DOJ Moves Medical Cannabis to Schedule III: What It Means for the USVI

As of April 28, 2026. On April 22, Acting Attorney General Todd Blanche signed a Final Order placing state-licensed medical cannabis into Schedule III of the Controlled Substances Act. It is the first time in the CSA’s 55-year history that the federal government has formally recognized marijuana as having accepted medical value.

The order covers two categories: FDA-approved products containing marijuana, and marijuana products subject to a qualifying state medical marijuana license. It does not reschedule recreational cannabis, which remains Schedule I.

For the Virgin Islands, the question is whether “state” includes territories.

What the order does

Three DEA drug codes moved from Schedule I to Schedule III: marijuana in FDA-approved or state-licensed medical products (code 7362), marijuana extract (code 7353), and naturally derived delta-9-tetrahydrocannabinol (code 7386).

State-licensed medical operators can now apply for federal DEA registration. The portal opens April 29, 2026. Operators that submit within 60 days of the Federal Register publication (approximately by June 26) can continue operating under their state license while the DEA reviews, and the agency has committed to processing those early applications within six months.

The Treasury Department and IRS announced plans to issue guidance on Section 280E of the tax code, which has barred cannabis businesses from deducting ordinary business expenses. The Cannabis Regulators Association estimates the effective tax rate for qualifying medical marijuana businesses could drop to 20 to 30 percent, measured from the order’s effective date.

What it does not do

The order does not reschedule all cannabis. Adult-use marijuana remains Schedule I. A separate DEA hearing, set for June 29 through July 15 at the DEA Hearing Facility in Arlington, Virginia, will consider whether to reschedule cannabis broadly. Participants must file notice of intent by May 24 (electronic) or May 20 (postmarked). The DEA will notify selected participants by June 22.

The order also does not preempt existing federal restrictions on interstate commerce in cannabis. Each jurisdiction’s supply chain still operates within its own borders.

The territory question

The Virgin Islands has operated a legal medical and adult-use cannabis program under the Cannabis Use Act (Act 8680) since January 2023. The Office of Cannabis Regulation has conditionally licensed cultivators, dispensaries, and practitioners across St. Thomas, St. Croix, and St. John, with the first regulated sales targeted for fall 2026.

The DOJ order references “state medical marijuana licenses” throughout. Legal analyses published in the days since, including a detailed Foley Hoag summary, note that the order does not explicitly address whether its provisions extend to US territories. The Controlled Substances Act generally applies in territories, and the CSA’s definitions section (21 U.S.C. 802) defines “State” to include territories and possessions. But the DOJ’s cooperative-federalism framework, which treats state licenses as “conclusive evidence” of authorization, has not been tested against territorial licensing structures.

If the order does apply, the implications for the USVI are concrete. Licensees could register with the DEA under their OCR-issued conditional licenses, potentially clearing the banking barrier that has dogged the program since Act 8680 was signed. Section 280E relief would benefit every operator currently building out facilities. And rescheduling could, in time, open a legal pathway for inter-island transport of cannabis between St. Thomas, St. Croix, and St. John, where federal maritime law currently forces each island to run an isolated supply chain under 19 V.I.C. 777(a)(4).

Canada First Financial, the bank that agreed to provide pre-operational and operational banking for USVI licensees, faces a lighter federal posture under Schedule III. Handling those funds no longer triggers the level of scrutiny that has kept most US banks out of cannabis since Act 8680 was signed.

What to watch

The DEA registration portal opens tomorrow, April 29. Whether the OCR advises its licensees to apply is the first signal of how the territory interprets this order. The 60-day expedited window closes around June 26. The broader rescheduling hearing begins three days later, on June 29, and could determine whether adult-use cannabis also moves to Schedule III. For the USVI, where adult-use possession is already legal under Act 8680 but federal law still governs the waters between the islands, that hearing matters as much as the order itself.