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

INTRODUCTION

In our 2021 article for California NORML, we discussed how federal gun laws intersect with California’s and other states legalization of recreational marijuana use. In that article, we examined Ninth Circuit authority holding that federal law makes it illegal for all marijuana users to possess a firearm.

Since then Second Amendment rights jurisprudence has developed rapidly. In June 2022, the Supreme Court issued its decision in New York State Rifle & Pistol Association v. Bruen. That ruling set forth the legal test that courts must apply when evaluating the constitutionality of laws regulating firearms and the people who can possess them. And it expressly rejected the analysis previously employed by the Ninth Circuit for deciding such cases. This year, the Court further elaborated on the Second Amendment analysis it established in Bruen with United States v. Rahimi, which confirmed that people deemed dangerous by a court can be disarmed.

Because some recent federal court rulings have held that the law prohibiting marijuana users from possessing firearms is unconstitutional, many have asked whether anything has changed legally for marijuana users who would choose to own a firearm.

The short answer is no. But that could change—and possibly soon.

This memo explains what has happened so far, what could happen next for marijuana users who would like to own a gun for sport or to defend themselves or their families, and how folks can reduce their vulnerability to prosecution.

THE NINTH CIRCUIT HAS CONFIRMED THAT FEDERAL LAW PROHIBITS MARIJUANA USERS FROM POSSESSING FIREARMS

Under 18 U.S.C. 922(g), it is unlawful for certain categories of people to “ship or transport in interstate or foreign commerce, or possess in or affecting commerce, any firearm or ammunition; or to receive any firearm or ammunition which has been shipped or transported in interstate or foreign commerce.”

One such category includes people that are “unlawful user[s] of or addicted to any controlled substance (as defined in section 102 of the Controlled Substances Act (21 U.S.C. 802)).” 18 U.S.C. 922(g)(3). Of course, the federal Controlled Substances Act still includes marijuana, effectively banning all current marijuana users from owning firearms or ammunition.

“Firearms” are defined by the law as “(A) any weapon (including a starter gun) which will or is designed to or may readily be converted to expel a projectile by the action of an explosive; (B) the frame or receiver of any such weapon; (C) any firearm muffler or firearm silencer; or (D) any destructive device.” 18 U.S.C.S. § 921(a)(3). So aside from prohibiting marijuana users from possessing firearms, federal law also prohibits users from possessing starter guns, firearm mufflers and silencers, and destructive devices (bombs, grenades, rockets, and so on).

“Ammunition” is defined by the law as “ammunition or cartridge cases, primers, bullets, or propellant powder designed for use in any firearm.” Id. § 921(a)(17)(A).

The Ninth Circuit has held that the firearm prohibition on cannabis users is constitutional, even in the context of those with medical marijuana cards, explaining that “these laws will sometimes burden—albeit minimally and only incidentally—the Second Amendment rights of individuals who are reasonably, but erroneously, suspected of being unlawful drug users. However, the Constitution tolerates these modest collateral burdens in various contexts, and does so here as well.” Wilson v. Lynch, 835 F.3d 1083, 1094-95 (9th Cir. 2016).

Thus, in the Ninth Circuit at least, even those with medical marijuana cards are essentially considered acceptable collateral damage to this overbroad government policy.

 THE PROCESS OF BUYING A FIREARM

When anyone buys a firearm from or through a firearms retailer, they are required to answer questions on the federal “4473” form. In California, there are other state forms that must also be completed, including the Dealer Record of Sale (DROS) form.

The 4473 form specifically asks if the firearm purchaser is an “unlawful user” of marijuana. Even if marijuana use is legal in your state, it is still illegal under federal law. So to be truthful, you must answer “yes” to this question if you use marijuana.

The 4473 form must be signed under penalty of perjury. Committing perjury is a crime.

Federal law also expressly prohibits knowingly making any false statement on the 4473. Doing so is punishable by up to ten years in prison and up to a $250,000 fine. 18 U.S.C.S. § 924(b).

So if you don’t answer the questions on the 4473 form truthfully, you can be prosecuted under 18 U.S.C.S. § 924(a)(1)(A) for lying on the form. Prosecutors typically call these cases “Lie and Buy” cases.

A SUPREME COURT DECISION AND LEGAL GAME CHANGER

As a recent Associated Press article explained[1]

 A landmark U.S. Supreme Court decision on the Second Amendment is upending gun laws across the country, dividing judges and sowing confusion over what firearm restrictions can remain on the books.

 The high court’s ruling that set new standards for evaluating gun laws left open many questions, experts say, resulting in an increasing number of conflicting decisions as lower court judges struggle to figure out how to apply it.

The Supreme Court’s so-called Bruen decision changed the test that lower courts had long used for evaluating challenges to firearm restrictions. Judges should no longer consider whether the law serves public interests like enhancing public safety, the justices said.

 Under the Supreme Court’s new test, the government that wants to uphold a gun restriction must look back into history to show it is consistent with the country’s “historical tradition of firearm regulation.”

Courts in recent months have declared unconstitutional federal laws designed to keep guns out of the hands of domestic abusers, felony defendants and people who use marijuana. Judges have shot down a federal ban on possessing guns with serial numbers removed and gun restrictions for young adults in Texas and have blocked the enforcement of Delaware’s ban on the possession of homemade “ghost guns.”

 In several instances, judges looking at the same laws have come down on opposite sides on whether they are constitutional in the wake of the conservative Supreme Court majority’s ruling. The legal turmoil caused by the first major gun ruling in a decade will likely force the Supreme Court to step in again soon to provide more guidance for judges.

THE UNITED STATES v. HARRISON DECISION HOLDS THAT THE BAN ON FIREARMS POSSESSION BY MARIJUANA USERS IS UNCONSTITUTIONAL

The case of United States v. Harrison began on May 20, 2022, when Mr. Harrison was pulled over for running a red light. A loaded revolver was found in the car, along with a backpack with various marijuana products. A federal grand jury returned an indictment charging Harrison with possessing a firearm with knowledge that he was a marijuana user in violation of USC 18 U.S.C. § 922(g)(3). United States v. Harrison, No. 22-00328, 2023 U.S. Dist. LEXIS 18397 (W.D. Okla. Feb. 3, 2023).

Harrison asked the district court to dismiss the indictment on various grounds, including that § 922(g)(3), as applied to his marijuana use, violates the Second Amendment. Echoing what the Supreme Court ruled last year in Bruen, Harrison’s lawyers argued that the federal law barring marijuana users from possessing firearms conflicted with the nation’s historical tradition of firearm regulation.

The prosecution argued, on the other hand, that “disarming presumptively risky persons, namely, felons, the mentally ill, and the intoxicated” is in the public interest.

District Court Judge Patrick Wyrick disagreed, holding that the federal law depriving marijuana users of their Second Amendment rights is unconstitutional. He first explained that the federal government cannot simply exclude marijuana users from “the people” who have Second Amendment rights. If it could, he continued, then the power to exclude people from the protections that constitutional rights provide would be essentially limitless:

Frankly, it’s not even clear this is carving out a “subset,” as much as an outright declaration of the federal government’s belief that it can deprive practically anyone of their Second Amendment right. Who among us, after all, isn’t a “lawbreaker”? For sure, there may well exist some adult who has never exceeded the speed limit, changed lanes without signaling, or failed to come to a complete stop at a stop sign, but they are few and far between.

The government also argued that § 922(g)(3) was constitutional because it is analogous to the Nation’s deeply rooted historical tradition of disarming felons (because unlawful users of controlled substances have engaged in felonious conduct, even if not convicted of it yet). Again, Judge Wyrick disagreed:

Imagine a world where the State of New York, to end-run the adverse judgment it received in Bruen, could make mowing one’s lawn a felony so that it could then strip all its newly deemed “felons” of their right to possess a firearm. The label “felony” is simply “too easy for legislatures and prosecutors to manipulate.”

Judge Wyrick was also amused with the government’s response on this point:

Remarkably, when presented with this lawn-mowing hypothetical argument, and asked if such an approach would be consistent with the Second Amendment, the United States said “yes.” So, in the federal government’s view, a state or the federal government could deem anything at all a felony and then strip those convicted of that felony—no matter how innocuous the conduct—of their fundamental right to possess a firearm. Why? Because courts must defer to a legislature’s judgments about what is and is not a felony, says the United States. It’s as if Bruen’s command regarding the inappropriateness of such deference to legislative judgments has been lost in translation.

According to Judge Wyrick, the Nation’s historical tradition of regulating firearms supports disarming those who have shown their dangerousness through past violent, forceful, or threatening conduct. But a total prohibition on the right to possess a firearm merely because a person is a user of marijuana does not fall within that tradition. While the government made other arguments—including a bizarre effort to protect its law by analogizing to racist laws of the past (a move Wyrick called “concerning”)—ultimately it was this logic that led the court to rule as it did.

It bears repeating that all the United States would have to prove at trial in order to justify depriving Harrison of his right to possess a firearm is that he is a user of marijuana. But the mere use of marijuana carries none of the characteristics that the Nation’s history and tradition of firearms regulation supports. The use of marijuana—which can be bought legally (under state law) at more than 2,000 ordinary store fronts in Oklahoma—is not in and of itself a violent, forceful, or threatening act. It is not a “crime of violence.” Nor does it involve “the actual use or threatened use of force.”

That Congress may have passed § 922(g)(3), as the United States suggests, with some vague relation to public safety or “the public interest” does not change this conclusion. It is not appropriate for a court to “reflexively defer to a [legislative] label when a fundamental right is at stake.” And the use of marijuana does not become a violent, forceful, or threatening act merely because the legislature says it is. 

Having established that marijuana users who possess firearms come within the plain text of the Second Amendment, Judge Wyrick proceeded to the historical analysis now required under Bruen. He noted that while there is some history of laws regulating firearm possession by intoxicated persons, none appear to have prohibited the possession of a firearm in the home for purposes of self-defense.

Where the seven laws the United States identifies took a scalpel to the right of armed self-defense—narrowly carving out exceptions but leaving most of the right in place—§ 922(g)(3) takes a sledgehammer to the right.

Judge Wyrick referenced the Bruen decision when he stated that marijuana use doesn’t make someone a “dangerous lunatic.”

 But the United States’ own conception of the historical tradition demonstrates why §922(g)(3) as applied to Harrison is not analogous to these traditions. Under the United States’ own theory, history and tradition would limit disarmament to dangerous lunatics. And as explained above, the mere use of marijuana does not indicate that someone is in fact dangerous, let alone analogous to a “dangerous lunatic.” There are likely nearly 400,000 Oklahomans who use marijuana under state-law authorization. Lumping all those persons into a category with “dangerous lunatics,” as the United States’ theory requires, is a bridge too far. 

Judge Wyrick also noted that the criminal justice system could have kept Harrison behind bars to ensure he didn’t get his hands on a gun if it concluded that he’s a threat.

 None of this is to say that the government cannot play a role in protecting the public from dangerous persons possessing firearms. It can, and it should. For example, if the State of Texas thought that Harrison’s alleged involvement in a shooting demonstrated that Harrison was a danger to the public, it could have demonstrated to a Texas judge—in an individualized proceeding of which Harrison would have been given notice and the opportunity to be heard—that Harrison ought to be jailed while awaiting trial for that shooting. The Constitution, after all, permits pre-trial detention, and such detention would be a highly effective means of furthering the government’s interest in protecting the public from a gun-toting Harrison. But that didn’t happen; Harrison was released pending trial in Texas. And so here we are, with the federal government now arguing that Harrison’s mere status as a user of marijuana justifies stripping him of his fundamental right to possess a firearm. For all the reasons given above, this is not a constitutionally permissible means of disarming Harrison.

Judge Wyrick vacated the indictment against Harrison, dismissing it with prejudice. You can read the full ruling here.

In our opinion, the Harrison ruling properly applied the Bruen test. But many state and federal government authorities disagree. Indeed, the federal government appealed the district court decision, so the Tenth Circuit will be deciding on the constitutionality of the marijuana prohibition soon. You can track this appeal here.

UNDERSTANDING PERSUASIVE LEGAL AUTHORITY VS. MANDATORY LEGAL AUTHORITY

The ruling in Harrison was issued by the Western District of Oklahoma. A decision by one federal district court is not considered mandatory authority. So other district courts in Oklahoma (or anywhere else) are not bound by the decision, and they do not have to follow it.

Depending on how well-reasoned and well-written a district court ruling is, however, it can be considered persuasive authority, and the reasoning can be adopted voluntarily by any court.

The U.S. government has appealed the Harrison decision. Oklahoma is in the United States Court of Appeals for the Tenth Circuit, so decisions of the federal courts of Oklahoma are appealed to the Tenth Circuit. That may uphold or overturn the district court’s ruling. If upheld, any ruling (a win or a loss) from the Tenth Circuit would only be binding on federal courts within the Tenth Circuit. But again, such a decision could be relied on as persuasive authority in courts outside that circuit.

RULINGS BY OTHER COURTS

So far, two other court rulings have substantively discussed Harrison.

The first was not favorable. A district court in the Northern District of Indiana stated in a footnote:

The [c]ourt is not persuaded by Harrison in part due to the weight of authority reaching the contrary conclusion, the [c]ourt’s own analysis of the arguments presented in this case, and disagreements with the analysis and conclusions reached by the court in Harrison. For example, the [c]ourt would note that Harrison’s reasoning distinguishing the tradition of disarming dangerous persons from § 922(g)(3) seems reliant on reinterpreting those traditions based on pre-Bruen dissents from circuit decisions. See e.g., Harrison, No. 2:22-cr-328 at *31-*32, 2023 U.S. Dist. LEXIS 18397. The [c]ourt is not persuaded such a dramatic departure from existing precedent is required given Bruen established it was consistent with Heller, and the first step of the pre-Bruen test was also consistent with Heller. Bruen, 142 S.Ct. at 2127-30.

United States v. Posey, No. 2:22-CR-83, 2023 U.S. Dist. LEXIS 22005, at *24 n.9 (N.D. Ind. Feb. 9, 2023).

Things went better in the Western District of Texas, where the court cited Harrison repeatedly to support its conclusion that “Section 922(g)(3) breaks with historical intoxication laws by prohibiting not just firearm use by those who are actively intoxicated but also firearm possession by those who use controlled substances, even somewhat irregularly.” United States v. Connelly, No. EP-22-CR-229(2), 2023 U.S. Dist. LEXIS 62495, at *30 (W.D. Tex. Apr. 6, 2023).

The federal government appealed that ruling, but just recently, the Fifth Circuit affirmed, writing that while restrictions on a presently intoxicated person find historical support, “they do not support disarming a sober person based solely on past substance usage.” Like Judge Wyrick, the Fifth Circuit also rejected the government’s comparison to historical laws that restricted firearm access by the mentally ill. Thanks to this ruling, § 922(g)(3) will only be effective in the Fifth Circuit when it is applied to presently intoxicated people, and cannabis users are unaffected when they are not under the influence. And because it is a circuit court ruling, it has more persuasive value to courts in other circuits than the Harrison district court ruling does. Presumably, the federal government will petition the Supreme Court to review the case now, but it is unclear if that request will be granted.

It is likely that similar challenges will be brought in other district courts in other federal circuits, and those decisions will likely also be appealed. Ultimately, perhaps the Supreme Court will have to address this issue, particularly if two courts of appeal reach different conclusions. Indeed, because Harrison and Connelly are proceeding in different circuit courts, if different conclusions are reached by the respective circuits, the odds of Supreme Court review will increase. For example, if the Tenth Circuit reviewing the Harrison ruling ultimately disagrees with the Fifth Circuit’s recent ruling and upholds the federal law, then the Supreme Court will likely need to resolve the split. On the other hand, if the Tenth Circuit agrees with the district court in Harrison and the Fifth Circuit in Connelly, Supreme Court review may be less likely until another circuit court reaches a contrary ruling. That said, the more circuits that agree, the stronger the persuasive authority becomes, even without a Supreme Court ruling.

 WHAT COMES NEXT?

For California marijuana users who choose to own a firearm to benefit, a similar challenge would have to be brought in a district court in the Ninth Circuit, which includes California. A district court ruling in California would likely be appealed to the Ninth Circuit—the same circuit that ruled in Wilson that federal law prohibits marijuana users from possessing firearms. Wilson v. Lynch, 835 F.3d 1083, 1094 (9th Cir. 2016).  But that decision did not consider whether the ban itself violates the Second Amendment under Bruen. That is, the Ninth Circuit did not consider whether the ban was unconstitutional under our historical tradition of firearm regulation. Rather, it proceeded under the now-defunct tiered-scrutiny approach that gave the government far more deference.

There are legal battles being waged in Second Amendment challenges to various gun control laws across the country right now to determine how to apply Bruen when evaluating the constitutionality of any gun control law. Some of those cases challenge classifications of people who are prohibited by federal law from possessing firearms, like non-violent felons, certain misdemeanants, and people subject to civil restraining orders. Rulings in those cases might influence a court that is weighing the constitutionality of bans on firearm possession because of marijuana use.

TRY TO AVOID TROUBLE AND KNOW YOUR RIGHTS

Remember that if you are using marijuana and possess a firearm, you are breaking federal law.

If you have a medical marijuana card and you own firearms, that is evidence that can be used against you if the card is discovered, such as in an unrelated search. Even if you do not currently use marijuana, the government may assume otherwise if it learns you have such a card or other evidence of marijuana use.

The Bruen decision specifically addressed concealed carry permits, and what states could require from folks applying for one. The decision has made it much easier in all states, including California, to get one of these permits. But people who apply for a CCW are generally asked about drug use, and so forth. If you are not truthful in your application, you could face years in prison and hundreds of thousands of dollars in fines if the permit’s existence tips the government off that you are illegally in possession of firearms.

Further, while there is no crime specifically barring lying on a CCW permit application, the standard CCW application form is signed under penalty of perjury. If caught in a lie about marijuana use (or any other information asked on the form), you could be charged with perjury. Even if no such charges are brought, however, getting caught in such a lie would likely mean any future effort to get a CCW permit would be denied based on prior dishonesty.

Also keep in mind that you are vulnerable to being reported by anyone who knows this, and to police if they conduct an investigation for whatever reason. Although prosecuting people for this offense may not currently be high on the list of government priorities, if you possess a firearm and use marijuana, you are at risk right now. The politics of this issue could change.

Know your rights. Remain silent. Don’t incriminate yourself. Anything you say will be used against you, even if you are not read your rights first. Do not answer questions. Give your name and address only. Repeatedly say, “I want to remain silent and call my lawyer.” Do not discuss your case with police, friends, family, cellmates, or anyone but your lawyer. Beware: Police car and jail phone conversations are recorded and many in jail are informants.

Do not consent to give up your rights. A right voluntarily given up is a right lost. Do not be tricked, threatened, or persuaded into giving up your rights. Do not “consent” to a search without a search warrant. If asked for consent to search, politely and repeatedly refuse, and note nearby witnesses. Do not sign any statements without an attorney’s advice.

Ask for a lawyer. If arrested, you may be handcuffed, searched, photographed, and fingerprinted. Do not physically resist a search or arrest. You have a right to have an attorney present during any questioning. Once you say you want to remain silent and ask for a lawyer, questioning should stop. If they keep asking questions, keep silent and keep asking for your lawyer! Call and get your lawyer involved asap!

If you would like a free KNOW YOUR RIGHTS card with the above information to carry in your wallet, email our office at helpdesk@michellawyers.com and we can send you some.

[1] https://apnews.com/article/politics-mississippi-state-government-delaware-california-massachusetts-3983cecfd1107c263d5309ec0d80a966

Related Reading: NORML Legal Committee Submits Amicus Brief in Federal Case Challenging Government’s Gun Ban for Medical Cannabis Consumers 5/26/23

 C.D. “Chuck” Michel is Senior Partner at the Long Beach Law firm of Michel & Associates, P.C. He is the author of California Gun Laws, A Guide to State and Federal Firearm Regulations now in its 10^th edition for 2023 and available at www.calgunlawsbook.com.

Michel & Associates, P.C. is a California NORML legal committee member. See their listing in the Cannabis Attorneys directory.

Learn how you can help sustain Cal NORML’s essential advocacy and lobbying efforts in the coming years, while providing a helpful needed service to your customers that will boost your sales.

California NORML is excited to announce a new partnership with Banking and Merchant Specialist, Ian Rassman of Rassman Payments. This new collaboration will benefit our business members while generating essential funds for Cal NORML with each tap of your customers’ payment cards.

You’ll enjoy all applicable processing services at extremely competitive rates alongside personalized service from a team that understands the cannabis industry. Cal NORML earns a small commission with each transaction, with no additional charge to you. To help you make the switch, we’ll provide some (or all) of your new hardware free of charge.

This is a fantastic opportunity for all cannabis businesses and ancillary companies, as well as those outside the industry to support cannabis consumers’ rights in California.

Cal NORML receives regular requests to partner with a variety of companies, due to our stellar reputation and vast network. We are pleased to have found a beneficial match with Ian, who you may know through his service as Executive Director of Los Angeles NORML. Ian offers 13 years’ experience in the Banking and Payments Industry and has enjoyed 35 years of involvement with the cannabis culture.

Learn how you can help sustain Cal NORML’s essential advocacy and lobbying efforts in the coming years, while providing a helpful needed service to your customers that will boost your sales.

Please contact kharla@canorml.org or 707-337-9747 for more information and questions.

Founded in 1972, California NORML is a non-profit, membership-supported organization dedicated to protecting and expanding the rights of California’s cannabis consumers. We lobby lawmakers, publish newsletters, sponsor events, and offer legal, educational, and consumer health advice. Current focuses include employment rights and medical marijuana patients’ rights. We are funded solely from donations from within California.