Marijuana Rescheduling to Schedule III: What Trump's Executive Order Means (2025)
Trump's December 2025 executive order directs marijuana rescheduling to Schedule III. What changes for research, businesses, and you.
Professor High
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On December 18, 2025, President Trump signed an executive order directing the Attorney General to expedite marijuana rescheduling from Schedule I to Schedule III—the most significant federal cannabis policy shift in 55 years. The move signals federal recognition of marijuana’s medical potential while falling short of legalization.
What the Executive Order Actually Does
Let’s be clear about what happened: Trump signed an executive order directing action, not a law changing marijuana’s status.
The order instructs Attorney General Pamela Bondi to take “all necessary steps” to expeditiously move marijuana from Schedule I to Schedule III under the Controlled Substances Act (CSA). This builds on work started under the Biden administration, when the Department of Health and Human Services recommended rescheduling in August 2023, followed by the DEA’s proposed rule in May 2024.
The order also directs agencies to:
- Develop research methods using real-world evidence for health outcomes
- Create a framework for hemp-derived CBD products with safety standards
- Assess impacts on vulnerable populations, including adolescents and seniors
Key agencies involved: DOJ, HHS, FDA, CMS, NIH, and DEA.
Schedule I vs. Schedule III: What’s the Difference?
Understanding the schedules matters:
| Schedule I | Schedule III |
|---|---|
| ”No accepted medical use” | Recognized medical applications |
| High potential for abuse | Moderate to low potential for abuse |
| Cannot be prescribed | Can be prescribed with DEA registration |
| Strictest research controls | Easier research access |
What Schedule III means: Marijuana would join drugs like ketamine, anabolic steroids, and Tylenol with codeine. Doctors could prescribe it (with DEA registration), and researchers would face fewer barriers.
What it doesn’t mean: Legalization. Recreational use remains federally illegal. State-legal cannabis operations still technically violate federal law.
📊 The Big Win: Goodbye, 280E
The most immediate business impact? Relief from IRC Section 280E—the tax code provision that’s been crushing cannabis businesses for years.
Under 280E, marijuana businesses cannot deduct normal business expenses because they’re trafficking a Schedule I substance. Sam Brill, CEO of Ascend Wellness Holdings, laid it bare:
“I can’t deduct the rent for my stores, the cost of my employees in those stores, my interest expense.”
How bad is it? Ascend reserved approximately $38 million for potential IRS penalties in 2024 alone.
Once rescheduling takes effect, cannabis businesses could finally claim ordinary deductions at the federal level—reducing effective tax rates and improving cash flow significantly. For an industry operating on razor-thin margins, this is transformative.
🔬 Research: Easier, But Not Easy
For researchers like neuroscientist Staci Gruber, Schedule III would eliminate some major headaches:
- No more Schedule I licenses required
- Relaxed laboratory security regulations
- Fewer storage and handling restrictions
- Broader access to standardized study materials
But Gillian Schauer warns: “There’s a lot that will still be challenging in researching cannabis unless we see a lot of agency policies change.”
The core problem? Access to consistent, quality-controlled marijuana for studies. Researchers currently depend on limited government-approved suppliers. That bottleneck may not disappear overnight.
What Doesn’t Change
Rescheduling isn’t a silver bullet. Several major issues remain unresolved:
Interstate Commerce: Still illegal. You can’t transport marijuana across state lines, even between two legal states. This fragments the market and prevents economies of scale.
Banking Access: Most financial institutions still won’t serve cannabis businesses. The industry remains largely cash-based—Friday is the busiest sales day because that’s when customers get paid. Banking reform requires congressional action (like the SAFER Banking Act), not just rescheduling.
Drug Testing: “We don’t know what will happen to federal drug testing requirements,” Schauer noted. DOT-regulated industries and federal contractors await agency guidance.
State vs. Federal Conflicts: Your state medical card? Still valid. But the patchwork of state regulations continues, and possession arrests still happen—hundreds of thousands annually.
Timeline: When Does This Actually Happen?
Here’s where it gets complicated.
The executive order directs expedited rescheduling—it doesn’t accomplish it. The DEA must still:
- Complete formal notice-and-comment rulemaking
- Compile an administrative record
- Address the 43,000+ comments from the 2024 proposal
- Potentially hold administrative hearings
- Publish a final rule
Possible paths:
- Expedited: DOJ could skip some procedural steps, but this invites legal challenges
- Traditional: Full process taking months, possibly into late 2026
- Litigation: Legal challenges under the Administrative Procedure Act are “quite possible”
Adding uncertainty: Current DEA leadership has been vocal against marijuana legalization. How aggressively they pursue rescheduling remains to be seen.
🔮 What Comes Next: 2026 and Beyond
Industry analysts expect 2026 to be a “planning period” rather than a speculative moonshot.
ATB Capital Markets forecasts:
- 4% revenue growth for multi-state operators (MSOs) in 2026
- M&A activity picking up in the second half of the year
- Operators preparing for a “Schedule III world”
Coming in April 2026: A CMS policy shift could allow doctors to recommend CBD products to older Americans, with Medicare covering up to $500 annually for qualifying individuals.
The next transformation? Vince C. Ning, co-CEO of cannabis platform Nabis, puts it directly: “The next transformation will happen when interstate commerce barriers between states are removed.”
Still needed:
- SAFER Banking Act for true banking reform
- FDA pathways for cannabis products
- Coordinated federal framework for a $38 billion state-legal industry
- Institutional investor protections (pensions, mutual funds, endowments are waiting)
📢 Industry Reactions
The response has been cautiously optimistic:
Sam Brill (Ascend Wellness CEO): Rescheduling could bring “a cascade of positive changes,” with 280E relief being the biggest immediate benefit.
Vince C. Ning (Nabis co-CEO): “Rescheduling will help accelerate research, reduce stigma, attract new investment, and ease some of the tax burdens that have held the industry back.”
Marijuana Policy Project: While welcoming Schedule III, they emphasized “neither the plant itself nor its naturally occurring component cannabinoids belong on the schedule at all.” They noted the order “does nothing to end hundreds of thousands of possession arrests each year.”
📊 Quick Facts
| Statistic | Source |
|---|---|
| 1 in 4 U.S. adults experience chronic pain | White House EO |
| 40 states + D.C. have medical marijuana programs | White House EO |
| 20% of surveyed veterans use fewer opioids with medical marijuana | White House EO |
| 1 in 5 American adults used CBD in the past year | White House EO |
| $38 billion state-legal cannabis industry | Industry estimates |
| 43,000+ comments on 2024 DEA proposal | DEA records |
FAQs
Q: Is marijuana now legal federally?
No. The executive order directs agencies to expedite rescheduling, but marijuana remains Schedule I until the DEA completes rulemaking. Even at Schedule III, it won’t be “legal”—just less restricted for medical and research purposes.
Q: When will rescheduling take effect?
Unknown. The process requires formal rulemaking that typically takes months. Depending on the approach and potential legal challenges, full implementation could extend into late 2026 or beyond.
Q: Can I transport marijuana across state lines?
No. Interstate commerce remains illegal regardless of rescheduling. Even between two legal states, crossing state lines with cannabis violates federal law.
Q: What happens to my state medical card?
Nothing changes. State programs continue operating independently. Your state medical card remains valid under state law.
Q: Will workplace drug testing change?
Unclear. Federal agencies haven’t issued guidance yet. DOT-regulated industries (trucking, aviation, etc.) and federal contractors should expect continued testing until specific policies change.
Q: Does this affect CBD products?
Potentially. The executive order includes provisions for developing a regulatory framework for hemp-derived CBD, including THC milligram limits per serving. Medicare CBD coverage ($500/year) may begin April 2026.
Q: What about banking for cannabis businesses?
Still a problem. Rescheduling alone doesn’t solve banking access. Congressional action (like the SAFER Banking Act) is needed to provide safe harbor protections for financial institutions serving the cannabis industry.
Key Takeaways
- December 18, 2025: Trump signs executive order directing expedited rescheduling to Schedule III
- Not automatic: DEA rulemaking still required; timeline uncertain
- Biggest immediate win: 280E tax relief for cannabis businesses
- Research gets easier: But barriers remain in accessing quality-controlled marijuana
- What stays the same: Interstate commerce illegal, banking problematic, drug testing unclear
- 2026 outlook: Planning period for industry; Medicare CBD coverage coming; M&A expected to increase
- The bigger ask: SAFER Banking Act and interstate commerce reform still needed for industry maturation
Last updated: December 30, 2025
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