A drug screening association and an aspiring cannabinoid pharmaceutical company that are asking a federal court to halt the Trump administration’s Schedule III cannabis order are doubling down on their standing to do so.
The National Drug and Alcohol Screening Association (NDASA), an organization that promotes drug-free workplaces, and MMJ International Holdings (MMJ), an aspiring pharmaceutical company whose subsidiary holds an active Drug Enforcement Administration (DEA) Schedule I analytical laboratory registration, argued in a July 16 legal filing that they:
Will sustain irreparable, Article III injuries, absent a stay;
Fall within the “zone of interests” of the Controlled Substances Act (CSA); and
Will likely succeed on their merits.
The two anti-rescheduling groups’ motion for stay is part of an underlying lawsuit that they and seven other prohibitionist parties initiated in May, asking the U.S. Court of Appeals for the District of Columbia Circuit to review U.S. Acting Attorney General Todd Blanche’s April 2026 order that immediately rescheduled state-licensed medical cannabis and FDA-approved cannabis products to Schedule III under the CSA.
Since then, state-licensed medical cannabis companies like Trulieve and Glass House Brands have listed their shares on the New York Stock Exchange, something that wasn’t previously possible for U.S. cannabis businesses under a Schedule I listing.
Also, medical cannabis companies big and small, private and public, have applied for Schedule III registration with the DEA’s Diversion Control Division, which will solidify their federal tax positions to deduct ordinary business expenses that are disallowed under Internal Revenue Code Section 280E for those who “traffic” Schedule I or II controlled substances.
But the nine anti-rescheduling petitioners are hoping the D.C. Circuit will put the Schedule III toothpaste back in the prohibition tube, claiming Blanche’s order was unlawful.
In the meantime, pending the review, NDASA and MMJ asked the appellate court on June 9 to stay Blanche’s Schedule III to “avoid the devastating effects that will flow from ballooning access to marijuana while this case is pending.”
On July 2, the Department of Justice (DOJ), on behalf of Blanche, filed its opposition response to that stay motion, arguing the “intended beneficiaries” of the CSA are “the American public and scientists and medical practitioners seeking legitimate access to controlled substances for research and patient treatment,” not two anti-rescheduling parties that “invoke pocketbook interests served by keeping all marijuana in Schedule I.”
The DOJ also argued that NDASA and MMJ failed to meet Article III standing, claiming NDASA did not identify “concrete harm” to any of its individual members, and that MMJ did not “demonstrate competitor standing when it has not yet produced an authorized product to compete” against other cannabinoid-drug companies in the marketplace and therefore is not a current market competitor but rather a potential future market competitor.
NDASA and MMJ’s (the “movants”) legal teams called the government’s arguments “meritless” in their July 16 response.
“The government’s standing and zone-of-interests arguments are meritless diversions from its indefensible position on the merits,” their legal teams argued. “Movants will suffer irreparable harm, and the balance of equities plainly favors a stay.”
NDASA argued that its members will suffer at least two forms of irreparable harm, including unrecoverable costs on medical review officer (MRO) practices. The drug screen association also argued that many of its members will either have to discontinue cannabis testing and “live with the substantial risk of impaired-employee accidents and diminished productivity” or pay substantially to revise their testing procedures and policies.
The DOJ had argued that Congress did not enact the CSA to provide drug screeners with a permanent source of income, and that NDASA did not identify “concrete harm” to any of its individual members.
NDASA’s legal team called that claim “speculative quibbles,” adding that NDASA Executive Director Jo McGuire did speak with all three of NDASA’s MRO members named in her declaration.
NDASA further reiterated that MROs will “need to perform time-intensive checks to determine whether positive THC tests are attributable to licit uses,” providing a declaration from Angela Moore, the CEO of Cynergy Wellness Inc., an MRO service provider and NDASA member.
“Cynergy Wellness generates revenue in part by providing MRO services to private-sector employers that conduct workplace drug testing,” Moore wrote. “Its client base includes both employers subject to mandatory drug testing under federal regulations – such as those operating in the trucking, aviation and railroad industries – and employers that voluntarily implement drug-testing programs to enhance workplace safety, reduce liability and discourage illegal drug use.”
Cynergy Wellness derives approximately 48% of its drug-testing revenue from employers who are not subject to federal regulations, she said.
Moore estimated that the average cost of reviewing positive THC results will increase by 60% under Blanche’s Schedule III order because MROs will have to investigate whether those results are attributable to authorized medical cannabis use under state law. She also said that THC-positive results generate a substantial portion of litigation risks for Cynergy’s clients – risks she said Blanche’s order will only exacerbate.
“Based on my familiarity with Cynergy's past business practices and our profit margins, we will have to pass on the cost through to our clients,” she wrote. “I predict that it is nearly certain that the increased cost to verify a valid medical marijuana referral, the inability of the MRO to accurately determine a legal marijuana source, and the costs to defend employment drug-test results for marijuana, will result in employers removing marijuana from their drug testing panels over the next several months.”
The DOJ had also argued that MMJ did not “demonstrate competitor standing when it has not yet produced an authorized product to compete” against other cannabinoid-drug companies in the marketplace and therefore is not a current market competitor but rather a potential future market competitor.
In the July 16 response, MMJ argued it had retained a “strong first-mover advantage” until Blanche’s rescheduling order because it had complied with federal law while seeking an FDA-approved product, investing $10 million over eight years.
“These harms cannot be dismissed on the theory that MMJ is ‘not a current market competitor’ while it remains subject to the FDA approval process,” the company argued in response. “MMJ has jumped through countless hoops over eight years to seek DEA registration and FDA approval, while its competitors ‘have taken few steps’ – indeed, no steps – toward seeking federal drug approval.”
In a supplemental declaration, MMJ CEO Duane Boise named five multistate cannabis operators as “direct competitors” to his company: Trulieve, Cresco Labs, Verano Holdings, Green Thumb Industries and TerrAscend.
“The rescheduling order directly harms MMJ’s competitive advantage by granting legal Schedule III status to state-licensed products without requiring the companies producing them to satisfy the same federal pharmaceutical-development requirements that MMJ has meticulously observed,” he wrote. “It also harms MMJ’s competitive advantage by granting MMJ’s competitors relief from Section 280E’s deduction disallowance for trafficking in a Schedule I controlled substance.”
NDASA and MMJ also countered the DOJ’s zone-of-interests argument, claiming that they don’t need to be the “intended beneficiaries of the CSA,” and that it does not matter that they “have ‘pocketbook interests’ at stake while the CSA has broader objectives aimed at the general welfare.”
NDASA argued that “what matters is whether a litigant’s interests ‘can be expected to police the interests that the statute protects,” and that:
- the drug-screen industry’s trade association has an interest in a formal rulemaking process that Blanche’s order bypassed;
- drug testing creates a deterrent that is essential to the CSA’s “main objective[] of combating drug abuse;” and
- NDASA’s members who test their employees have a strong interest in ensuring safety for both their employees and members of the public who may be affected by their work.
MMJ, meanwhile, pointed to a D.C. Circuit case from 1998, MD Pharma v. DEA, in which the court found that a current pharmaceutical manufacturer seeking to block its competitor’s registration was within the zone of interests.
“This case is no different,” MMJ’s legal team argued. “The rescheduling order suddenly creates federally licit competition from state-legal cannabis drugmakers – which, to date, have made no effort to comply with federal drug laws.”
NDASA and MMJ also argued that they are likely to succeed on their merits, claiming that Blanche acted beyond his lawful authority to immediately reschedule state-licensed medical cannabis without a formal rulemaking process, pointing to a 1977 D.C. Circuit case, NORML v. DEA.
“NORML held that when more than one CSA schedule satisfies the Single Convention, Section 811(d) does not grant the attorney general discretion to choose among those treaty-compliant schedules,” the movants argued. “Instead, once the treaty-prescribed level of control is established, subsequent scheduling decisions must proceed through the formal rulemaking procedures of § 811(a)-(b).”
They were referring to U.S. compliance with international treaty obligations under the Single Convention on Narcotic Drugs.
The DOJ had argued in its July 2 response that the treaty obligations were already settled in the department’s Office of Legal Counsel’s (OLC) opinion from 2024, which concluded that a Schedule III listing satisfied U.S. compliance, and that the U.S. attorney general may “issue an order controlling such drug under the schedule he deems most appropriate” for the treaty obligations “without regard to” other statutory requirements, such as formal rulemaking procedures.
While the U.S. Department of Health and Human Services conducted a scientific and medical evaluation in 2023, recommending that cannabis be rescheduled to Schedule III, and while former Attorney General Merrick Garland issued a proposed Schedule III rule that drew some 43,000 comments in the Federal Register, that was completely separate from Blanche’s April 2026 order, NDASA and MMJ argued.
A now-vacated cannabis rescheduling hearing from 2024 under the Biden administration that was to include 25 participants to debate Garland’s notice of proposed rulemaking, including NDASA, also didn’t figure into the April 2026 equation, NDASA argued.
“To put it mildly, NDASA had ‘something useful to say’ about the government’s combined rescheduling and rule changes: NDASA submitted over 300 pages of comments, prehearing statements and exhibits in the rulemaking announced in 2024,” the drug-screening group argued. “All were excluded from consideration here.”
