Hirsh Jain: Rescheduling Is Already Picking Winners

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Bryan Fields: Off the record, what they've said is like, "Hey, we hear this interstate commerce discussion is happening. We will block it for as long as we can." Hirsh, I want to start with the question I think a lot of people have. My dad asked me, "Didn't Trump reschedule cannabis?" And that sounds simple, but the answer is not simple. So what actually happened in April, and what did not happen, and why is the phrase "cannabis being rescheduled" misleading? Hirsh Jain: Sure. I'll give you the very short answer, and then we can jump into it. So, as I'm sure many folks listening know, in April the Acting Deputy Attorney General, Todd Blanche, issued an order. What that order did was reschedule medical cannabis, and it also set a hearing to consider the full rescheduling of cannabis. That hearing will take place from June 29th to July 15th. So one reason this is somewhat ambiguous is that we have a rescheduling of medical cannabis, but the full rescheduling of cannabis is still pending — that's one source of ambiguity. Another reason, Brian, is that there continue to be legal challenges against this order, and those challenges dispute the notion that this has been finalized. So the rescheduling, I'd say, is still in process, even though we've taken some important steps forward. Bryan Fields: Why did he split it that way? Hirsh Jain: It's a great question. I think you can only say the Trump administration took a different tack than the Biden administration. The Biden administration intended to reschedule cannabis in one fell swoop. Here, the Trump administration took a different approach. One explanation is that Trump wanted to get this done and didn't want to be bogged down by the administrative state or procedural guidelines — that's consistent with the ethos of this administration, which is that the federal government moves slowly and they just want to get things done. So I think they thought — and we can evaluate later whether this was well-grounded — that this was one of the most expeditious ways to move forward, by arguing that medical cannabis should be rescheduled under the 1961 UN Single Convention. So that's a dramatically oversimplified answer, but the Biden administration took an approach based on procedure and ultimately didn't get it done, and the Trump administration, wanting to one-up Biden and not wanting to be bogged down by procedure, anticipated that this bifurcated rescheduling — bypassing normal notice-and-comment procedures and justifying it under international treaty obligations — was the most efficient path. Bryan Fields: So we took cannabis and sliced it into two categories, medical and adult use, and then rescheduled the medical piece. So adult use is still Schedule I, and medical has immediately become Schedule III? Hirsh Jain: I think that's right. I'd add that yes, medical cannabis has been rescheduled to Schedule III. There are a number of legal challenges playing out in the coming weeks challenging that rescheduling. And separately, there's a hearing to consider what's being described as the "full rescheduling" of cannabis, running June 29th to July 15th. Those are the two parallel tracks. I'll also note — I think implicit in your question is the somewhat nonsensical nature of this medical/adult-use distinction, and we can get into why that doesn't really make sense conceptually. But procedurally, yes, that's how this is proceeding. Bryan Fields: From a state-licensed medical cannabis standpoint, are they federally legal today? Hirsh Jain: I think that's a really interesting question. You can make the case that medical cannabis businesses are now federally legal. People have different takes — someone who disagrees would say that even as Schedule III, it's still under the Controlled Substances Act, still a controlled substance, therefore still federally illegal in a strict sense. I look at it a bit differently: a Schedule I drug is strictly federally illegal, while a Schedule III drug is federally legal under certain circumstances. I think evidence that other institutions view medical cannabis this way is that Trulieve was able to uplist onto the New York Stock Exchange — if it were still considered strictly federally illegal, that likely wouldn't have been possible. It's a spectrum: Schedule I is strictly illegal, Schedule III is legal under certain conditions we can unpack. Bryan Fields: This is where words really matter. Words are critical, and it's easy to misuse them when you're not intending to. So are there things medical operators should be doing differently today than before? Some teams are still slow to act — they haven't made changes because they're not sure where things stand. What should medical operators be doing differently? Hirsh Jain: A couple of things. First, operators that are both medical and adult-use need to think through how they bifurcate parts of their operations — many of us are still waiting on guidance from Treasury and the IRS on how that works. Second, businesses that are medical or could be medical should take steps to claim their medical status. In dual-licensee states like California and Illinois, it's now easier for an adult-use licensee to also qualify as medical. Those states are still operating under uncertainty, but they're creating a pathway for businesses to identify as medical to access certain benefits. Third, medical operators of any size should think about how to avail themselves of benefits available to federally legal businesses — for an operator like Trulieve that could mean uplisting onto a major exchange; for a distressed operator it could mean taking advantage of bankruptcy protections that may be newly available. We saw recently, in a case involving the company formerly known as Columbia Care, that bankruptcy law — historically off-limits to cannabis businesses — might be evolving to allow access. So operators should think about IP protections, SBA loans, and other benefits, and position themselves to access them even if not tomorrow, then in the near future. Bryan Fields: What I'm hearing is companies can start thinking about how to operate like a normal business, using the tools and infrastructure every other industry uses to start, grow, and, in difficult times, unfortunately wind down a business. Hirsh Jain: Yeah, they should start thinking about how they can obtain those benefits. Some could take months or longer; in some instances, like Trulieve, they can happen much more quickly than anticipated. But yes — you should think about how to avail yourself of the benefits available to other legal businesses and position accordingly. Bryan Fields: What is the DEA registration portal? Is it similar to a cannabis license application, or very different? Hirsh Jain: The DEA now has a live registration portal. One key thing to note is there's a deadline of June 26th to complete it. We're recording this on Monday, June 22nd, so this might be right around when the podcast comes out. There's a June 26th deadline for operators to complete the portal to be eligible for what's called expedited review — the DEA has pledged to review applications within six months if completed by then. But the DEA has also clarified you can still apply after June 27th; you just may not qualify for expedited review. Also, the form right now is only available for retail dispensary licenses — a similar portal for manufacturing and cultivation is supposedly coming "in the coming weeks" but hadn't been released as of Monday afternoon, June 22nd. There's also a manual form, Form 225, that captures similar information, and some administrative law attorneys are encouraging clients to fill that out instead of the portal. One open question is whether DEA registration is even necessary to access these benefits — it's unclear whether it's needed for 280E relief, for uplisting onto a major exchange (Trulieve uplisted without DEA approval), or for interstate commerce, where one theory is that interstate commerce will only be allowed between DEA-registered entities. There's a heated debate in the industry about whether to register. Christian Sederberg of Vicente Sederberg, one of the industry's veteran attorneys, has essentially said that despite ambiguities, DEA registration is likely the strongest basis for demonstrating compliance with the Controlled Substances Act. On the other hand, the Origins Council — representing growers in far Northern California — wrote an eight-page memo arguing against registering, essentially calling it a trap. I lean toward the view that registering, despite the ambiguities, is the right move. Bryan Fields: The split is a natural part of how the industry works, and some hesitancy is expected — it's an uncomfortable process, and some of the questions feel self-incriminating. Section 4 of the liability questionnaire asks whether anyone in ownership or operation previously manufactured, distributed, or dispensed a controlled substance without DEA authorization. Answering "yes" — which most teams would have to — feels like self-indicting for activity that, while federally illegal, was how the industry operated. How do you answer a question like that? Hirsh Jain: Totally. A few points: first, there's absolutely a bucket of concerning questions — some feel self-incriminating, some ask for Social Security numbers of everyone involved in operations. It makes sense that people with a history in the legacy market would see that and say no way. Second, after these concerns surfaced, the DEA put out a Q&A saying that none of these questions, if answered a certain way, will automatically disqualify you from registration. That's not much of a promise, but it's notable they addressed it. Christian Sederberg and others have pointed out that a lot of this information is already publicly available in many states — some states even have searchable employee records — so if this is a trap, the DEA likely already has access to much of this information elsewhere. Finally, around June 12th or 13th, the first DEA inspections began, starting with operators in Mississippi, and reports described these four-to-five-hour visits as polite and cooperative. We're trying to reconcile our historic understanding of the DEA as part of the war-on-drugs enforcement infrastructure with a possible new posture as more of a regulator. Bryan Fields: There's a lot of scar tissue there, and it's hard to get past — having the DEA at your facility is always going to be stomach-turning regardless of intent. So who should apply? Is there a certain type of operator you think should or shouldn't be applying? Hirsh Jain: It's really hard to say with confidence given the continuing ambiguities. Bryan Fields: What's the downside of applying — assuming the DEA means what it says and there are no repercussions? Hirsh Jain: One downside is the risk we discussed, if the DEA is in fact trying to trap people. Another is reputational risk — imagine an operator in Oklahoma, where at least some branches of government have indicated registration is mandatory by January 1st, 2027. If 70% of operators are approved and 30% aren't, that creates a scarlet letter for the rejected ones, suggesting deficiencies. It also costs money — thousands of dollars, which adds up across multiple licenses. Bryan Fields: Is this the beginning of real federal cannabis compliance? Hirsh Jain: I think it's the first instance of a federal agency establishing a framework for registration and compliance, so yes, in that sense. Long term, I believe there will be a strong effort to keep most regulation at the state and local level — I don't think we'll be living under a robust federal architecture in a couple of years. But this is the beginning of the feds engaging with the industry, and the open question is how clumsy or streamlined that engagement will be. Bryan Fields: All the states' programs are different, and the federal government doesn't always get along with the states — and some states are interpreting rescheduling differently than others. Can you explain that? Hirsh Jain: There are three models I've seen. First, the Oklahoma model — Oklahoma is the only state suggesting this process is mandatory, by January 1st, 2027. But even in Oklahoma it's complicated: several agencies interpret the order differently. The main regulator, Adria Berry, wasn't the one pushing for mandatory registration — the Oklahoma Bureau of Narcotics was, and Director Berry said she was caught by surprise. Second is the California model — not mandatory, but California is trying to position its licensees for success by making it easier for adult-use licensees to add a medical designation, or to split into two separate license entities, one medical and one adult-use. I spoke directly with DCC Director Clint Kellum, and when I asked about Oklahoma's mandatory stance, he essentially said "we're not there yet." Illinois has recently copied this model, passing a bill letting dispensary licenses identify as medical. Third is the Washington model — Washington has all adult-use licenses, and its regulator put out a bulletin around June 15th or 16th saying they don't believe this order even applies to them, while leaving the door open to revisiting that. And then there's Ohio, which put out a statement recently basically saying they have no idea what this means — which, having talked to maybe a dozen state regulators, I think is the most honest and common sentiment. Bryan Fields: Is it politics driving these differences — red versus blue states, or personal politics? Hirsh Jain: I think it's mostly the narrow circumstances of each state. Oklahoma has had a wild-west illicit market for a long time, and has tried to crack down on it — so it's not surprising the Bureau of Narcotics would want mandatory registration to help cull problematic operators. California, by contrast, has many operators with deep legacy histories, and the Origins Council urged the DCC to discourage registration and push the federal government to delay. California is trying to avoid putting sensitive licensees in jeopardy, while also recognizing it stands to benefit significantly from a national market and doesn't want to be the reason California operators are locked out of it. Bryan Fields: What about companies with operations in multiple states? Hirsh Jain: That's why I'm watching these state-by-state bifurcations closely — they affect multi-state companies directly. For example, I was recently on a call with an operator in Minnesota and New York: in New York they hold a strict adult-use license, while in Minnesota a new law now allows adult-use licensees to sell medical cannabis for the first time. It's genuinely confusing for these operators to navigate. Bryan Fields: Are we creating winners and losers based on how each state originally designed its license structure? Hirsh Jain: I think so. Winners and losers will be created no matter what, given how this policy framework evolves. State regulators are trying to figure out how to position the greatest number of their licensees for success while knowing they can only do so partially. California is trying to position operators to take advantage of a national market. Off the record, other regulators have told me: "We hear this interstate commerce discussion is happening, and we will block it for as long as we can." I'm not endorsing that strategy, but it illustrates how regulators are playing both offense and defense. This will also play out politically — some politicians may know an interstate market is inevitable but see upside in being seen to resist it, similar to politicians defending restrictive laws they know may not survive constitutional challenge. Bryan Fields: Have you thought through what interstate commerce might actually look like — maybe using DEA quotas the way regions could be set up, similar to how a state with a biomass surplus like Kentucky could supply a state like New York with a shortage? Hirsh Jain: I have a lot to say here. Let's start with why interstate commerce isn't allowed today. The simple explanation is that cannabis is federally illegal, but there's more nuance. After Washington and Colorado passed adult-use initiatives in 2012, the Obama administration issued the Cole Memo in 2013, saying the federal government would take a hands-off approach as long as certain enforcement priorities weren't violated — one of which was preventing diversion from legal states to other states. In response, states passed laws prohibiting interstate cannabis activity. The Cole Memo was rescinded in 2018 and never reinstated, but we've continued operating under its shadow, with those state-siloed laws still on the books. Over the past several years, those laws have been challenged on dormant commerce clause grounds, but all such challenges have been dismissed because cannabis remains federally illegal. So one pathway to interstate commerce is a legal challenge arguing that, with cannabis at Schedule III, it's no longer strictly federally illegal in the same way, and so the dormant commerce clause should apply. A second pathway is simply changing state laws — complicated by the fact that state legislatures operate on different calendars; Texas and Nevada meet every other year, for example. A third pathway is interstate compacts — California's SB 1326 authorizes the governor to negotiate interstate compacts with consenting states under certain conditions, and Vermont recently passed a similar law. Bryan Fields: Is there another option where it's like the dormant clause, but states have to opt in — because a compact between consenting states seems fine, but what if an excluded state, like Pennsylvania, argues it's being unfairly shut out? Wouldn't that be a dormant commerce clause violation? Hirsh Jain: A court decision affecting one state's law, like Missouri's, would likely have reasoning applicable to other similarly situated states — though such decisions can be appealed and take time to work through the system. It's also important to understand how nuanced the dormant commerce clause is. Take California's Proposition 12 on humane livestock standards — it didn't explicitly exclude other states, but it effectively restricted which meat could be sold in California based on production standards, and the Supreme Court upheld it 5-4. Similarly, California has the strictest cannabis pesticide standards in the country — could that be used to argue that out-of-state cannabis shouldn't access the California market? There's no clear bright line here; it will be sorted out in the courts. I do think interstate commerce will likely open iteratively, region by region, rather than all at once. Bryan Fields: The California pesticide example is a great one — positioning restrictions as safety standards without saying it outright, protecting the market indirectly. And going back to your quota idea, maybe the DEA allows something like a small quota so a state like New York, facing a biomass shortage, can import from a surplus state like Kentucky — benefiting both markets. Teams should be thinking directionally about what they do best, since where we are in 2026 won't be where we are in 2030, and figuring out what parts of the business they may not need to keep doing themselves. Hirsh Jain: I totally agree. I'd add there's a political dimension too — some states may resist shipments that threaten their own growers, but newly standing-up medical states, like Indiana or South Carolina — which has a law on the books requiring a medical program if cannabis is federally rescheduled — may not want to wait years to build cultivation infrastructure and might prefer to import in the short term. The analogy is Germany, which continues to import most of its medical cannabis from Canada rather than wait for domestic cultivation to scale. There's also the Food, Drug, and Cosmetic Act to consider, which technically restricts interstate commerce in goods unless they're FDA approved — a separate legal layer worth tracking. Bryan Fields: This is my favorite topic in the space — the optionality over the next four years is fascinating. Let's move on to the April order — who's challenging it, and what can we expect? Hirsh Jain: A varied group. The National Drug and Alcohol Screening Association, which profits from cannabis testing; MMJ International Holdings, a biopharmaceutical cannabis company that feels wrongly excluded from the process; SAM (Smart Approaches to Marijuana) — shout out to Kevin [Sabet]; and state attorneys general from states like Indiana, Louisiana, and Nebraska. The most charitable reading of the lawsuit centers on a 1977 D.C. Circuit case, NORML v. DEA, which held that the Attorney General doesn't have authority to reschedule a substance without formal rulemaking and notice-and-comment. I actually think that case may have been wrongly decided, but it exists, and it's relevant because it was decided in the same D.C. Circuit court hearing this challenge — essentially the second most important court in the country after the Supreme Court. The threshold issue is standing — whether these litigants can show a concrete, direct injury. Even an ethically questionable argument, like the drug-testing association's claim it will lose money, could technically satisfy standing. If they have standing, a judge will consider whether to grant a stay, which requires demonstrating a likelihood of success on the merits — if a stay is granted, that's when to get nervous. Bryan Fields: Just to clarify — this is a hearing, not literally two sides arguing pro versus con, but witnesses explaining how they're adversely affected? Hirsh Jain: For the April order challenge, it's a legal case about whether proper procedure — the Administrative Procedure Act — was followed. Separately, the June–July hearing is about the full rescheduling of cannabis, and there the DEA will formally be the proponent of the rule, opposed by seven witnesses, all opposed to full rescheduling, selected because they argued they'd be adversely affected. The administrative law judge explicitly said last Thursday that hearing is focused only on full rescheduling, not the medical piece. Bryan Fields: It's fascinating that the DEA is now essentially representing the interests of the industry against these witnesses, when for years we debated whether the DEA even had our best interests in mind. Hirsh Jain: Totally — we're watching the DEA's posture evolve in real time. Some believe the DEA could call pro-rescheduling witnesses of its own, though it's not obligated to. On Friday, June 19th, NORML actually filed suit saying it was wrongly excluded from the hearing — arguing it favors full descheduling, not just Schedule III, and was excluded as if it were a proponent of the rule when it isn't. I applaud NORML and Joseph Bondy for that effort. Some argue the exclusion of pro-rescheduling voices helps explain why the hearing can wrap by July 15th — a much faster timeline than if all sides were heard at length. Bryan Fields: Do you feel optimistic that this compressed hearing timeline is actually the right approach? Hirsh Jain: I lean optimistic, though smart lawyers I've spoken to worry this taints the administrative record because only anti-cannabis narratives will be on it. We've been waiting almost four years for full rescheduling — the Knicks won an NBA title in that span — so I favor a compressed timeline. That said, after the hearing wraps on July 15th, there are still weeks for proposed findings of fact, objections, an ALJ decision, a DEA administrator decision, and then 30 days for judicial review. I believe the Trump administration wants this wrapped quickly, partly to use as a midterm talking point, but that desired political timeline may collide with the mechanics of the administrative state. Bryan Fields: Will the outcome be a clean, final answer, or full of carve-outs and exceptions? Hirsh Jain: I don't have strong opinions on that — we'll have to wait and see. I don't think we'll know by July 16th whether this was ultimately successful; the formal administrative process afterward could take a few more months, and I don't think any of us fully anticipated how the original April 23rd order would look either. Bryan Fields: Let's dive into the red states you've ranked — Georgia, Texas, and Arkansas as the medical markets you think could grow the most. Hirsh Jain: Georgia, on July 1st, will dramatically revise its medical program to admit new form factors and qualifying conditions, after a decade of a very limited program. It's a big state with a big economy — similar to how Florida's medical market took off once flower was allowed. The expansion law passed with a veto-proof majority, which shows medical cannabis's appeal even in deep-red legislatures. Texas expanded its program last year — new licenses, expanded qualifying conditions — and patient counts are up 30-40% since. Both states have had huge illicit hemp markets, so if intoxicating hemp gets restricted, that demand could funnel into the regulated medical programs. And Arkansas is a great example of an overlooked, robust medical market — it does higher per-capita cannabis sales than Florida, despite Florida being a much larger state. Arkansas does almost $300 million a year across just 38 dispensaries — roughly $7 million per dispensary, more than in many adult-use states. Despite the Arkansas GOP establishment — Sarah Huckabee Sanders, Tom Cotton, and state legislators — fighting cannabis hard, about 4% of the state is registered as a medical patient, rivaling Florida and Pennsylvania. States like Utah and Mississippi tell a similar story, and I expect Kentucky, Alabama, and West Virginia to follow in the coming years, further proving medical cannabis's acceptance even in the reddest states. Bryan Fields: And leaning into interstate commerce could let these newer states skip building out full cultivation infrastructure themselves. Hirsh Jain: Totally agree — Georgia and Texas alone could move the needle significantly for companies with existing infrastructure there, especially once out-of-state reciprocity becomes possible. Bryan Fields: What about the recent Supreme Court decision on gun rights and cannabis users — was that surprising to you? Hirsh Jain: Not entirely surprising, given how Justice Gorsuch's oral argument comments in March suggested skepticism toward treating cannabis users as inherently dangerous — his Colorado background clearly informs his views. The Court rejected the idea that cannabis use alone is evidence of dangerousness sufficient to strip Second Amendment rights, shifting the framework from status to conduct. That reasoning could extend to employment law, housing, child custody, professional licensing, and access to medical benefits. It's significant administratively because Gorsuch's reasoning referenced rescheduling, showing branches of government are paying attention to one another. Culturally, it's a big deal too — the Supreme Court often acts as a lagging indicator of cultural change, similar to how it eventually recognized gay marriage after years of societal shift. Justice Alito — who, if he weren't on the Court, could easily be a Fox News host — acknowledging cannabis's cultural acceptance is notable, as is seeing NORML and the NRA on the same side. It's also symbolically important: many social movements build through successive wins across different branches of government — executive, then judicial, then legislative — much like the civil rights movement moved from Truman's military desegregation, to Brown v. Board of Education, to the Civil Rights and Voting Rights Acts. If rescheduling was our executive win, this is an early judicial one. Practically, many gun owners who also use cannabis have avoided registering as medical patients to protect their Second Amendment rights, so it will be worth watching whether this decision drives increased patient registration in the coming months. Bryan Fields: Last question — give one signal you're watching that the July hearing is moving in the right direction, and one that it's moving in the wrong direction. Hirsh Jain: Honestly, I don't think we'll be able to tell much from the hearing itself, since most witnesses will be anti-cannabis, and we can largely predict what they'll say. If anything, I'd watch the behavior of the administrative law judge — similar to how Judge John Mulrooney chastised the DEA in the prior rescheduling proceeding. But mostly, I think this process will stay fairly opaque until after the hearing concludes. Bryan Fields: That's a good point — no news is often the reality here, and people looking for early signals may just need to be patient. Hirsh, thanks so much for taking the time — where can listeners find you? Hirsh Jain: It was great joining you as always, Brian. People can find me on Twitter/X at Ananda Strategy — A-N-A-N-D-A Strategy — and you can email me at hirsh@anandastrategy.com. Thanks so much.