California regulators warn DEA rescheduling order leaves industry with major unanswered questions, operators urge pause

Department of Cannabis Control Director Clint Kellum told the department's Cannabis Advisory Committee that a late‑April U.S. Attorney General order reshaped federal scheduling in an unusual way: certain FDA‑approved cannabis drugs and cannabis produced under a state medical license are treated as Schedule III while adult‑use cannabis remains Schedule I.

Kellum said the order created an expedited DEA registration window that closes in late June and directed the DEA to review registrations within six months. He described likely benefits if operators register under the narrow pathway — including potential 280 tax relief, increased research opportunities and improved access to banking for registrants — but emphasized multiple crucial questions remain unanswered.

"We are operating with the same level of information you all are," Kellum said, noting the department has sought direct contact with DEA headquarters and so far received no private guidance. He warned that DEA's interpretation of what counts as "state medical" activity, IRS guidance on tax relief, and pending litigation all add uncertainty for California licensees.

Industry leaders and patient advocates used the committee meeting to press the agency for action. "This is an unclear, rushed, chaotic, exclusionary and inequitable process," said Ross Gordon of Origins Council, urging the DCC and state leaders to push the DEA for a pause on the priority registration period and clearer rules. "Small farmers and equity operators risk being shut out."

Brandon Levine, CEO of Mercy Wellness, told the committee the DCC's emergency regulatory approach ' allowing a retailer to create a separate legal entity to hold a medical license ' could impose heavy operational and local‑permitting costs on smaller operators. "Most independent California operators do not have this luxury," Levine said. He proposed a streamlined, statewide medical authorization at point‑of‑sale to avoid forcing operators to create thousands of new entities.

Kellum said the DCC has taken immediate steps to reduce friction for operators who choose to engage with the DEA pathway, including an expedited application process to add a medical designation and emergency rules that would permit a legal separation between adult‑use and medical operations at the state level. He cautioned, however, that those state steps do not change local permitting rules: "We cannot issue a local use permit; local governments control that." The department is also preparing guidance and will continue outreach to licensees.

Public commenters and trade groups pressed for additional state action: requests included asking the governor and legislature to press the DEA for a pause on the priority registration window, building a multi‑agency state working group to clarify tax and patient access consequences, and designing protections to prevent market capture by a few large registrants.

Kellum said the DCC is preparing public communications and emergency regulations and urged operators to be deliberate: "We are not recommending that operators register; that's up to each individual. But if you choose to, be proactive and submit designation changes early." He also said the department will continue pressing federal authorities for clearer instructions.

The committee did not take formal action on the rescheduling issue at the meeting beyond public discussion. Members and public commenters asked the DCC to return with additional briefings and to coordinate statewide advocacy to ensure small, craft and equity operators are not excluded from any federally authorized medical markets.