DEA Rescheduling Hearing Paused: The Cream Still Rises

The Weed Furus said 10 days!

Tuesday afternoon, DEA Chief Administrative Law Judge Derek Julius stayed the marijuana rescheduling hearing. Marijuana Moment had the order within the hour so shout out to Tom Angell and the cannabis timelines did what they always do. Screenshots. Red candles. Somebody's "told you so" thread. We read the order, shrugged, and started looking at bids. A stay like this doesn't change what the best operators earn. It changes what the crowd will pay for them, for a while. That gap is the whole opportunity.

What the order actually says vs a headline

Three of the anti-rescheduling participants in the hearing filed a motion to reopen the record. A drug-testing trade group (NDASA), an outfit called DUID Victim Voices, and a physician named Kenneth Finn. They want a new Government Accountability Office report added to the file. That report knocks DEA for having no written rules on how its staff evaluate and schedule drugs. Julius agreed the argument had enough merit to stop the clock while everyone briefs it. DEA has until October 13 to file up to 20 pages on whether the record should reopen. The other parties can weigh in if they feel like it.

That's it. That's the whole order. A briefing schedule.

Some context. The hearing took testimony in June and July. Post-hearing briefs landed in August. The only step left was Julius sending his recommendation up to DEA Administrator Terrance Cole, who makes the final call. So yes, that recommendation slips. A few weeks, maybe longer if the record reopens and everybody gets another bite. Annoying. Not material.

And look at who filed it. A trade group for the drug-testing business. You can do the math on what fewer failed tests means for their members. The drug-testing industry already tried the D.C. Circuit, and the court refused to block the April move while the lawsuits play out. So they went back to the one room that still lets them talk. That's not strength. That's a lobby running out of doors.

What the order doesn't touch

Back in April, Attorney General Todd Blanche signed an order moving state-licensed medical marijuana and FDA-approved marijuana products from Schedule I to Schedule III. Effective on the spot. Done. Treasury and the IRS followed with word that 280E no longer applies to state-licensed medical activity, starting with tax year 2026. Adult-use stayed in Schedule I, and adult-use revenue still eats 280E until the rest of marijuana moves.

The hearing that got stayed is that second act. It asks whether adult-use follows medical into Schedule III. Tuesday's stay pauses the second act. The first act closed in April, and nobody is un-signing it. There's a House committee rider floating around that would block further rescheduling, and lawmakers on both sides told Marijuana Moment it isn't becoming law. We assume it won't anyway. We assume nothing in this sector happens until it prints. More on that below.

The stay sorts the sector into three piles

Pile one is medical-only and already through the door. The stay means nothing to it. Pile two is the mixed-use cream. Operators that make real money today, with adult-use books that get a fatter check when the broader reschedule lands. The stay delays their payday. It doesn't dent their business. Pile three is everyone who needs the catalyst to survive. Levered, sub-scale, story stocks that trade on the next headline because the income statement can't carry them. Tuesday hurts that pile, and only that pile.

Our whole approach to this sector is to own piles one and two, trade the noise around them, and let pile three be somebody else's problem. The cream of the crop is Trulieve $TRLV and Green Thumb $GTBIF. One from each pile.

Trulieve $TRLV: already on the other side

Trulieve is a medical-only company. On purpose. On June 3 it deconsolidated Harvest, the mixed medical and adult-use business in Arizona, Connecticut, Maryland and Ohio, 34 dispensaries in all. It sold 10% and operational control to a third party and kept a 90% economic interest. The adult-use revenue came off the consolidated statements. What's left is 207 dispensaries and 3.5 million square feet of production across Florida, Georgia, Pennsylvania and West Virginia. All state-licensed medical. All Schedule III. DEA registration applications filed. Conditional licenses in Alabama and Texas on top. That structure put Trulieve on the NYSE on June 10 as the first U.S. plant-touching cannabis company on a major exchange. We wrote up the mechanics when it happened.

Every dollar of Trulieve's consolidated revenue already sits in Schedule III. 280E is already off the 2026 income statement. Julius could rule tomorrow or in 2027 and Trulieve's third quarter looks the same either way. The August 7 release showed a medical-only business doing $222 million a quarter at a 63% gross margin. Adjusted EBITDA was $98 million on $271 million of total revenue. Operating cash flow was $53 million, with $325 million of cash against $289 million of debt. Full-year operating cash flow is guided to at least $225 million. Not one of those figures has a DEA hearing in it.

Florida seals it. The adult-use amendment isn't on the November ballot. Smart & Safe Florida came up short on verified signatures in February, and the Florida Supreme Court tossed the case. So Trulieve's biggest market stays medical, and medical stays Schedule III. If anything, a slower adult-use answer keeps Trulieve the only plant-touching name most institutions and index funds can own. S&P added it to the Total Market and Completion indices on September 22. The delay costs Trulieve nothing today and widens the moat while it lasts.

Green Thumb $GTBIF: the one the stay actually delays

Green Thumb is the opposite structure, and that's exactly why it's the trade. It runs about 110 RISE dispensaries across 14 states, most of them mixed medical and adult-use. Its medical activity already gets 280E relief, and it has filed DEA registration applications for those operations. The adult-use side still pays the 280E penalty until the broader reschedule lands. CEO Ben Kovler said on the Q2 call that the uplist to a major U.S. exchange waits on two things: the administrative law judge process has to finish, and adult-use has to move. He said the company is teed up, talking to both exchanges, and plans to list the whole business, not a carved-out piece.

Tuesday delayed both of those. It didn't touch this: the second quarter printed $307 million of revenue, up 5%, and $84 million of normalized EBITDA at a 27.5% margin. Operating cash flow was $29 million and GAAP net income was $4.9 million. That's on top of $76 million of operating cash flow in Q1. Cash sits at $284 million, about a dollar a share, against roughly $283 million of debt. The company bought back about 8 million shares in the quarter at just over $6 each, and has retired 29.5 million shares since late 2023, 13% of the float. Virginia adult-use sales start July 2027 and Green Thumb is one of five medical operators there with its capacity expansion already done. Texas is moving. Florida gets five to seven new stores by year-end.

So follow the setup. Green Thumb makes $84 million a quarter with nobody helping it. It's buying its own stock with cash it earns selling weed. The full 280E release and the uplist are pure upside sitting behind a door Julius just left shut for a few more weeks. When the stay knocks $GTBIF down, the market is discounting a check the company wasn't cashing in Q4 anyway. That's not risk. That's a sale. Kovler also said $MSOS has been the only institutional buyer of size in the space. That's the entire reason the multiples on the best operators are still this dumb. When the door opens and real money can own the whole company, that fixes itself. Until then, we buy the dips the tourists hand us.

The honest asterisk

This isn't free. Green Thumb's gross margin fell to 45% from 50% a year ago, with price compression in Massachusetts, New Jersey and Pennsylvania and $17.5 million of brand licensing fees in the quarter. Management guided Q3 revenue flat. If the record reopens and the ALJ's recommendation drifts into 2027, Green Thumb's adult-use 280E bill keeps running, and the uplist keeps waiting. Trulieve's optionality sits behind the same door. There's a roughly $600 million uncertain tax position from prior-year 280E it stopped paying, and a 90% economic stake in Harvest that's worth more if adult-use goes Schedule III. Both are real. Neither is the business. If you were underwriting any of that for a Q4 2026 payoff, that's a you problem.

How we trade this sector: assume the news won't happen

Our rule for cannabis hasn't changed since 2014. Assume the news won't happen. Then trade around a core position, or “the gospel according to Wolf.”

Look at the tape. HHS recommended Schedule III in August 2023. DEA proposed it in May 2024. The first hearing collapsed in early 2025 over witness-selection fights. Trump signed the executive order in December 2025. Medical got moved in April 2026. The hearing ran June and July. Now a stay. Every one of those headlines came with a spike, and every spike got sold. We laid out the sell-the-news pattern in April, and Tuesday is one more data point for the file.

If you bought a date, you got wrecked. Every time. If you bought the cream and treated the headlines as a trading layer, you're fine. That's the whole strategy. The core is $TRLV and $GTBIF, owned outright, shares in custody. When a headline rips the tape, sell some of the trading layer into strength. When a headline like Tuesday's pukes it, buy that layer back. The core never moves. The layer does. A 20-page briefing schedule is a gift to the second group and a tax on the first.

We don't need Julius to recommend anything, and we don't need Cole to sign anything. We'd take both. We're not paying up for either. Assume the news won't happen, and the news can only surprise you to the upside.

Bottom line

A drug-testing lobby that already lost in federal court found a judge willing to let it file more paper. That's Tuesday's news. Trulieve sold the same medical flower on Tuesday as it did on Monday, under the same Schedule III, with the same NYSE ticker. Green Thumb earned the same money it earned last week and got a better price on its own buyback. The stay delays a recommendation. It doesn't reschedule the cream. Trade the noise. Own the operators that don't need it.

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