On April 22, 2026, the Acting Attorney General issued a final order reclassifying FDA-approved marijuana products and state-licensed medical marijuana from Schedule I to Schedule III under the Controlled Substances Act. A formal DEA hearing on broader cannabis rescheduling is scheduled to begin June 29, 2026.
This is the most consequential shift in federal marijuana policy in decades — and it has direct implications for cannabis business valuations.
The 280E Change Is Immediate
For state-licensed medical marijuana operators, Section 280E of the Internal Revenue Code no longer applies as of April 22, 2026. 280E has long prevented cannabis businesses from deducting ordinary operating expenses — rent, payroll, and other standard costs — resulting in effective tax rates that have significantly compressed valuations. The removal of that burden improves after-tax cash flow, which is a direct input into how a business is valued.
Additionally, the Acting Attorney General has encouraged the Treasury Department to consider retrospective 280E relief for prior tax years. If granted, that would represent a further material change for operators with open tax years or pending IRS matters — and another factor that affects how businesses in this space are analyzed.
The Picture Is Still Developing
Recreational cannabis remains Schedule I. The broader rescheduling hearing beginning June 29 will determine how far federal reform extends. Questions around banking access, interstate commerce, and state tax treatment remain open. The full valuation impact of this shift will come into focus as those issues resolve.
What This Means for Cannabis Business Owners
For operators who have been considering a transaction, a capital raise, or simply want to understand what their business is worth in this new environment — the regulatory landscape just changed in ways that matter. Houlihan Capital has provided valuation and investment banking services to cannabis businesses for over a decade and is actively analyzing the implications of this order.
Those with questions about how this shift affects business value or strategic options are encouraged to reach out.
This content is for informational purposes only and does not constitute investment, legal, or tax advice. Cannabis businesses should consult qualified legal and tax counsel regarding their specific circumstances.
