Marijuana Rescheduling Ordered by Trump
Marijuana rescheduling could let cannabis firms claim federal tax deductions and expand research, prompting traders to reprice margins and cannabis stocks.
KEY TAKEAWAYS
- Order directs rescheduling of marijuana from Schedule I to Schedule III, acknowledging medical value.
- Reclassification lets state-licensed cannabis businesses claim federal deductions under Section 280E, improving after-tax margins.
- Order removes Schedule I research barriers and directs agencies to expedite DEA rescheduling and a CMS CBD pilot.
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President Donald Trump signed an executive order on Dec. 18, 2025, directing federal agencies to expedite marijuana rescheduling from Schedule I to Schedule III under the Controlled Substances Act. This change would allow state-licensed cannabis businesses to claim federal tax deductions under Section 280E and ease research restrictions.
Federal Reclassification and Industry Impact
The order directs federal agencies to reclassify marijuana from Schedule I, reserved for drugs with high abuse potential and no accepted medical use, to Schedule III, which covers substances with recognized medical value and moderate abuse risk. This shift signals federal acknowledgment of marijuana’s medical benefits.
Reclassification removes research barriers tied to Schedule I status, expanding federal approvals, increasing supply sources, and simplifying institutional pathways that have limited clinical studies. It also permits state-licensed cannabis operators to claim federal tax deductions previously barred by Internal Revenue Code Section 280E, potentially improving after-tax margins and altering cash-flow profiles. These changes may prompt investors to reassess valuations and affect cannabis stocks as profitability expectations adjust.
Implementation and Political Response
The order instructs the Attorney General to accelerate the Drug Enforcement Administration’s formal rescheduling process, relying on a Health and Human Services scientific review initiated under the prior administration. It leaves practical implementation to federal agencies and Congress, which must update hemp definitions for full-spectrum cannabidiol (CBD) access.
White House staff were directed to collaborate with lawmakers on expanding access to full-spectrum CBD while excluding products deemed high risk. The Centers for Medicare & Medicaid Services plans to launch a model providing full-spectrum CBD to beneficiaries at no cost with a physician’s recommendation, an initiative announced by CMS Administrator Mehmet Oz.
The executive order does not legalize recreational marijuana federally; possession and sales remain prohibited under federal law. Before signing, Trump met with marijuana-industry executives, HHS Secretary Robert F. Kennedy Jr., and CMS Administrator Oz. He also spoke with House Speaker Mike Johnson (R-La.), who opposed the rescheduling.
Dozens of Republican lawmakers criticized the move on public-health and safety grounds, while leading Democrats said it did not go far enough and dismissed it as political theater. The order also conflicts with a recent spending bill signed by Trump that bans most consumable hemp products, creating a policy contradiction between efforts to expand CBD access and earlier congressional restrictions.
States with medical or adult-use legalization may accelerate reforms in response to the federal shift, narrowing the gap between state laws and federal policy.
