Two-Thirds of Missouri's Cannabis Operators Told the DEA No. Their Own Lawyers Disagree About Whether That Was Smart.

A week after the Drug Enforcement Administration opened its registration portal, on May 6, Missouri's Division of Cannabis Regulation sent its licensees an email that most states did not send. It told them the decision was theirs. "While we cannot answer for any particular licensee whether the DEA expects them to register," the email read in part, "doing so is not a requirement at this time to remain in compliance with DCR." On the question of whether a Missouri license even qualified, the state deferred entirely: "it will be up to DEA to decide if a license type that serves both medical and adult-use populations is eligible for DEA registration." (S1)

Missouri's operators read that and, in large numbers, did nothing.

Of the more than 90 members of the Missouri Cannabis Trade Association, only about a third applied, executive director Andrew Mullins told MJBizDaily. As of mid-September, not one of them had been approved. Across a $1.5 billion state market, roughly two-thirds of the industry watched the sixty-day federal window close and stayed where they were. (S1)

Everywhere else, operators lined up. Nearly 400 filed before the window shut on June 22. Two companies used registration to uplist onto major U.S. exchanges. Missouri is the largest state that mostly declined, which makes it the closest thing the industry has to a control group on the question nobody can answer yet: whether DEA registration is a formality or the price of admission to Section 280E relief. (S1)

The structural reason is specific to Missouri and it is not a small thing. Missouri dispensaries hold a comprehensive license. Medical and adult-use are sold on the same permit, from the same inventory, to customers who are distinguished only by whether they produced a patient card at the counter. Medical is under 9 percent of the state's sales, according to Division of Cannabis Regulation figures. (S1)

That geometry makes registration look like a bad trade. Rescheduling moved state-licensed medical cannabis to Schedule III and left adult-use in Schedule I. Registering would place the entire business under potential federal oversight in order to cover the small slice of it that changed schedules, while the other 91 percent stays Schedule I and stays subject to 280E. Eric Walter, a partner at Armstrong Teasdale in St. Louis who helped draft Missouri's adult-use legalization law, reads the federal order as written for medical-only states. Florida, Georgia, Virginia for now. For states running both under one roof, he told MJBizDaily, "the DEA really didn't seem to roll out the welcome mat." (S1)

Then there is the paperwork, which is not really about paperwork. Registration required submitting a list of owners and employees, Mullins said, and for businesses with hundreds of employees, producing all of them with background information "would be a challenge for any organization." Walter's clients had a blunter objection. "Some of our owners want to be confidential," he said. "They don't want the DEA to have that information." (S1)

Operators who found that squeamish should look at what the employee list has already cost someone. In Aberdeen, Mississippi, the DEA ran the names on Wildflower Medical Dispensary's application, found two employees with felony convictions, and gave its owner four days to choose between firing them and keeping her place in the expedited queue. The rule behind that, 21 C.F.R. 1301.76(a), was one of the few provisions the April order did not let state law satisfy. Handing the DEA your roster is not a clerical act. It is the beginning of a federal review of who you employ.

The lawyers who advise Missouri operators do not agree on whether their clients just made an expensive mistake, and the disagreement is unusually sharp for a profession that hedges by instinct.

“This isn't a request. This is a requirement.”

— Marshall Custer, attorney, Husch Blackwell

Marshall Custer, a Denver-based Husch Blackwell attorney with a substantial Missouri client base, thinks the non-filers got it wrong. "Frankly, I think that was the wrong tack," he said. "You can choose not to and there might be consequences to it. There might not, we don't know. But if you want to take advantage of what a federally legal Schedule 3 business is, you needed to have applied within the 60-day window." With Treasury guidance still unwritten, he treats registration as step one and nothing more complicated than that: "If you're going to take the position that I don't have to pay 280E because I'm a Schedule 3 DEA handler, you better have registered with the DEA." (S1)

Mullins reads the same order the opposite way, as extending 280E relief to medical sales whether or not an operator registers. That is also the interpretation Eric Berlin, a partner at Dentons, offered in an interview last month. Two readings, no guidance, and a filing deadline that has already passed. (S1)

There is a further complication underneath the Missouri numbers, and it explains some of the non-filing better than caution does. A growing number of cannabis companies have simply stopped treating 280E as applying to them, on the strength of opinion letters from their own law firms. Some, Walter said, "have run out ahead and just started saying, yeah, we're not subject to 280E." (S1)

For a company in that posture, registering is worse than pointless. It concedes the frame. Carving out medical alone, Walter noted, "would be a 90% loss on the 280E front" for a Missouri comprehensive licensee, because medical is the 9 percent. The aggressive position claims the whole business. The DEA position claims a tenth of it.

Custer, who calls some of those no-280E opinions "incredibly weak legal arguments," identifies the trap anyway. An operator who took that position on prior returns cannot quietly switch to the registration theory now without undermining the earlier filings and potentially owing tax on them. Some of Missouri's non-filers are not waiting and seeing. They are locked in. (S1)

Other states did not leave it open. Oklahoma instructed licensees to register or risk their state permits, which converts a federal judgment call into a state compliance obligation and removes the decision from the operator entirely. California amended rules so more of its operators could take advantage of rescheduling. Missouri sent an email saying it was optional and that eligibility was the DEA's call.

There is a defense of Missouri's approach, and it is the federalism one. A state regulator has no authority to interpret a federal registration requirement, and pretending otherwise would have exposed the division to licensees who registered on its advice and were then denied, or who registered and found themselves inside a federal employment-screening regime the state never told them about. Saying "we cannot answer for any particular licensee" was accurate.

What makes Missouri worth watching rather than merely unlucky is that the arithmetic is not unique to it. Every state that folded medical into a single adult-use permit produced the same ratio: a large business, a small medically-coded fraction of it, and a federal reclassification that only reaches the fraction. The states that kept their programs separate had an easy decision. The states that consolidated, on the theory that one license was simpler for everyone, are the ones now holding the harder one.

The cost of that accuracy is that two-thirds of a $1.5 billion market made a consequential federal tax decision on the basis of two law firms disagreeing in the trade press. Oklahoma's licensees did not have to.

1. Treasury guidance on how cannabis businesses claim 280E relief, still unissued and the only thing that settles the argument.
2. The first DEA approval of a Missouri comprehensive licensee, which would resolve whether a dual-use license is even eligible. As of mid-September there were none.
3. Any IRS examination of a registered versus unregistered operator claiming Schedule III treatment, the first real data point on consequences.
4. Whether the DEA opens a second registration window. Nothing has been announced, and its absence is why June 22 keeps mattering.
5. Other comprehensive-license states, whose operators face the identical arithmetic and are watching Missouri's outcome.

Mullins is not describing an industry that made a defiant choice. He is describing one that was asked to hand a federal drug agency its ownership structure and its payroll, in exchange for a tax benefit nobody in government has yet agreed exists, covering under a tenth of what it sells.

Two-thirds of Missouri declined. Whether that reads as prudence or as the most expensive paperwork anyone skipped this year depends entirely on a Treasury document that has not been written.

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