South Dakota Attorney General Marty Jackley released an opinion on Oct. 13 informing state lawmakers that he believes federal cannabis rescheduling will “likely have a negligible impact” on the state’s medical cannabis program.
Jackley’s opinion was in response to an inquiry from state Sen. John Carley, R-Piedmont, who serves as vice chair of the Legislature’s Medical Marijuana Oversight Committee. Carley asked Jackley what U.S. Attorney General Todd Blanche’s April 2026 order, which loosened restrictions on medical cannabis by reclassifying it as a Schedule III drug under the Controlled Substances Act (CSA), meant for the Mount Rushmore State’s existing cannabis laws.
South Dakota voters legalized medical cannabis in the 2020 election, with 70% supporting Measure 26, and the state’s first licensed dispensary began serving registered patients in July 2022.
While cannabis is not scheduled in South Dakota as a controlled substance, possession and distribution of cannabis remain prohibited outside the state’s medical cannabis program.
“Because federal law explicitly permits state medical marijuana programs, South Dakota’s program may continue to operate as it has without impact from marijuana’s federal rescheduling to a Schedule III controlled substance,” Jackley wrote. “How the program functions in the future will be a policy determination at the discretion of the Legislature or the voters of South Dakota.”
Under Blanche’s rescheduling order, state-licensed medical cannabis businesses can register with the Drug Enforcement Administration’s (DEA) Diversion Control Division to become Schedule III compliant under federal law.
A key benefit of registering with the DEA is that a federal Schedule III status allows companies to claim ordinary business deductions, such as payroll, rent and utilities, which are otherwise disallowed for operators dealing with Schedule I and II substances under Section 280E of the Internal Revenue Code. A Schedule III listing also provides medical cannabis businesses with the recognition that their products have currently accepted medical use under federal law.
However, many state-licensed medical cannabis operators did not take advantage of a 60-day early application window that guaranteed an expedited review process once learning the DEA registration asked businesses to admit to drug trafficking.
That said, Blanche said in April that it wasn’t his intention to disrupt state cannabis programs.
“The attorney general has determined that incorporating state licensing systems into the federal registration framework represents the most effective and efficient means of achieving the CSA’s objectives with respect to medical marijuana while promoting the medical benefits of marijuana and causing the least disruption for patients and existing state systems,” Blanche wrote in the order.
But registering with the DEA comes with certain caveats.
In partnering with the federal government through the registration process, licensed medical cannabis businesses must grant the DEA access to their cultivation and manufacturing facilities where plants are harvested and stored.
Blanche indicated this would fulfill the federal government’s international drug treaty obligations, under the United Nations Single Convention on Narcotic Drugs, to “control” supply through a purchase-and-resale mechanism that will establish a nominal price for the now reclassified substance. This mechanism allows the DEA to “acquire and resell” the crops back to cannabis businesses as part of a transaction that would include an “administrative fee.”
Since the details of the registration process emerged, industry legal experts have debated whether medical cannabis businesses that register with the DEA could still do business along the supply chain with other businesses that choose not to register and remain Schedule III compliant.
In South Dakota, Jackley acknowledged the federal registration process and projected it would have little impact on state operators.
“The Medical Marijuana Oversight Committee is now compelled to consider whether South Dakota’s existing medical marijuana program conflicts with the DEA’s current scheduling of marijuana,” the state attorney general wrote. “Because federal rules explicitly accommodate state medical marijuana programs, no conflict exists.”
Jackley weighed the Supremacy Clause, which establishes that federal law overrides conflicting state laws when Congress has acted within its constitutional authority, but also pointed out that federal courts operate with a presumption against preemption in areas traditionally regulated by the states, such as licensed cannabis programs.
“Here, the federal rescheduling of marijuana does not preempt South Dakota’s medical marijuana program because Congress has not expressly preempted state action, it has not totally occupied the field of marijuana regulation, and South Dakota’s medical marijuana law does not conflict with the federal scheduling,” Jackley wrote. “In fact, under the DEA’s April 2026 rule, an existing manufacturer, distributor or dispensary operating under a valid state license may now do so in compliance with federal law if they register with the DEA.”
Despite South Dakota not listing cannabis as a controlled substance, federal law now accommodates state-licensed medical cannabis programs, meaning South Dakota law does not conflict with dispensing Schedule III cannabis under federal law, Jackley determined.
“If South Dakota were to choose to reschedule marijuana to a Schedule III controlled substance, then the general rules regarding Schedule III substances would apply to marijuana as with any other Schedule III substance,” he wrote. “But this action would have to be taken by either the Legislature or the voters, independent from the rescheduling of marijuana federally. The Department of Health is statutorily tasked with making recommendations to the Legislature as to where particular substances should be placed on the schedule.”
Jackley said the Medical Marijuana Oversight Committee set forth six potential options of future actions for evaluation, and he determined current federal or state law would exclude none of them.
Following the 2021 enactment of Measure 26, the South Dakota Legislature has continued to refine the requirements governing the state’s medical cannabis program, and it’s up to the committee to evaluate future refinements and make recommendations to the Legislature, he said.
“Which option will provide the greatest benefit to South Dakota is a policy determination for the Legislature or the voters of South Dakota,” Jackley wrote.
