As the D.C. Circuit prepares to decide whether the Justice Department lawfully moved state marijuana into DEA Schedule 3, experts warn that billions in anticipated tax benefits could unravel.
WASHINGTON, D.C. / ACCESS Newswire / September 8, 2026 / MMJ International Holdings, Inc. ("MMJ") today warned that a pending federal appeals court decision could disrupt billions of dollars in anticipated tax benefits and expose the central contradiction in the government's marijuana policy:
State licensed marijuana products may receive Schedule III treatment even though the individual products have not been approved by the U.S. Food and Drug Administration or validated through product specific evidence of consistent chemistry, standardized dosing, manufacturing quality, safety and efficacy.
Schedule III is a controlled substance classification. It is not FDA approval.
That distinction lies at the center of the consolidated marijuana-rescheduling challenges now pending before the U.S. Court of Appeals for the District of Columbia Circuit.
Billions Ride on the Court's Decision
MMJ is a petitioner in the consolidated challenges to the Justice Department's April 2026 Marijuana Rescheduling Order, including Case Nos. 26-1106, 26-1130 and 26-1136.
The order placed two categories into Schedule III: marijuana contained in qualifying FDA approved products and marijuana produced or distributed under qualifying state medical marijuana licenses.
Those categories are not scientifically equivalent.
An FDA approved medicine is a specific product supported by an approved application. Its formulation, dose, manufacturing process, stability, labeling, safety and efficacy have been evaluated for a defined use.
State marijuana markets contain thousands of materially different flowers, concentrates, edibles, vapor products and other formulations. Their cannabinoid concentrations, manufacturing controls and delivery systems vary. Schedule III treatment does not establish that any particular state product is safe or effective for treating a disease.
Yet the scheduling change carries an extraordinary economic benefit.
Internal Revenue Code Section 280E generally denies ordinary deductions and credits to businesses trafficking in Schedule I or II controlled substances. Moving qualifying state marijuana into Schedule III could remove that burden and potentially produce billions of dollars in prospective tax savings and disputed refund claims.
A ruling invalidating or remanding the state license provisions could place those anticipated benefits in jeopardy.
"This case is about much more than changing a number on a federal schedule," said Duane Boise, President and Chief Executive Officer of MMJ International Holdings. "The government attached billions of dollars in economic value and federal credibility to a state license without requiring FDA approval of the individual products receiving those advantages."
A State License Is Not FDA Approval
The April order did not make state marijuana products FDA-approved drugs. It did not establish validated medical indications, standardized doses or approved labeling. It did not determine that individual products possess reproducible chemistry or can be consistently manufactured from batch to batch.
Nor does Schedule III status, standing alone, authorize a state dispensary to operate as a federally registered pharmacy or convert a dispensary recommendation into a lawful prescription for an approved drug.
Nevertheless, the order risks creating the public impression that state marijuana has been federally validated as medicine.
It has not.
"Calling thousands of chemically different products 'medical marijuana' does not make them one medicine," Boise said. "FDA approval is product-specific. Schedule III cannot transform an entire state market into a collection of approved pharmaceutical products."
What the D.C. Circuit Will Decide
The D.C. Circuit will determine whether the Justice Department possessed authority to build this new system through the Controlled Substances Act's treaty-implementation provision, 21 U.S.C. § 811(d)(1), without completing the statute's ordinary scheduling procedures.
The court could find that the government:
Exceeded its limited treaty-implementation authority;
Failed to establish that international obligations required state-licensed marijuana to be placed in Schedule III;
Improperly bypassed the Controlled Substances Act's ordinary procedures;
Failed to explain how materially different state products could be treated as one medically accepted category; or
Improperly combined FDA-approved medicines and non-FDA-approved state marijuana under the same order.
The court does not have to invalidate every part of the order.
It could preserve legally supportable treatment for specific FDA-approved products while vacating or remanding the provisions covering state-licensed marijuana.
That partial outcome may be MMJ's most realistic path to victory-and the result with the greatest immediate consequences for the commercial cannabis industry.
What Happens if the State-License Provisions Fall?
Vacatur or remand could force federal agencies and cannabis companies to reconsider:
Schedule III treatment for products covered solely through state licenses;
The new DEA registration pathway created for state operators;
Prospective Section 280E tax relief;
Pending or disputed cannabis tax-refund claims;
Acquisitions and valuations based on Schedule III expectations; and
Corporate disclosures portraying federal rescheduling as settled.
Such a ruling would not prohibit Congress or DEA from pursuing broader marijuana reform through lawful procedures. It would mean that the Justice Department could not reach that result through an unauthorized shortcut.
A Stay Denial Would Not End MMJ's Case
The court may first rule on the pending request to stay the order while the litigation proceeds.
A stay is emergency relief. Petitioners must establish standing, likely success on the merits, irreparable harm and that the equities favor immediate intervention.
The court could deny a stay because it considers the alleged injury insufficiently immediate without deciding that the order itself is lawful. A denial would allow the order to remain effective temporarily, but it would not prevent the court from later vacating or remanding the state-license provisions.
The government argues that MMJ's competitive injury is speculative because MMJ is not presently selling an FDA-approved cannabinoid medicine.
But MMJ cannot lawfully market an investigational product as an approved drug before completing the federal process.
MMJ has manufactured approximately 50,000 defined-dose soft-gelatin capsules and advanced two Investigational New Drug programs. Its product exists. What remains incomplete is the regulatory and clinical process required for commercial approval-the same process that individual state products have not completed.
MMJ's Compliance Is the Injury
MMJ has spent more than eight years and more than $10 million pursuing standardized cannabinoid medicines through the federal pharmaceutical pathway.
Its work includes:
Defined-dose cannabinoid formulations;
Pharmaceutical manufacturing of approximately 50,000 finished capsules;
Analytical testing and chemical fingerprinting;
Stability testing;
Two FDA Investigational New Drug programs;
An FDA Orphan Drug Designation; and
A DEA Schedule I analytical-laboratory registration.
MMJ's investigational products have faced requirements involving chemistry, manufacturing and controls, impurity identification, stability, toxicology and clinical-trial design.
State-market competitors receiving Schedule III benefits have generally not completed those requirements for their individual products.
That creates a regulatory trap: MMJ is allegedly not a competitor because it has not commercially launched, but it cannot legally launch until it completes the federal process. Meanwhile, companies that avoided that process receive immediate tax and regulatory advantages.
"MMJ's compliance is not evidence that we lack an injury-it is the source of the injury," Boise said. "The federal government cannot require MMJ to satisfy pharmaceutical standards and then declare those standards irrelevant when it distributes competitive advantages."
MMJ Is the Gladwell Outlier
Malcolm Gladwell's Outliers popularized the "10,000-hour rule"-the idea that sustained preparation and accumulated experience become decisive when the right moment arrives.
MMJ's eight years navigating FDA drug development, pharmaceutical manufacturing, analytical science and DEA regulation represent the cannabinoid-medicine equivalent of those 10,000 hours.
While much of the industry pursued state licenses and retail expansion, MMJ took the slower federal road. What once made MMJ appear commercially unusual may now make it uniquely prepared for a market forced to distinguish between scheduling status and an actual FDA-approved medicine.
"We put in the equivalent of the 10,000 hours before this defining moment arrived," Boise said. "We followed the pharmaceutical pathway because that is how a product proves it is medicine. Now the appeals court must decide whether doing that work still matters."
In Summation
A Schedule III classification is not FDA approval.
A state license is not proof of pharmaceutical quality.
Patient use is not a substitute for controlled evidence.
And calling a product "medical marijuana" does not establish that the individual product is a validated medicine.
The D.C. Circuit's ruling could determine whether billions in cannabis tax benefits remain intact-and whether federal agencies may confer medical-market advantages without requiring the scientific process ordinarily applied to medicines.
"The question is not whether cannabinoids have therapeutic potential," Boise said. "MMJ has invested more than eight years pursuing that potential. The question is whether medicine will continue to require a defined product, reproducible chemistry and credible evidence. MMJ did that work. Now the court decides whether that work still counts."
About MMJ International Holdings
MMJ International Holdings, Inc. and its subsidiaries develop standardized botanical cannabinoid drug products through the FDA pharmaceutical pathway. MMJ is seeking to demonstrate the safety and efficacy of investigational products for serious neurological conditions, including Huntington's disease and multiple sclerosis.
Media Contact
Madison Hisey
MMJ International Holdings
MHISEY@mmjih.com
203-231-8583
The D.C. Circuit has not ruled on the pending stay request or the merits. Statements concerning potential judicial, tax, regulatory or market outcomes are analysis and opinion, not predictions of a guaranteed result. The treatment of particular tax positions or refund claims would depend upon the court's remedy, applicable tax law and subsequent government action.
SOURCE: MMJ International Holdings
View the original press release on ACCESS Newswire:
https://www.accessnewswire.com/newsroom/en/healthcare-and-pharmaceutical/appeals-court-to-rule-soon-on-marijuana-rescheduling-as-billions-in-c-1218243
