Trump Cannabis Executive Order Tees Up Eased Restrictions, Improved Access, and Increased Research
December 19, 2025
Types : Alerts
On December 18, 2025, President Donald Trump signed an executive order directing the reclassification of marijuana from a Schedule I to a Schedule III substance under the Controlled Substances Act (CSA) and steps to improve access to cannabidiol products. The change will not legalize marijuana for recreational use at the federal level, but it opens the door for medical research and expanded tax benefits, banking access, and federal regulatory requirements for state-licensed cannabis businesses.
Drug Scheduling Under the CSA
The CSA classifies drugs and other substances into five different categories called “schedules.” A controlled substance’s schedule assignment is based on both its medical utility and its potential for abuse and dependence.
- Schedule I substances are deemed to have no accepted medical use and high potential for abuse. Examples include heroin and lysergic acid diethylamide (LSD).
- Schedule II substances have an accepted medical use in treatment or an accepted medical use with severe restrictions, but high potential for abuse, with use potentially leading to severe psychological or physical dependence. Schedule II examples include cocaine, methamphetamine, oxycodone (OxyContin, Percocet), fentanyl, amphetamine (Adderall), and methylphenidate (Ritalin).
- Schedule III substances have an accepted medical treatment use with less abuse potential than Schedule I and II substances. Abuse of a Schedule III drug may lead to moderate or low physical dependence or high psychological dependence. Examples include ketamine, anabolic steroids, and testosterone.
- Schedule IV substances have an accepted medical treatment use and a low abuse potential relative to Schedule III substances. They may lead to only limited physical or psychological dependence. Schedule IV examples include Xanax, Valium, and Ambien.
- Schedule V substances have an accepted medical treatment use and a lower potential for abuse that may lead to physical or psychological dependence that is more limited than the dependence caused by Schedule IV substances. Examples include cough medicines with codeine and CBD.
Thus, in addition to the more practical consequences of the reclassification of marijuana discussed below, Trump’s executive order also serves as an acknowledgment by the federal government that marijuana has accepted medical treatment uses and less potential for abuse and harmful consequences than previously believed.
Federal Regulation of Marijuana
The December 18, 2025 executive order is but the latest development amidst a long history of cannabis regulation in the United States.
Congress has regulated drugs in some capacity since the 19th century, beginning with tariffs, import and export controls, and purity and labeling requirements for narcotic drugs such as opium, coca leaves, and their derivatives.[1]
By the early 1930s, multiple state governments had banned marijuana, but given the ongoing exploration of cannabis’ therapeutic uses and profits derived from commercial applications of hemp fiber, seeds, and oil, the U.S. government declined to outlaw it at the federal level.[2] That changed following a powerful campaign by anti-marijuana crusader and Federal Bureau of Narcotics Commissioner Harry Anslinger, who led a successful charge culminating in the passage of the Marihuana Tax Act of 1937. The Marihuana Tax Act regulated the importation, cultivation, possession, and distribution of marijuana at the federal level.[3]
In 1970, Congress passed the CSA,[4] which designated marijuana as a Schedule I controlled substance.
In 2022, President Joe Biden requested that the scheduling of marijuana be revisited, and in 2023, the Department of Health and Human Services (HHS) recommended that it be reclassified as a Schedule III substance. In 2024, the Department of Justice (DOJ)/Drug Enforcement Administration (DEA) issued a notice of proposed rulemaking, proposing to transfer marijuana from Schedule I to Schedule III. The proposed rule received nearly 43,000 public comments and is currently awaiting an administrative law hearing. After President Trump hinted to reporters that he was “looking at reclassification” in August 2025, the long-awaited December 18, 2025 executive order followed.
The executive order requires the Attorney General to “take all necessary steps to complete the rulemaking process related to rescheduling marijuana to Schedule III of the CSA in the most expeditious manner in accordance with Federal law[.]” It further directs the “updat[ing of] the statutory definition of final hemp-derived cannabinoid products to allow Americans to benefit from access to appropriate full-spectrum CBD products while preserving the Congress’s intent to restrict the sale of products that pose serious health risks” which will include the development of “a regulatory framework for hemp-derived cannabinoid products, including development of guidance on an upper limit on milligrams of THC per serving with considerations on per container limits and CBD to THC ratio requirements.”
Consequences of Declassification
We expect far-reaching changes in the wake of reclassification. These are likely to include:
1. Expansion of Medical Marijuana Programs, Research, and Clinical Trials—Along with Increased FDA and DEA Regulation
Numerous roadblocks prevent researchers from studying the risks and benefits of Schedule I drugs, but there are far fewer barriers for Schedule III substances. With expanded access to marijuana research now on the table, we expect to see a surge of funding for and interest in studies about the therapeutic potential of cannabis. Such research would also help inform marijuana regulation, medical guidelines, and prescriptions.
In addition, experts predict that the reclassification will lead to an expansion of medical marijuana programs nationwide. Schedule III drugs may be lawfully dispensed by prescription and more healthcare providers may now feel comfortable recommending marijuana as part of treatment plans. This could mean relief for millions of patients suffering from chronic medical conditions that did not previously have access to cannabis.
However, a Schedule III substance can only be introduced or delivered into interstate commerce if approved by the federal Food and Drug Administration (FDA).[5] Although the FDA has approved some drugs derived from or related to cannabis, marijuana itself is not yet an FDA-approved drug. In addition, following FDA approval, marijuana manufacturers and distributors would be required to register with the DEA and comply with regulatory requirements that apply to Schedule III substances in order to handle those products. Patients would then need to obtain valid prescriptions subject to federal legal requirements, which differ from existing state medical marijuana regulatory requirements.
2. Tax Benefits and Improved Profitability
Section 280E of the Internal Revenue Code prohibits businesses that traffic Schedule I or Schedule II controlled substances from deducting ordinary business expenses from their gross income, and the effective tax rate for state-licensed marijuana businesses has been estimated to be as high as 80%. Once marijuana is reclassified as a Schedule III drug, dispensaries are no longer subject to section 280E’s prohibitions and may be able to take advantage of an array of deductions on their federal tax filings.[6] This may significantly improve those businesses’ profitability.
3. Improved—but Still Incomplete—Access to Banking and Financial Services
The reclassification of marijuana will not resolve all banking challenges, but it may improve access to financial services for cannabis industry players. We expect that banks, credit card processing companies, and financial institutions will be more willing to do business with dispensaries and related businesses now that marijuana has been rescheduled.
Conclusion
In the wake of the reclassification executive order, it is imperative that cannabis businesses have the most up-to-date information to ensure compliance with current regulations and requirements.
If you are currently or looking to become involved in the cannabis space and have questions, please contact Rachel Welsh or Alexandra Jacobs of Montgomery McCracken’s Cannabis Law Practice Group.
[1] https://www.congress.gov/crs-product/R45948.
[2] https://www.cbp.gov/about/history/did-you-know/marijuana.
[3] https://www.cbp.gov/about/history/did-you-know/marijuana.
[4] The CSA was enacted as Title II of the Comprehensive Drug Abuse Prevention and Control Act of 1970.
[5] 21 U.S.C. § 355(a).