Three ways DEA is saying no, and the 12-point checklist to avoid them

The Drug Enforcement Administration has now registered more than 900 medical dispensaries in Alabama, Florida, Mississippi, South Dakota, Texas, Virginia and West Virginia, the Justice Department said Oct. 30. But the same week made clear that a state license does not guarantee a federal one. "State licensure alone does not automatically grant federal registration," DOJ said, and every dispensary must clear DEA's pre-registration investigation.

Three recent cases show where applications break down: who owns you, what your state allows, and who works for you. Each is a wake-up call for operators who assumed the Schedule III paperwork was a formality.

Under the April rule that moved state-licensed medical marijuana to Schedule III (91 FR 22714, Apr. 28, 2026), dispensaries register with DEA as "practitioners." The dispenser fee is $888 for three years. State credentials count as "conclusive evidence of state-law authorization," but DEA can still deny a registration it finds inconsistent with the public-interest factors in 21 U.S.C. 823 or with the Single Convention treaty. If your state license is suspended, revoked or expires, your DEA registration suspends automatically. Applicants who filed within the 60-day window may keep operating while their application is pending.

DEA's timely-applicant list, dated Oct. 30, has roughly 6,980 entries, including about 812 in Florida, 771 in California and 141 in Colorado. Being on that list is not the same as being registered.

On Oct. 7, DEA published a final order denying MedPharm Research, LLC of Denver (91 FR 64176). The order was signed Oct. 2 by DEA Administrator Terrance C. Cole and takes effect Nov. 6.

MedPharm is not a dispensary, and the denial is not a ruling under the new medical registration framework. MedPharm applied in September 2016 to be a bulk manufacturer of Schedule I marijuana, and the order says that application "will be reviewed under the application requirements for Schedule I bulk manufacturers," not under the April rule's state-license process. Jason Adelstone (LinkedIn), a partner at Harris Sliwoski, told CP by email: "The denial concerned a Schedule I registration application … By contrast, DEA registrations for state-legal medical marijuana businesses are being issued under an entirely new regulatory framework. The two processes are legally and procedurally distinct, and the MedPharm denial should not be interpreted as reflecting DEA's approach to applications under the new framework." (Per the order, MedPharm filed on or about Sept. 12, 2016; DEA published notice of it in 2019 and asked the company for more information in December 2023.)

That question matters because of what the order found. DEA said MedPharm's parent, MedPharm Holdings (d/b/a Bud & Mary's Cannabis), and sister company MX, LLC had grown marijuana without DEA registration for about a decade, and that MX sold into Colorado's recreational market. DEA called the recreational sales "diversion." The order cites agency precedent that DEA "can look behind [an entity's] ownership structure" to the people who make decisions.

Adelstone says the bigger issue is what DEA measures: "I think the more important question is whether DEA will evaluate a registrant's corporate structure based on its control over adult-use operations or its equity ownership in those operations. If DEA focuses on equity ownership, a company like Trulieve would presumably face obstacles to registration, given that it retains a 90% economic interest in the mixed-use operations it spun off. If DEA focuses solely on control, however, operators may be able to replicate Trulieve's restructuring strategy by separating their adult-use operations into independently controlled entities, where state licensing structures permit."

MedPharm also never answered. DEA personally served its order to show cause in September 2025, and the company did not request a hearing, file an answer or respond "in any way," according to the order. Under 21 CFR 1301.43(e), every allegation was deemed admitted. A footnote says MedPharm may still apply under the new state-license framework, "if applicable."

In Minnesota, DEA agents delivered an order to show cause to In-Dispensary in downtown Minneapolis on Oct. 30, according to the Star Tribune. Marijuana Moment published the order, which was first reported by the Star Tribune. As reported, DEA objected to Minnesota's combined medical and non-medical license, treated recreational sales as diversion, and cited Minnesota letting veterans self-certify without a practitioner and allowing "synthetic marijuana products."

Carol R. M. Moss (LinkedIn), who leads the cannabis practice at Hellmuth & Johnson, told CP by email that the order is about Minnesota, not the operator: "The DEA cites to MN's laws, not the operator's conduct or business, for the basis of denying In-Dispensary. It does not matter want [sic] In-Dispensary LLC does in response to the Order to Show Cause. The Order states it is denying any 'applicant with the state authority to dispense a controlled substant [sic] for non-medical use.'"

Moss pointed to Minnesota's dual medical/recreation market, its hemp-derived THC and its allowing veterans into the medical program without a practitioner's certification. "Neither a hearing or a corrective action plan can accomplish anything when the grounds for the deny is Minnesota's laws."

Adelstone agrees the license itself is the obstacle: "The issue emerging in Minnesota is that the state permits both medical and adult-use sales under a single license, which appears to be the concern DEA has identified. In states with similar dual-purpose licensing structures, corporate restructuring alone would not resolve the issue because the underlying state license—not merely the ownership or operational structure—is the obstacle to federal registration."

Restructuring can still work where state law separates the licenses. "Presumably, Trulieve is eligible for DEA registration and may already be among the registered entities, so yes, this is a realistic possibility," Adelstone said. Moss told the Star Tribune (about Oct. 30) that dual-license businesses will miss out on the Schedule III tax benefits.

The order to show cause still starts a clock. Under 21 CFR 1301.37, a recipient has 30 days from receipt to request a hearing and answer, and allegations not denied are deemed admitted.

According to Marijuana Moment (Oct. 28), DEA correspondence shared by Nicole Huff, CEO of Wildflower Medical Dispensary in Aberdeen, gave Wildflower four options over two employees with felony records: drop them, withdraw its application, seek a waiver (and lose its fast-track status), or go before an administrative law judge. The report describes DEA correspondence, not a formal order to show cause. Huff told Marijuana Moment she will take the issue before a DEA judge.

DEA's employee-screening rule, 21 CFR 1301.76(a), restricts registrants from employing people with felony controlled-substance convictions or a denied or revoked DEA registration or who surrendered a DEA registration for cause, as agents or employees with access to controlled substances. The rule text itself does not mention a waiver; the waiver option comes from DEA's letter to Wildflower, as reported. For hiring managers, background checks now carry federal stakes, and they can collide with state fair-chance hiring laws and social-equity programs. Asked about that tension, Moss said: "I don't think I can answer this one." Get counsel before letting anyone go. (Related CP coverage: Missouri now bars felony agent IDs and requires fingerprints.)

DOJ says qualifying applicants "must operate under a state medical marijuana regulatory framework consistent with federal law and the United States' international treaty obligations," and registrants are subject to "security, recordkeeping, inventory controls." Marijuana Moment has reported that DEA inspected Mississippi dispensaries and sent 26 questions to Colorado applicants.

One more deadline: DEA's Oct. 30 timely-applicant guidance says applicants are "expected to complete these activities and establish compliant supply chains no later than November 29, 2026." Dealing with anyone other than a timely applicant or registrant "could be potential grounds for denial" of an application or revocation of a registration. Inventory acquired before the guidance can still be sold.

Adelstone says operators should track how DEA treats look-alike companies: "Licensees should be closely monitoring companies like Trulieve because DEA must apply its registration criteria consistently and avoid arbitrary or disparate treatment of similarly situated applicants. If DEA grants registration to Trulieve but denies registration to another operator with a materially similar corporate and operational structure, the denied applicant may have grounds to challenge the agency's decision under the Administrative Procedure Act, particularly if DEA cannot provide a reasoned explanation for the disparate treatment."

He also flags a tension in a control-only test: "The difficulty with a control-based approach is that equity ownership generally entitles the holder to economic benefits from the underlying business, regardless of who exercises operational control. DEA would therefore need to reconcile its willingness to register a medical-only operator with that operator's continued economic interest in federally unlawful adult-use activities. In theory, such a structure could allow revenue generated by federally unlawful adult-use operations to flow into federally authorized medical operations through distributions or other financial arrangements. That raises a significant question about whether DEA can reasonably distinguish operational control from economic participation when evaluating eligibility for federal registration."

There is legal risk overhead, too. Adelstone argued in a Sept. 11, 2026 Harris Sliwoski analysis that the rescheduling order may be overturned in the D.C. Circuit and that operators should be "very careful" in their contracts (per a Sept. 14 newswire release from MMJ International Holdings, a party challenging the order). Matthew J. Strait, a former DEA deputy assistant administrator for diversion control now at Controlled Substance Strategies, said in an Oct. 13, 2026 newswire release: "I don't think it would be wise for DEA to issue any registrations" while that challenge is pending. Strait declined to comment for this story.

Which contract clauses should operators add now? Adelstone: "Two contractual provisions immediately come to mind."

Adelstone's bottom line: "The applicable-law and dispute-resolution provisions will need to reflect the specific regulatory status and activities of the parties involved."