95: California says that many cannabis retailers have split dual medical and adult-use licenses as it proposes permanent rules tied to DEA registration

California regulators say 95 licensed cannabis businesses have split their combined medical and adult-use licenses into two separate licenses since the state adopted emergency rules in June, and the state now wants to make that option permanent as businesses weigh federal registration under the medical marijuana rescheduling order.

The California Department of Cannabis Control (DCC) disclosed the figure in rulemaking documents for proposal DCC-2026-04-R, which The Marijuana Herald reported were published Oct. 30. The department's notice sets a written comment deadline of Dec. 14, 2026, and a virtual public hearing on Dec. 15, 2026, beginning at 10 a.m.

What the rules do

Under California's Medicinal and Adult-Use Cannabis Regulation and Safety Act, every non-laboratory license the DCC issues must carry a medicinal ("M") or adult-use ("A") designation, and a single license may carry both. Many California retailers hold licenses with both designations. Before the emergency rules, the department says, there was no way to turn one dual-designated license into two separate licenses "without requiring withdrawal of the original license, submitting two new applications, and investing a substantial amount of time."

The department adopted emergency regulations on June 4, 2026, to create a faster path. The proposed permanent text would let a licensee authorized to engage in retail, holding a combined A- and M-designated license, convert it into an A-license and receive a new, separate M-license. The new medical license may be issued to a different legal entity from the one holding the existing license, but only if both businesses:

• share the same individual owners and designated responsible party;
• physically separate all cannabis goods by license and distinguish them in inventory and tracking records;
• keep all business records separately for each license; and
• are jointly and severally liable for all obligations, debts and violations incurred under either license.

Licensees request the change by email and must submit business formation documents, a federal employer identification number and a seller's permit number for the new license holder. The proposed text says the department must review a request "as soon as possible, but no later than five (5) business days after receipt."

Existing inventory stays under the A-license's track-and-trace account, and the licensee must pay the annual fee for the new M-license before moving inventory to it. No added fee is due for the new license until renewal; after that, each license pays its own fee. The proposal also says that when separate A and M licenses are held by one entity, or by two related entities with the same ownership at the same premises, they "shall be considered to be one licensee for compliance and enforcement purposes," and that failing to follow the section is grounds to suspend or revoke both licenses.

Why California did it

The department ties the change directly to federal rescheduling. In its Initial Statement of Reasons, the DCC says the federal order published April 28, 2026 (AG Order No. 6754-2026) moved state-licensed medical marijuana to Schedule III of the Controlled Substances Act while adult-use cannabis stayed in Schedule I. The department says it "is in the best interest of California cannabis licensees and the State's regulated cannabis market to allow for medical cannabis businesses to apply for and receive DEA registration."

According to the DCC, businesses that obtain DEA registration "will be able to lawfully manufacture, distribute, or dispense cannabis under federal law" and "will be more clearly exempted" from Section 280E of the Internal Revenue Code, the provision that bars ordinary business tax deductions for trafficking in Schedule I or II substances.

The department also describes the bind it says licensees faced: they could "convert their operations to medicinal only to allow registration and forgo existing adult use sales that are needed for their business survival; or decline to register and forgo the advantages of federal legal status." The proposal, it says, "would allow the medicinal entity to register, while preserving the related adult use business's operations."

The DCC says it acted on an emergency basis because of "ambiguities in the Order" and "a lack of procedural or other guidance from the DEA," and because the order gave businesses a 60-day window to apply under the expedited process.

How many could use it

Beyond the 95 businesses that have already separated their licenses, the department estimates that about 1,600 licensees could be eligible, and that about 97% of them are small businesses. The affected businesses are retailers and microbusinesses holding both designations.

The DCC says it cannot predict how many will act, because the choice is voluntary. It also says uncertainty about federal requirements "has caused uncertainty and apprehension amongst some licensees, who are waiting for clearer indication from the federal government regarding the DEA permit requirements before they request or make modifications to their licenses."

The Marijuana Herald noted that completing California's license separation does not by itself show that any of the 95 businesses has received DEA registration.

The federal backdrop

The proposal arrives in the same week federal officials began sorting state-licensed businesses. On Oct. 30, the U.S. Department of Justice announced that DEA had issued its first federal registrations to more than 900 medical marijuana dispensaries in Alabama, Florida, Mississippi, South Dakota, Texas, Virginia and West Virginia. California was not on that list. The department said "State licensure alone does not automatically grant federal registration" and that DEA will keep processing dispensary applications in phases.

Marijuana Moment reported that those seven states permit only medical cannabis sales, with the exception of Virginia, which passed legislation to legalize adult-use sales this year but has not yet started licensing.

The same day, DEA served an order to show cause on a Minneapolis dispensary saying Minnesota's "dual-purpose marijuana license, permitting both medical and non-medical dispensing falls outside the recent promulgated definition of 'state medical license'" in federal policy, according to Marijuana Moment, which said the order was first reported by the Minnesota Star Tribune. DEA also said in that order that "Registering an applicant with the state authority to dispense a controlled substance for non-medical purposes—constituting per se diversion under the CSA—would violate federal law," Marijuana Moment reported. The dispensary has 30 days to request a hearing or submit a corrective action plan.

Neither DEA nor the DCC documents say whether DEA will treat California's separately issued medical licenses differently from Minnesota's single dual-purpose license. The DCC's own notice says "there is very little guidance" from DEA on registration requirements for medical businesses in states with both medical and adult-use markets.

What happens next

Anyone may email written comments to the DCC at publiccomment@cannabis.ca.gov or mail them to the department's Legal Affairs Division in Rancho Cordova; comments must be received by Dec. 14. People who want to join the Dec. 15 WebEx hearing must request a link by 4:30 p.m. on Dec. 14, and the department says it will also post the link on its website by 9 a.m. the day of the hearing.

After reviewing comments, the department may adopt the regulations substantially as proposed. If it makes related changes, it must post the modified text for at least 15 days before adopting it and accept comments on the changes during that time.

This article reports on public documents and news coverage and is not legal advice.