Christmas Comes Early to the Cannabis Industry

On December 18, 2025, President Donald Trump signed an executive order directing federal agencies to expedite the rescheduling of marijuana from a Schedule I to a Schedule III controlled substance. This marks a major step toward transforming federal marijuana policy in the United States and follows prior recommendations to reclassify from the US Department of Justice and the National Institute of Drug Abuse.[1]

Under the Controlled Substances Act, a Schedule I controlled substance is classified as having no currently accepted medical use, whereas a Schedule III controlled substance is believed to have acceptable medical uses and lower abuse potential.[2] Examples of Schedule III controlled substances include butalbital, ketamine, testosterone and Tylenol with codeine.

The Biden administration began the rescheduling process several years ago, and now President Trump has fast-tracked the administrative process. The executive order directs the White House Deputy Chief of Staff for Legislative, Political and Public Affairs to work with Congress to provide clearer access to appropriate CBD and hemp-derived cannabinoid products. Note that hemp-derived products, including CBD, are regulated differently from marijuana pursuant to the Farm Bill of 2014 and its subsequent versions passed in 2018 and 2024. Moreover, the Centers for Medicare and Medicaid Services (“CMS”) also announced a plan to create a trial run for some Medicare patients to receive eligible therapies derived from cannabinoids.

Rescheduling marijuana will enable researchers to study effective ways to use marijuana in treating disease and other infirmities. According to the White House, the FDA has found credible scientific support for using marijuana to treat medical conditions such as anorexia, nausea, vomiting and pain. With chronic pain affecting nearly one in four U.S. adults, rescheduling marijuana will lead to new and enhanced modalities for managing this pervasive condition. The new research will provide medical providers with guidance on prescribing or recommending marijuana as a treatment option, which was previously restricted at the federal level due to the Schedule I classification.

Finally, the President’s executive order also eliminates a tax rule known as 280E, which prevented businesses engaged in the sale of a Schedule I or II controlled substance from deducting business expenses from federal tax filings. This rule adversely affected marijuana cultivators, processors and dispensaries from leveraging favorable tax deductions when compared to other commercial industries.

While expanding access, consumers and businesses involved in the marijuana industry should recognize that the executive order does not fully legalize marijuana nor sanction its use as a recreational drug. Even so, the rescheduling is poised to significantly alter the nation’s acceptance of marijuana as a treatment modality and important economic industry.

If you have any questions about President Trump’s executive order and how the rescheduling may impact you, please contact your Dinsmore attorney.