Washington Says Rescheduling Doesn’t Apply to Its Cannabis Industry

Washington’s cannabis regulator has told licensed operators that the Trump administration’s federal rescheduling of marijuana most likely passes them by, leaving them outside the tax relief and federal registration pathway the reform opened for medical cannabis businesses in other states.

In guidance issued June 16, 2026, the Washington State Liquor and Cannabis Board said its review found that “federal rescheduling in its current form does not appear to apply to Washington’s cannabis licensees due to the statutory framework predominately regulating recreational cannabis.” The conclusion turns on how Washington built its market: as a single adult-use system with no separate medical license.

Why Washington falls outside the rule

The federal action is narrower than its headline suggests. On April 23, 2026, the acting U.S. attorney general issued a final order moving two categories of cannabis from Schedule I to Schedule III of the Controlled Substances Act — marijuana products approved by the Food and Drug Administration, and marijuana covered by a qualifying state medical marijuana license. Every other form, including state-licensed adult-use cannabis, stays in Schedule I.

That line is what leaves Washington outside. The order reaches only medical marijuana, and its benefits run to businesses the federal government calls state medical marijuana licensees. Washington, though, does not license medical cannabis producers, processors, or retailers. It runs one recreational market in which producers and processors can make products that meet state Department of Health standards, and certain retailers can sell those products to adult patients and their designated providers. Because no medical license exists to point to, the board concluded, its licensees do not appear to qualify and may not be able to register under the federal rule.

What state operators stand to miss

The distinction carries real consequences. Schedule III status removes the federal tax penalty that has long barred cannabis companies from deducting ordinary business expenses such as rent, payroll, and marketing — a burden that has pushed effective tax rates on many operators far above those of conventional businesses. It also opens an expedited path to register with the Drug Enforcement Administration as a federally recognized manufacturer, distributor, or dispenser. Operators that fall outside the rule’s definition capture neither benefit.

The board was careful not to block anyone from trying. It will not stand in the way of licensees who want to apply for federal registration, it said, and would want to hear about the outcome if any do. But it also stressed that whether Washington businesses meet the federal definition is not Washington’s call to make. The applicability of the tax change and qualification for a Schedule III permit rests with the federal government, the board said, and the Justice Department may interpret its own rule and decide the question on its own.

Washington is not working through this alone, and its read is not the only possible one. The board said it consulted state agency partners, other states through the Cannabis Regulators Association, and the National Governors Association before reaching its view. The interpretation is not a formal opinion of the state, and the board cautioned it “may not be our final interpretation as information is evolving.”

The contrast with other states is sharp. California, which licenses medical and adult-use activity separately, moved quickly after the federal order, with regulators adopting emergency rules to let operators split their licenses and position themselves to claim the federal benefits. Washington’s single-market design gives it no comparable lever to pull — and it is far from the only state that has struggled to tell operators what rescheduling means for them.

What happens next

The board signaled that its guidance is a snapshot, not a settled answer. It pointed to several federal developments that could change the picture: more guidance from federal agencies, new or updated registration processes, and the broader rescheduling proceeding the DEA is set to take up at a hearing on June 29, 2026, which could extend Schedule III treatment to all marijuana, including adult use. The U.S. Treasury and the Internal Revenue Service have also said tax guidance for the industry is coming, though it has not yet arrived.

Active litigation adds another layer of uncertainty. A drug-testing trade group and a pharmaceutical company have asked a federal court to pause the rescheduling order outright, one of several challenges that could reshape or unwind the reform before its benefits ever reach the states.

For Washington’s operators, the practical takeaway is a holding pattern. The board said it would work with state and federal partners on timing and strategy, and weigh whether changes to state law, licensing structures, or medical cannabis rules are needed to preserve patient access and keep the state’s businesses in contention for federal benefits as the rest of the country moves.