TLDR: Applicants in states with both medical and adult-use markets have to prepare their supply chains for the DEA’s November 29 expectation while nobody knows whether the DEA will accept their state’s licensing structure. Do the verification work now and document it. Before surrendering a license, forming new entities, or relocating, identify which federal concern the change would answer and which concerns would still be there afterward.
For cannabis businesses in states with both medical and adult-use markets, the latest federal developments create a difficult planning problem. Applicants need to prepare their supply chains for federal oversight while fundamental questions remain about whether the DEA will accept their state’s licensing structure.
There is useful preparation to do now. There are also decisions, such as surrendering an adult-use license, creating new entities, or relocating operations, that can consume substantial time and money. Before making those changes, businesses need to understand which federal concern the change would address and which concerns would remain.
Prepare the supply chain for November 29
The immediate reference point is the DEA’s timely-applicant guidance. It says Timely Applicants are expected to complete business-partner verification and establish compliant supply chains by November 29, 2026.
The central point is the closed system the guidance describes for commercial medical cannabis transactions: Timely Applicants and appropriately authorized registrants can buy from and sell to other businesses within that system. My earlier article explains how Timely Applicants and registrants can do business together.
For a Timely Applicant or registrant, the practical task is to verify that its suppliers and business customers are qualifying Timely Applicants or appropriately authorized registrants, and to document that verification. Collect application confirmations or registration certificates, check document control numbers where applicable, confirm active state licenses, and retain the supporting records. I wrote a business-partner verification guide that walks through that process.
The file should show which business and premises were checked, the documents reviewed, when the review occurred, and any questions that remain unresolved. The goal is to have a documented basis for concluding that the businesses in your supply chain can participate in the transactions you are conducting.
State restrictions also remain relevant. In its November 2 guidance, Missouri explained that its current framework prohibits cannabis imports, exports, and interstate commerce, even where federal registration might provide federal authorization. As discussed in Missouri’s message on interstate cannabis commerce, federal status does not eliminate state restrictions. A proposed relationship with an out-of-state supplier or buyer needs to account for the state laws governing both ends of the transaction.
Minnesota raises a different problem
The Minnesota Order to Show Cause raises a different problem. In proposing to deny In-Dispensary’s application, the DEA identified three grounds involving Minnesota’s framework: dual-purpose licensing, an alternative medical certification process for certain veterans, and the permitted dispensing of certain synthetic cannabinoid products.
The licensing objection has particularly broad implications. The DEA argues that a license authorizing both medical and non-medical dispensing falls outside the federal definition of a state medical marijuana license. Its reasoning focuses on what Minnesota’s system permits, rather than simply identifying a compliance failure by this particular applicant. The order is a proposed denial that the applicant can contest, not a final ruling resolving eligibility in every state. Marijuana Moment’s reporting provides additional context.
If the objection concerns the state’s licensing framework, an individual business needs to consider whether its proposed restructuring would overcome it. A business could incur formation costs, modify contracts, and give up revenue without resolving the issue preventing approval.
Colorado and California: separate licenses, same uncertainty
Colorado offers a useful comparison. In August, Marijuana Moment reported that applicants there were receiving a 26-question form from the DEA’s Rocky Mountain Division. Colorado’s framework permits certain medical and adult-use operations at the same location under separate licenses and applicable separation requirements.
Separate licensing could help explain the different treatment. But the reported questionnaires appear to be follow-up requests on applications, and they do not tell us whether the DEA will ultimately accept those businesses’ operating arrangements. We are also comparing different applicants at different stages of review.
California illustrates the same uncertainty. Its emergency regulations created a process for separating combined medical and adult-use retail licenses, and the state is pursuing permanent regulations. My earlier article examines whether California’s approach addresses the concerns raised in Minnesota.
The proposed text permits separate entities to hold the licenses at the same premises, subject to conditions including common individual owners and a designated responsible party, physical separation of goods, and separate records. It also provides for joint and several liability and treats qualifying related entities as one licensee for state compliance and enforcement purposes. The businesses may have separate licenses and entities while remaining closely connected operationally. California’s authorization of that arrangement does not establish that the DEA will accept it.
What MedPharm adds
The MedPharm Research decision adds another reason to examine the substance of a proposed restructuring. The DEA considered the activities of the applicant’s parent and sister companies, common management, and proposed operations at a facility used for medical and recreational cultivation.
That decision has limits. It involved a Schedule I bulk-manufacturing application and was decided on default. The DEA expressly noted that the denial did not prohibit an application under the newer state-medical-license framework, if applicable. MedPharm does not establish that every affiliated or co-located Schedule III applicant must be denied.
Even with those limits, the DEA may take issue with affiliated or co-located medical and adult-use operations. Separate entities may change the legal structure without addressing the agency’s concerns about how the businesses actually operate. I would be cautious about treating that separation as a solution by itself.
Before you restructure, name the problem
Before making a substantial change, an operator needs to identify the specific problem it is trying to solve. Is the concern the authority granted by the license, actual adult-use activity, shared premises, common control, inventory movement, patient certification, or something else? These questions are related, but they are not interchangeable.
The next question is what would actually change. A new entity might hold a different license while the same owners, employees, facility, and supply relationships remain in place. The analysis needs to account for how the business would operate after restructuring, including how products, personnel, records, and decision-making would be separated.
Cost and reversibility belong in that analysis too. What approvals would be required? Would leases or supply agreements need to change? Could an adult-use license be recovered if surrendered? What happens to the investment if the DEA later identifies an objection that the restructuring did not address?
One argument for restructuring that does not depend on answering the DEA’s current objections is optionality. In a state like California, where a combined retailer can separate its adult-use and medicinal licenses, a separation may not resolve whatever concern the DEA ultimately raises, but it leaves the operator positioned to pivot. If it turns out that only the medical side will be authorized federally, an operator that already holds a standalone medicinal license and entity can move on that outcome without starting from scratch. That is a legitimate reason to separate, as long as it is understood as providing flexibility rather than providing a holistic solution.
A particular applicant’s facts or communications from the DEA may warrant action. Each proposed change should be connected to an identified concern, with a clear explanation of how it would address that concern. Read the Minnesota order alongside your own state’s framework and consider where the two differ, if at all.
Applicants also need to keep responding to agency requests and preserving their rights if an Order to Show Cause arrives. Uncertainty about the broader framework is no reason to let an individual response deadline pass.
Frequently asked questions
Does November 29 change my eligibility or my application?
No. November 29 is the date by which the DEA expects Timely Applicants and registrants to have arranged their supply chains so that they do business only with each other. It is not a new filing window, and it does not decide whether any application will be granted.
Does the Minnesota order mean every applicant in a dual-use state will be denied?
Not on its own. The order is a proposed denial directed at one applicant, and that applicant can contest it. What makes it worth reading in every dual-use state is the reasoning, which targets how Minnesota’s license is structured rather than something this applicant did. Whether the DEA applies that reasoning to other states’ structures, and whether those structures differ in a way that matters, is the open question.
If my state lets me separate the licenses, does that solve it?
Separate licenses answer one possible objection, the authority the license grants. They do not necessarily answer objections about shared premises, common control, shared employees, or how product actually moves. MedPharm shows the DEA may look at affiliates, management, and the facility, not just the paper. Separation may not be a guaranteed fix.
Should I surrender my adult-use license now to protect my application?
Not before you can name the federal concern the surrender would answer and confirm it is the only one. A surrender may leave the real objection in place if that objection is about control or operations. More to the point, it may not address structural issues the DEA may take with a state’s licensing program. If the DEA has raised a specific issue with you, that changes the analysis, and the response should be built around that issue.
What should I do if an Order to Show Cause arrives?
Calendar the response deadline the day it arrives and treat the matter as litigation from that point. The broader uncertainty about your state’s framework is never a reason to let the deadline pass. Keep responding to any other agency requests in the meantime, and preserve the records that show what your operation actually does.
Thanks for reading,
Ryan
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