Yesterday, President Donald J. Trump signed an Executive Order directing federal agencies to begin the formal process of rescheduling marijuana under the Controlled Substances Act (CSA) from Schedule I to Schedule III. Although the Executive Order does not immediately change federal law, it represents one of the most consequential federal cannabis policy actions in decades and signals a meaningful shift in the federal government’s approach to marijuana regulation.
The Executive Order instructs the Department of Justice, in coordination with the Department of Health and Human Services (HHS) and the Drug Enforcement Administration (DEA), to initiate the administrative proceedings required to reclassify marijuana. Until that process is completed, marijuana remains classified as a Schedule I substance, and all existing federal laws and enforcement frameworks remain in place. The Order does not legalize marijuana at the federal level, nor does it override state cannabis laws, but it establishes a clear policy directive that federal agencies must now carry forward.
Rescheduling under the CSA is a structured and often lengthy process. It requires a scientific and medical evaluation by HHS, input from the Food and Drug Administration (FDA), and formal rulemaking by the DEA, including a public notice-and-comment period. After reviewing public input and any evidentiary record developed, the DEA may issue a final rule published in the Federal Register. Historically, this process has taken many months and sometimes more than a year, and it may be extended further if legal challenges are brought once a final rule is issued.
If marijuana is ultimately reclassified as a Schedule III substance, the legal and business implications for the cannabis industry would be significant. Most notably, cannabis operators would no longer be subject to the punitive limitations of Internal Revenue Code Section 280E, allowing businesses to deduct ordinary and necessary expenses for federal tax purposes. Schedule III classification would also reflect federal recognition of accepted medical use, potentially expanding research opportunities and encouraging broader participation by institutional investors and financial markets. While marijuana would remain a regulated controlled substance, the criminal penalties associated with Schedule III are substantially less severe than those applied to Schedule I substances.
At the same time, rescheduling would not amount to federal legalization. Adult-use cannabis would remain unlawful under federal law, interstate commerce in marijuana would still be prohibited, and state cannabis programs would continue to operate independently under their own regulatory frameworks. Additional oversight by federal agencies, including the FDA, may also follow, particularly with respect to medical cannabis products.
Opposition to rescheduling has already begun to surface. Critics argue that marijuana does not meet the statutory criteria for Schedule III substances and express concerns regarding public health, youth access, and compliance with international drug control treaties. Others contend that comprehensive cannabis reform should be undertaken by Congress rather than through executive action. These arguments are likely to be raised during the rulemaking process and may form the basis for administrative or judicial challenges.
Financial markets reacted swiftly to the announcement. Publicly traded cannabis companies experienced notable short-term gains as investors responded to the prospect of tax relief, regulatory normalization, and increased access to capital. Despite this initial optimism, market volatility remains high, reflecting uncertainty around the timing of rescheduling, the outcome of the administrative process, and the potential for litigation.In sum, President Trump’s Executive Order marks a major policy development, but it is only the first step in a complex regulatory process. While the potential benefits of rescheduling are substantial, cannabis businesses should continue to operate in compliance with existing federal and state law while preparing for possible regulatory changes.
The evolving federal stance on cannabis underscores the need for experienced counsel to help businesses navigate this uncertain yet promising environment. Akerman’s Cannabis Practice brings deep knowledge of the legal, regulatory, and operational challenges that shape the industry, advising clients across the supply chain — from multistate operators and investors to ancillary service providers — on compliance, transactions, and strategic growth opportunities. As federal policy continues to shift, our multidisciplinary team stands ready to help clients anticipate impacts, mitigate risks, and capitalize on emerging opportunities in this dynamic and rapidly evolving market.
Disclaimer:
Possessing, using, distributing, and/or selling marijuana or marijuana-based products is illegal under federal law, regardless of any state law that may decriminalize such activity under certain circumstances. Although federal enforcement policy may at times defer to states’ laws and not enforce conflicting federal laws, interested businesses and individuals should be aware that compliance with state law in no way assures compliance with federal law, and there is a risk that conflicting federal laws may be enforced in the future. No legal advice we give is intended to provide any guidance or assistance in violating federal law.