California Retailers Can Now Split A and M Licenses Before DEA Deadline
With the U.S. Drug Enforcement Administration’s expedited registration window for state-licensed medical marijuana set to close on June 26, 2026, the California Department of Cannabis Control has moved on an aggressive timeline of its own. The agency’s recently adopted emergency rulemaking, DCC-2026-03-E, opens an expedited path for dual-designated retailers to separate their adult-use (“A”) and medicinal (“M”) licenses — and, in some cases, to place the new M-license under a different legal entity entirely. For California’s retail operators, the window to act is measured in days.
By the Baghoomian Law team
The Federal Trigger: AG Order No. 6754-2026
On April 28, 2026, the DEA published AG Order No. 6754-2026 in the Federal Register at 91 Fed. Reg. 22714, moving FDA-approved marijuana products and products covered by a qualifying state-issued medical license from Schedule I to Schedule III of the Controlled Substances Act. The order took immediate effect and triggered a 60-day expedited registration window for state-sanctioned medical cannabis operators. That window closes on June 26, 2026, after which the DEA has indicated that future applications will follow the ordinary registration process — a path that historically takes years to resolve.
For California operators, the order created an awkward problem. Adult-use cannabis remains in Schedule I under federal law, and many of the state’s retail licensees hold a single license that bears both an A- and an M-designation under Business and Professions Code section 26050. A licensee that wants to seek a DEA registration on the medical side has, until now, faced two unattractive options: drop the adult-use designation entirely and forfeit the bulk of its sales, or remain dual-designated and risk being excluded from the federal pathway. The DCC’s emergency rule was crafted to provide a third option.
What DCC-2026-03-E Actually Does
The emergency action amends sections 15000.1 and 15000.2 of Title 4 of the California Code of Regulations and adds a new section 15023.1. Together, these provisions create an expedited process by which a licensee holding a dual-designated retail license may modify that license into two separate licenses: an A-license retained by the original entity, and a new M-license that may be held by either the same entity or a closely affiliated one.
Under amended section 15000.1, the Department clarifies that a separate A-license and M-license may be issued on the same premises so long as ownership is identical, and that for licensing purposes the two licenses are treated as a single licensee. New subsection (b) of section 15000.2 imposes guardrails when the two licenses are held by different legal entities: the businesses must share the same individual owners and the same designated responsible party; cannabis goods must be physically separated and distinguished in inventory and track-and-trace records; all business records must be maintained separately and clearly identified as belonging to the A or M operation; and the two entities are jointly and severally liable for all obligations, debts, and violations incurred under either license.
The procedural mechanics live in new section 15023.1. A modification request is initiated through the designated responsible party and submitted on DCC Form 9207 or by emailing the required information to the Department’s license-change inbox. The licensee must identify the dual-designated license being modified, provide the name of the new M-license holder, demonstrate that the new entity will operate at the same premises with the same ownership and DRP, and supply the new entity’s Federal Employer Identification Number and California Department of Tax and Fee Administration seller’s permit number. As the DCC’s Finding of Emergency makes clear, the new M-license cannot share a FEIN or seller’s permit with the existing A-license — separate entities, separate tax IDs.
The Pinch Points Operators Are Missing
The emergency rule reads simply enough on paper. In practice, three details have proven to be where retailers run into trouble.
First, the rule preserves the original license’s track-and-trace account during the transition. Section 15023.1(a)(2) requires that, until additional guidance is issued, all existing inventory must be held and sold through the original A-license. The new M-license cannot operate as a depository for legacy inventory; it must obtain its inventory anew under its own license. Operators planning to “shift” SKUs from the A-side to the M-side at the moment of approval should reread this subsection carefully.
Second, the annual license fee is deferred but not eliminated. Subsection (a)(3) and subsection (e) work together to provide that no additional fee is owed for the remainder of the existing license period, but a full annual fee will attach to the new M-license at renewal. Operators preparing 2026–2027 budgets should plan accordingly, and they should note that the M-license fee must be paid before any inventory may be transferred to that license.
Third, local compliance still controls. Subsection (b) of section 15023.1 prohibits the new M-license from conducting any activity unless that activity complies with all local rules. In jurisdictions that issue separate local authorizations by license type — Los Angeles and several Bay Area cities, for example — securing a new local medicinal authorization is not automatic and may take longer than the state-level expedited process. Operators should not assume that DCC approval alone clears the local hurdle.
Who Should Actually Pursue This
The DCC estimates that roughly 1,600 licensees are eligible to take advantage of the rule — primarily retailers and microbusinesses holding combined A- and M-designations. Eligibility, however, is not the same as suitability.
A retailer that primarily serves adult-use customers and has minimal medical patient volume may find that the cost of standing up a separate corporate entity, opening a new bank account, securing a new CDTFA seller’s permit, and managing dual track-and-trace records outweighs the speculative federal benefits. Conversely, a retailer with a meaningful medicinal book of business, particularly one that contemplates participating in any future federally permitted import or export channel, may view DEA registration as a strategic priority — and may find that the emergency rule is the only practical bridge.
The most cited benefit is potential relief from Section 280E of the Internal Revenue Code, which disallows ordinary business deductions for taxpayers trafficking in Schedule I or II substances. As the DCC’s own Finding of Emergency notes, the federal order encourages the Treasury Department to consider retrospective relief for state-licensed medical operators, and DEA-registered operators stand to be more clearly outside 280E going forward. That tax positioning, combined with potential access to traditional banking, federal bankruptcy protections, and intellectual property rights, is what is driving the rush. The rule does not promise those benefits — it merely preserves a licensee’s optionality to pursue them.
What This Means for Operators
For dual-designated retailers and microbusinesses considering DEA registration, the practical to-do list is short and time-bound. Decide quickly whether federal registration is part of the business plan and document the rationale. If the answer is yes, identify whether the new M-license will be held by the existing entity or a related entity, and prepare formation documents, a new FEIN, and a new CDTFA seller’s permit if needed. Confirm with local regulators that a separate medicinal authorization is available and on what timeline. Assemble the Form 9207 submission package — license numbers, DRP details, ownership documentation, FEIN, and seller’s permit number — and submit through the DRP’s email address of record. The DCC has stated that businesses must continue operating under their existing dual designation until the modification is approved, so operational changes should be staged rather than anticipated.
The DEA has not committed to a second expedited window. Operators who miss the June 26 deadline can still apply, but they will be subject to the ordinary federal registration timeline. For a fast-moving regulatory landscape, two weeks is not much runway.
Contact Baghoomian Law
Baghoomian Law advises California cannabis licensees on DCC licensing, local authorization, corporate restructuring, and the increasingly federalized compliance questions that flow from rescheduling. If your retail business is weighing whether to split its A- and M-designations before the DEA’s June 26 deadline — or what the downstream operational implications look like — our team can help you evaluate the options and prepare the filings. Reach us through our contact page to schedule a consultation.
This post is for informational purposes only and does not constitute legal advice. Consult licensed counsel for advice on your specific situation.
