💸 The Tape

The legal battle over federal cannabis rescheduling just got bigger — and it's landed in the one court that has historically been the least sympathetic venue for marijuana reform advocates.

Three Republican state attorneys general — from Indiana, Nebraska, and Louisiana — filed a lawsuit last week challenging the Trump administration's rescheduling order that moved state-licensed medical cannabis from Schedule I to Schedule III of the Controlled Substances Act. The U.S. Court of Appeals for the District of Columbia Circuit promptly consolidated the case with a previously filed suit from Smart Approaches to Marijuana (SAM) and the National Drug and Alcohol Screening Association (NDASA), creating a unified legal challenge that now carries both state governmental authority and prohibitionist organizational backing.

The attorneys general claim the rescheduling action "fails to comport with the requirements" of federal law, "was improperly promulgated," "exceeds or is inconsistent with pertinent authority," and is "arbitrary, capricious, an abuse of discretion, and not in accordance with law." They're asking the court to declare the order unlawful and vacate it entirely.

SAM CEO Kevin Sabet welcomed the consolidation, saying the coalition is "growing as leaders around the country recognize that this unprecedented order will cause significant harm to public health and safety."

Why the D.C. Circuit Matters

The court where these cases now sit isn't just any federal appellate court. The D.C. Circuit is the designated venue for challenges to federal agency actions under the Controlled Substances Act — meaning any challenge to DEA scheduling decisions must be filed there. It is widely considered the second most powerful court in the United States after the Supreme Court, precisely because of its jurisdiction over federal regulatory disputes.

And on cannabis specifically, the D.C. Circuit has a track record that reform advocates know well — and don't particularly like.

In Americans for Safe Access v. DEA (2013), the court upheld the DEA's denial of a petition to reschedule cannabis, finding that the agency's determination that marijuana lacked "adequate and well-controlled studies proving efficacy" was supported by substantial evidence and was not arbitrary or capricious. The court applied a highly deferential standard of review to the DEA's scientific and medical judgments, essentially telling petitioners that as long as the agency followed its own procedures, the court would not second-guess the outcome.

In 2022, the court heard challenges from the Hemp Industries Association regarding DEA rules following the 2018 Farm Bill — cases that tested the boundaries between legal hemp and controlled substances. While the court engaged with the technical distinctions between hemp-derived and marijuana-derived cannabinoids, it again demonstrated a tendency to defer to agency expertise on scheduling questions.

This history creates a complicated dynamic for the current challenge. The D.C. Circuit has historically deferred to the DEA and DOJ on scheduling decisions — but in those prior cases, the agencies were defending Schedule I classification. Now the situation is reversed: the agencies moved cannabis to Schedule III, and the challengers want the court to undo that action. The question is whether the same deference the court extended to the government's decision to keep cannabis in Schedule I will also apply to the government's decision to move it out.

The Legal Arguments

The consolidated challengers are attacking the rescheduling on primarily procedural grounds — a deliberate strategy. Rather than arguing the science of whether cannabis belongs in Schedule I or Schedule III (a debate they would likely lose given the weight of current evidence), they're claiming the process was flawed.

The core argument is that Acting Attorney General Todd Blanche bypassed the formal rulemaking procedures required under the Administrative Procedure Act and Section 201 of the CSA when he used the UN Single Convention treaty pathway to immediately reclassify medical cannabis — rather than completing the traditional administrative hearing process that the Biden administration had initiated. The SAM petition, signed by attorneys at Torridon Law PLCC — where Trump's former Attorney General William Barr is a partner — alleges the order "exceeds the statutory authority of the Attorney General under the CSA."

The irony of Trump's own former AG being used to challenge Trump's own DOJ remains one of the more remarkable subplots in this saga.

The state attorneys general add a federalism dimension, arguing that their states' regulatory frameworks and law enforcement operations are disrupted by the reclassification — a standing argument that could prove more durable than SAM's, which a different federal court recently found insufficient when it dismissed SAM's challenge to the Medicare CBD pilot program for lack of standing.

What Happens Next

The consolidated case will proceed on an expedited basis, though the exact timeline depends on the court's scheduling and any motions for preliminary relief. Several key variables will shape the outcome.

First, the standing question. The state attorneys general have a stronger claim to standing than SAM — states can argue concrete, sovereign injuries related to their regulatory and enforcement frameworks. Whether that's sufficient to survive a motion to dismiss will be an early test.

Second, the standard of review. If the court applies the same deferential posture it used in prior scheduling cases, the government should have an advantage — it's the agency's own decision being challenged, and courts are generally reluctant to overrule agency expertise on matters within their statutory authority. But if the court focuses narrowly on the procedural pathway Blanche used — the treaty-based mechanism rather than the traditional APA rulemaking — it could find that the process was legally insufficient even if the substantive outcome was reasonable.

Third, the broader rescheduling hearing beginning June 29 adds complexity. If the DEA proceeds with the administrative hearing on comprehensive rescheduling while the D.C. Circuit case is pending, the challengers may seek an injunction to block the hearing or to stay the existing rescheduling order pending judicial review.

The Bottom Line

The cannabis industry has been here before — watching the D.C. Circuit consider whether federal scheduling decisions pass legal muster. In every prior case, the court sided with the government's position. The difference this time is that the government's position is pro-reform, and the challengers are trying to reverse it.

Three Republican attorneys general and an anti-cannabis advocacy group are now asking the same court that historically deferred to the DEA's judgment to overrule the DEA's judgment. Whether the D.C. Circuit's tradition of agency deference works for or against rescheduling depends entirely on whether the court views the process as legally sound — regardless of the outcome.

The hearing is set. The briefs are being prepared. And the future of federal cannabis policy may ultimately be decided not by Congress, not by the president, but by a panel of judges on Constitution Avenue who have seen this question before — just never from this direction.

📈 Dog Walkers

$SNDL ( ▲ 0.69% ) Pivots To Buying Back Stock

SNDL just lost an Ontario retail deal — and decided to buy back its own stock instead.

The company announced that the second closing of its acquisition of 27 cannabis retail stores in Ontario from 1CM Inc. — operating under the Cost Cannabis and T Cannabis banners — is not expected to proceed after provincial regulatory approvals failed to materialize before the May 31, 2026 outside date. The deal, valued at $27.2 million, stalled due to what SNDL described as "a prolonged regulatory review process that extended beyond commercially reasonable timelines."

The original arrangement, signed in April 2025 and later amended in December 2025, contemplated SNDL acquiring 32 stores across Ontario, Alberta, and Saskatchewan for a total of $32.2 million. The first closing — covering five stores in Alberta and Saskatchewan — was completed in January 2026 and remains unaffected. It's the Ontario portion that fell through.

Rather than sit on the undeployed capital, SNDL is redirecting it toward share repurchases under its existing $100 million buyback program. Since March 31, the company has already repurchased more than 5.5 million shares valued at approximately $11.1 million — adding to the 15 million shares bought back since Q4 2024.

CEO Zach George framed the pivot pragmatically: "The continued repurchase of shares reflects a disciplined approach to capital allocation given SNDL's current valuation."

For a company sitting on $213 million in cash with zero debt, the choice between a stalled acquisition and buying back discounted shares isn't a difficult one. Ontario's regulatory process — which has frustrated multiple cannabis operators with its pace — ultimately made the decision for them.

SNDL's retail platform now spans 193 locations across its Value Buds, Spiritleaf, and Cost Cannabis banners. The Ontario expansion will have to wait — or find a different path.

$VREOF ( 0.0% ) Buys 389k Sq. Ft. Facility from IIPR

Vireo Growth just bought back the roof over its head — and it wasn't cheap.

The rapidly expanding multi-state operator completed the acquisition of its 389,000-square-foot cannabis cultivation and production facility in Johnstown, New York for US$88.5 million, exercising a purchase option under its existing lease with Innovative Industrial Properties (IIP).

The financing structure tells you how much Vireo wanted this asset. IIP provided seller financing of $49 million at 15% annual interest with a one-year maturity and two extension options. Chicago Atlantic Financial Services supplied the remaining $41 million as a second-priority mortgage. Both loans are secured by the property and guaranteed by Vireo entities.

At 15% interest on the seller note, this isn't cheap capital — but owning a nearly 400,000-square-foot production facility in New York eliminates ongoing lease obligations to IIP and gives Vireo full control of one of its most critical operational assets. For a company that has been on an acquisition spree — Schwazze, Eaze, Hawthorne, the pending FLUENT deal, a Glass House joint venture, and the Bridgewell agriculture play — securing its New York production backbone makes strategic sense.

The transaction also signals the continuing evolution of the cannabis REIT model, as operators increasingly seek to buy back facilities rather than lease them long-term.

🗞️ The News

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