The recent executive order does not legalize recreational marijuana at the federal level. Instead, it instructs the US Justice Department to carry out the administrative steps needed to change marijuana’s scheduling, including public notice and comment before any final rule takes effect. Photo credit: Peakpx.
An executive order directing the US attorney general to expedite the rescheduling of marijuana from Schedule I to Schedule III under the Controlled Substances Act was signed by the president, advancing a long-running federal review while stopping short of nationwide legalization.
The order accelerates a formal rulemaking process led by the US Drug Enforcement Administration (DEA). It aligns with a 2023 recommendation from the US Department of Health and Human Services (HHS) that, for the first time, concluded that marijuana has a currently accepted medical use. Marijuana is classified as a Schedule I substance—alongside heroin and LSD—reserved for drugs deemed to have no accepted medical use and a high potential for abuse. Schedule III substances include ketamine and certain anabolic steroids.
The White House emphasized that the executive order does not legalize recreational marijuana at the federal level. Instead, it directs the Department of Justice to complete the administrative process required to change marijuana’s scheduling status, including public notice and comment before any final rule takes effect.
According to a White House fact sheet, 40 states and the District of Columbia operate regulated medical marijuana programs that cover more than 6 million registered patients and approximately 30,000 licensed health care practitioners authorized to recommend marijuana for at least 15 medical conditions. The US Food and Drug Administration (FDA) has previously identified credible scientific support for marijuana’s medical use in treating anorexia associated with medical conditions, nausea and vomiting, and pain.
Rod Kight, a widely cited cannabis attorney, said the executive order is significant primarily for what it removes rather than for what it establishes.
“As I write this, President Trump is signing an executive order directing the attorney general to reschedule marijuana to Schedule III from its current (and longstanding) place on Schedule I,” Kight stated. “Notably, in addition to rescheduling, the EO addresses hemp and full-spectrum CBD.”
Kight has repeatedly cautioned that rescheduling does not resolve the fundamental conflict between federal law and state-legal cannabis markets, nor does it produce FDA-approved marijuana products. Schedule III status removes the federal government’s formal position that marijuana has no accepted medical use and improves access to research, but it leaves core regulatory and commercial barriers intact.
Rescheduling could, however, alter certain tax consequences for cannabis businesses. Under current law, companies trafficking in Schedule I or II substances are subject to Section 280E of the Internal Revenue Code, which limits deductions for ordinary business expenses. Schedule III status would remove marijuana from that restriction, though it would not establish a comprehensive federal regulatory framework for cannabis commerce.
Beyond marijuana scheduling, the executive order places renewed emphasis on cannabidiol and hemp-derived cannabinoid products, an area that has remained largely unsettled since the 2018 Farm Bill removed hemp from the Controlled Substances Act. The administration acknowledged that these products are widely used by consumers but lack a clear FDA regulatory pathway, resulting in inconsistent standards and limited consumer protections.
The order directs senior White House officials to work with Congress to update the statutory definition of “final hemp-derived cannabinoid products” to ensure access to appropriate full-spectrum CBD products while maintaining restrictions on products that pose serious health risks. It also calls for developing a regulatory framework that could include upper limits on THC per serving and per container, as well as CBD-to-THC ratio requirements.
Kight said the hemp and CBD provisions could ultimately prove as consequential as marijuana rescheduling itself, depending on how Congress and federal agencies implement them. He has argued that regulatory clarity in this area could significantly reshape enforcement priorities and market structure beyond the cannabis sector.
Industry operators cautioned that Schedule III reclassification changes marijuana’s legal status on paper but does not immediately transform day-to-day operations.
“Schedule III reclassification changes how cannabis is treated on paper, but it does not change how the industry operates day-to-day,” said Ari Raptis, c.e.o. of Talaria Transportation & National Secure Transport. “Cannabis remains federally illegal, and this does not automatically legalize recreational use or immediately resolve banking and payments issues.”
Raptis said rescheduling helps with tax treatment but leaves unresolved challenges in banking, payments, interstate commerce, and federal-state conflicts.
“Those unresolved gaps keep cash in the system, inflate compliance and security costs, and limit the industry’s ability to operate like any other regulated business,” he said.
From a financing perspective, Raptis said Schedule III status improves perception rather than access to capital. “Capital follows clarity, and clarity still has not arrived,” he said, adding that while some regional and community banks may become more comfortable, large national banks and payment networks are likely to remain cautious without explicit federal rules.
Raptis also warned that as capital gradually re-enters the sector, increased product movement and cash volumes will place additional pressure on secure transportation, regulatory oversight, and public safety infrastructure, especially in tightly regulated markets.
The executive order directs HHS, FDA, the National Institutes of Health, and the Centers for Medicare and Medicaid Services to develop research methods that use real-world evidence to inform standards of care and improve access to hemp-derived cannabinoid products in compliance with federal law. Implementation now rests with the DEA’s rulemaking process and potential congressional action, leaving the order’s ultimate impact dependent on how quickly—and how comprehensively—federal agencies act.