in liquor stores, bars, and restaurants — channels previously closed to THC products.

Market analysts forecast U.S. THC beverage sales could soon reach $1 billion, with global projections topping $30 billion by 2035. Brands like Curaleaf and Organigram are aggressively expanding their hemp drink portfolio. These brands are capitalizing on regulatory flexibility in states where hemp-derived cannabinoids are permitted.

California’s Regulatory Disconnect: Hemp-Derived Cannabinoids

Despite its industry leadership, California remains on the sidelines of the hemp beverage boom due to Assembly Bill 45 (AB 45) and a series of recent emergency regulations. For context, AB 45 prohibits the retail sale of intoxicating hemp products — including THC beverages.

In September 2024, California adopted emergency regulations immediately banning the sale of hemp food, beverages, and dietary products containing any detectable amount of THC or other intoxicating cannabinoids.

New legislative proposals like AB 8 seek to expand hemp product regulation and may allow low-dose hemp drinks with excise tax, signaling potential limited legalization.

For brands and investors, the takeaway is clear: monitor the evolving regulatory landscape closely, consider licensing in hemp-friendly states, and be prepared for rapid policy changes that could either open or further restrict the California market.

Vape Cartridges, Manufactured Goods & Tariffs

These input cost increases are squeezing margins across the supply chain. Vape manufacturers in states like Connecticut are passing on higher prices to licensed operators, forcing retailers to make tough decisions about their product assortments.

In April 2025, MJBizDaily’s Chris Casacchia reports that tariffs have driven duties on China-sourced vape hardware to roughly 150%, squeezing already thin margins. U.S. manufacturers scramble for new suppliers, demand higher deposits, and shorter quotes.

To cope, they either absorb costs or pass them to licensed operators, forcing retail price hikes. Many are scaling back underperforming product lines / SKUs, renegotiating fill contracts, or exploring local sourcing to maintain profitability.

For cannabis operators, now is the time to reassess vape product lines, optimize inventory, and build redundancy into sourcing strategies. Financial planning must account for ongoing volatility in trade policy and global supply chains.

Consumer Preferences

In 2025, cannabis consumers are gravitating toward premium solventless concentrates. Unlike solvent-based extracts — which use chemical solvents such as butane or ethanol — solventless products are made using only heat, water, and pressure.

The extraction process also provides a more “full-spectrum” experience due to the preservation of terpenes and cannabinoids, which gives solventless concentrates a greater appeal to the more health-conscious, quality-concerned customers.

Consumers are quickly catching on to solventless extracts, and retailers are taking notice. Shelf space is being reserved for these high-end products, as the more low-end, chemically extracted options fall by the wayside.

Strategic Guidance for Q3 2025

To stay competitive in this cutthroat environment, operators must take a proactive and strategic approach.

• Tariff Readiness: Re-forecast COGS and margins for vape and beverage lines. Build redundancy in sourcing to ease the pressure on the already volatile supply chain.
• Product Mix Optimization: Eliminate underperforming SKUs and double down on solventless concentrates and beverages in legal states.
• Monitor Policy Barriers: Closely track state-level restrictions, especially California’s evolving stance on hemp beverages and intoxicating hemp products. Advocacy and policy engagement are essential as national trends shift.
• Financial Precision: Tie SKU-level margin analysis to 280E tax strategy and segment-level COGS eligibility. Maintain flexibility in budgeting as both trade policy and state laws continue to evolve.

The Path Forward

California has long set the standard for cannabis culture, product innovation, and consumer experience. Yet, as tariffs reshape cost structures and consumer demand shifts toward premium and wellness-oriented products, the state risks losing its leadership position.

Especially if regulatory barriers like AB 45 and the new emergency rules persist or become permanent. For operators, investors, and compliance professionals, the imperative is clear: act strategically, adapt quickly, and position your business to seize emerging opportunities in the next frontier of cannabis commerce.

California NORML business member, BTA Cannabis CPA Tax is a division of Andersen CPA Firm. They offer specialized tax, audit, and CFO on Call services to cannabis and CBD businesses across 20+ states. See their listing to learn more about how BTA Cannabis CPA Tax can assist you. Support the businesses that support reform!

By Kate Dymedenko, CPA, CTC Growise CPAs

Section 280E of the federal tax code looms over American cannabis operators like a dark cloud, severely impacting profitability in an already challenged regulatory landscape. But we’re not here to tell you about things you already know. You might not be aware that 280E does not apply at the state level in California (and some other states), so you can deduct all business expenses and potentially save a bundle on this year’s tax filing.

Taking advantage of these deductions is especially critical now as new excise taxes may be implemented as early as July if Cal NORML’s bill to block them is unsuccessful.

Under 280E, cannabis companies can’t deduct everyday expenses the same way other businesses can. Cannabis is still classed as a Schedule I substance, lumped in with potent hallucinogens like LSD, ecstasy (methylenedioxymethamphetamine), peyote, and banned hypnotics like methaqualone, a position that never really fit, especially considering it’s legal for recreational or medical use in almost every state.

The federal government and the FDA seemed to be making good progress on rescheduling—at least until late last year—it’s unlikely we’ll see any movement until the dust settles on the current administration’s priorities.

For now, we’ll have to double down on strategy and take all the deductions we can. If you’re unsure about what expenses you can deduct, we’ve compiled a list so you can start gathering documentation.

What Cannabis Companies Can and Can’t Deduct

Though you can deduct expenses related to cost of goods sold (COGS), most standard business deductions can’t be applied to federal income tax owing.

Because 280E restrictions don’t apply to California state tax, it opens up avenues for significant tax savings that you should be taking advantage of. While you still can’t claim these deductions on your federal return, it is encouraging to know that California recognizes them as legitimate expenses.

Here is a list of 280E-related expenses you can claim on your state return:

• Rent or lease payments for business properties
• Utilities not related to production
• Insurance premiums for workers comp, liability, malpractice, etc.
• Legal and professional fees (accounting, tax prep, etc.)
• Software, office equipment (computers, printers, etc.), and technology costs
• Equipment purchase and maintenance
• Advertising costs (marketing, sponsorship, dues to associations etc.). So, yes, your Cal NORML business membership is deductible on the state level
• Delivery costs
• Trade show and convention fees and costs
• Banking fees
• Interest paid on business expenses
• Office supplies
• Online services and subscriptions
• Consulting fees
• Contractor fees
• Wages, salaries, and commissions
• Payroll taxes and payroll processing
• Permits and licenses
• Cleaning services, maintenance, and janitorial fees

What Types of Cannabis Businesses Can Access These Deductions?

All California-based cannabis companies and ancillary businesses can tap into deductions federally disallowed under 280E. This includes production facilities, dispensaries, research and testing facilities, cannabis technology companies, cannabis food and beverage companies, and manufacturers and retailers of consumption devices.

Additionally, California-based companies can access some unique tax credits that may further reduce their tax burden.

The High Road Cannabis Tax Credit (HRCTC) allows a credit of up to 25% of eligible expenses to a maximum of $250,000 annually. To qualify, businesses must pay their employees, provide group health insurance, and offer retirement or pension benefits. Qualified expenses under HRCTC include wages and benefits, safety equipment costs, and employee development and training.

The California R&D Tax Credit allows a dollar-for-dollar state tax liability reduction for cannabis companies and ancillary businesses involved in the research and development of products, equipment, product storage, processing, or environmental innovation.

Tips for Making the Most Out of California’s 280E State Tax Exemptions

Now that you’re armed with some good tax news for a change, let’s sharpen those pencils and get busy!

As with all things related to cannabis taxation, it’s critical to maintain clean books and keep meticulous records and documentation of your expenses.

All business expenses should be tracked regardless of their deductibility. Besides the more obvious benefit of knowing where your money is going, tax laws can change at any time, and you may be able to claim retroactively. In best practice, you should maintain records for seven years.

Plus, if you intend to seek investment or envision an exit in the coming years, you will need those records to support valuation and prove viability. Clean books support accurate business forecasting and cash flow analysis, enabling better business decisions.

Cannabis businesses are inordinately targeted by auditors, partly because there are so many grey areas where deductions are concerned, partly due to the high volume of cash transactions and non-compliant inventory methods and processes. By keeping clean books, you’ll be well-prepared when the auditor comes a-knocking.

Here are a few additional tips to keep you on track:

• Track all transactions. Accurate record-keeping is essential to support good accounting practices. Document every detail of your transactions, including sales, expenses, receipts, invoices, dates, taxes paid, and payment method. No detail is too small.
• Reconcile your accounts regularly. Match transactions to your bank accounts frequently, daily or weekly, if possible. Leaving your bookkeeping tasks too long makes it harder to track issues, if there are any.
• Using cannabis-specific accounting software to track inventory, sales, purchases, taxes, and payroll hours.
• Work with a qualified cannabis CPA. The cannabis industry is a complex, highly regulated environment. Working with accountants who understand your unique challenges is the best way to stay on top of current regulations and taxation and to take advantage of state-based tax deductions disallowed at the federal level.

Until the federal government reschedules, cannabis operators must rely on advice, expertise, and advocacy to keep their businesses healthy and profitable. The cannabis CPAs at Growise are dedicated to supporting you with timely tips and advice to help you navigate cannabis tax complexities.

Learn more about Growise CPAs in the Cannabis Marketplace member directory on CaNORML.org

Read more about Lobby Day 2025

BECOME A SPONSOR TODAY! See Links below or email us.

California NORML and ASA (Americans for Safe Access) are pleased to announce Citizen Lobby Day, taking place March 24, 2025 in Sacramento, CA. Our members and coalition partners will host a lobby day and training in support of state legislation to better regulate cannabis and protect consumers in California.

The California Citizen Lobby Day offers an exciting and unique opportunity to reach out to the medical and adult-use cannabis community. Becoming a sponsor of the Citizen Lobby Day is an excellent way to maximize your visibility to full or targeted groups of conference attendees. We offer a variety of options to suit every budget and marketing strategy.

Becoming a sponsor is a great way to help get legislation passed that is beneficial to cannabis consumers and the legal cannabis industry. It is also a great way to position and brand your business or organization as one that is helping solve problems and move the cannabis issues forward.

SPONSORSHIP LEVELS

• $5,000 Platinum
• $2,500 Gold
• $1000 Silver
• $500 Bronze

WHAT YOU GET

$500 Bronze (available to nonprofit groups and current Cal NORML business members. Become a member here for only $500 per year.)

• Text listing in Lobby Day printed materials
• Logo with link on the Lobby Day Page on CaNORML.org 
• Logo displayed in slideshow presentation during morning session
• Corporate Materials placement in the Registration area
• Two free tickets to the event and afterparty
• Use this link or email for an invoice

$1000 Silver
All of the above, plus:

• Thanked with your logo and quote on Cal NORML LinkedIn page 
• One Cal NORML eblast sponsorship (30 K followers)
• Use this link or email for an invoice

$2,500 Gold
All of the above, plus:

• Thanked with your logo and quote on Cal NORML Instagram page 
• Total of Four free tickets to event and afterparty
• One-year Cal NORML Business Membership — includes online listing and other benefits
• Use this link or email for an invoice

$5,000 Platinum
All of the above, plus:

• One year banner ad on CaNORML.org; any page of your choice
• Use this link or email for an invoice

If you have any questions, please email or call 707-337-9747