Cannabis Rescheduling Explained
By Shawn Hauser, Juliana Todeschi, Charles Alovisetti, Cassia Furman
Dec 18, 2025
- The Controlled Substances Act of 1970 (the “CSA”) divides drugs into five schedules based on potential for abuse and medical value.
- Marijuana moving from Schedule I (no accepted medical use, high abuse potential) to Schedule III (accepted medical use, moderate-to-low dependence risk) would mark the most consequential federal cannabis policy change in more than half a century, as it acknowledges, for the first time, marijuana’s medical value and relative safety. This development, commonly referred to as cannabis rescheduling or marijuana rescheduling, formally recognizes marijuana’s accepted medical use under federal law.
- Rescheduling does not federally legalize marijuana or state-authorized cannabis programs; rather, it legitimizes cannabis as medicine, lowers perceived risk for lenders, removes the 280E tax burden, and has many other indirect benefits as described below.
- For a deeper dive into the legal and business implications of Schedule III and the federal-state pilot program, explore our Vicente LLP Federal Cannabis Schedule III Updates & Resources Hub.
A common question surrounding this change is what is a Schedule III drug, and how marijuana would be regulated differently under this classification. Under the CSA, Schedule III drugs are substances with an accepted medical use and a moderate to low potential for abuse. The CSA has governed America’s relationship with cannabis since its enactment in 1970. The CSA divides drugs, certain chemicals used to make drugs, and other regulated substances into five distinct categories called “schedules.” Drugs are classified according to their abuse potential and currently accepted medical use.
Schedule V drugs represent the lowest potential for abuse relative to medical value, whereas Schedule I drugs carry the highest potential for abuse and the lowest medical value. Since the CSA’s inception, marijuana (e.g., the parts of the cannabis plant with a Delta-9 tetrahydrocannabinol concentration level exceeding 0.3 percent) has been inappropriately classified as a Schedule I substance despite its various medical applications and relative safety.
On December 18, 2025, President Trump signed an Executive Order ("EO") directing the Department of Justice ("DOJ") to initiate the process of reclassifying marijuana from Schedule I to Schedule III under the Controlled Substances Act ("CSA"). This rescheduling represents the most significant change in federal cannabis policy in over 50 years. The following provides a high-level overview of the key actions and implications outlined in the EO.
Overview of Executive Order
| Directed Official / Agency | Action Mandated |
| Attorney General | Take all necessary steps to complete the rulemaking process for rescheduling marijuana to Schedule III in the most expeditious manner possible, in accordance with federal law. |
| Assistant to the President and Deputy Chief of Staff for Legislative, Political, and Public Affairs | Work with Congress to update the statutory definition of hemp-derived cannabinoid products to ensure access to appropriate full-spectrum CBD while restricting high-risk products. This includes developing a regulatory framework with guidance on THC limits per serving/container and CBD-to-THC ratios. |
| Department of Health and Human Services (“HHS”), Food and Drug Administration ("FDA"), Centers for Medicare and Medicaid Services ("CMS"), and the National Institutes of Health ("NIH"). | Develop research methods and models that utilize real-world evidence to improve access to hemp-derived cannabinoid products and inform standards of care. |
Process to Complete Rulemaking to Reschedule Marijuana in the Most Expeditious Manner
The Executive Order directs the Attorney General to complete the rulemaking process to reschedule marijuana to Schedule III in the “most expeditious manner permitted under federal law in accordance with Federal law, including 21 U.S.C. § 811.”
Two primary procedural pathways exist, with Option 1 expected to be quicker and, as a result, more consistent with the requirements of the EO.
Option 1: The "Epidiolex Method" (Treaty Exception)
The “most expeditious manner” to reschedule is under Section 811(d)(1) of the Controlled Substances Act (CSA), addressing situations where control of a substance is required to comply with international treaty obligations. This "treaty exception” authorizes the Attorney General to immediately issue a Final Order, bypassing the currently stalled hearing process, and fulfilling the "expeditious" mandate more effectively than the standard path outlined in Option 2. This process is outlined below:
The DOJ could immediately issue a Final Order rescheduling marijuana to Schedule III under 21 U.S.C. § 811(d). To do so, the Attorney General would rely on an Office of Legal Counsel (OLC) opinion concluding that the United States can satisfy its international treaty obligations by placing marijuana in Schedule III, provided that rescheduling is accompanied by specific regulatory controls (e.g., production quotas and import/export permitting).
Unlike Epidiolex, botanical marijuana is not approved by the Food and Drug Administration (“FDA”); however, Section 811(d) affords the Attorney General broad discretion to select the schedule deemed most appropriate to meet treaty obligations, independent of FDA approval status. By citing the need to comply with international treaties while acknowledging the scientific findings of the Department of Health and Human Services (“HHS”), the DOJ could issue a Final Order rescheduling marijuana to Schedule III without completing the administrative hearing process.
Option 2: Notice-and-Comment Rulemaking
Outside of the “treaty exception,” the Attorney General may complete rescheduling through the standard rulemaking process under 21 U.S.C. § 811, a process including public notice, public comment, and administrative hearings. This approach may reduce procedural litigation risk but will likely take longer than the treaty-based pathway due to administrative complexity, including addressing the existing stalled rulemaking process. In October 2022, then-President Biden directed the Secretary of HHS and the U.S. Attorney General to initiate the administrative process to review how marijuana is scheduled under the federal CSA. As of January 2025, the presiding Administrative Law Judge (ALJ) stayed proceedings due to allegations of DEA bias and improper ex-parte communication. With regards to marijuana rescheduling, this would follow the process outlined below:
- Notice-and-Comment Process: The DOJ would provide a public comment period (potentially as short as 30 days if structured as a streamlined process).
- Administrative Review: The DEA would complete any required administrative hearings and review the evidentiary record.
- Issuance of Final Order: Following review, DOJ would issue a final rule or order formally rescheduling marijuana to Schedule III.
Pilot Program Overview
The Executive Order directs HHS and other agencies to develop research models using "real-world evidence" to improve access to hemp-derived products and to inform standards of care. While the EO itself does not contain operational details, insiders say this language aligns with a Federal Register proposal released in November 2025, which detailed a Medicare pilot program to test CBD treatments for seniors.
This policy direction is consistent with the advocacy of Howard Kessler‘s Commonwealth Project, whose earlier private pilot programs utilized "medical cannabis" administered by healthcare professionals in senior living facilities to demonstrate positive health impacts and cost savings. With its focus on ensuring therapeutic access to hemp-derived CBD for seniors and other patients, the administration appears to be using executive policy to remedy the limitations imposed by the recent legislative changes to the federal definition of “hemp.”
Beyond the specific Medicare pilot program, rescheduling marijuana formally recognizes the plant’s "accepted medical use and relative safety." The reclassification could help validate the medical models used in federal-state research pilot programs and open the door for future insurance reimbursement and expanded research opportunities, which are currently restricted under Schedule I status.
Impacts on Hemp
While the centerpiece of the EO is the rescheduling of marijuana, its treatment of hemp-derived cannabinoid products is equally consequential. Section 2(b) instructs senior White House officials to work with Congress to revise the statutory definition of hemp-based products in light of the restrictive THC caps recently imposed by Public Law 119-37, particularly the 0.4mg per-container limit that threatens to reclassify many full-spectrum CBD products as controlled substances.
The EO calls for the development of a regulatory framework that would establish THC limits per serving and per container, along with CBD-to-THC ratio requirements. The aim is to preserve access to effective full-spectrum CBD products while restricting high-risk formulations. To that end, the EO directs Congress and federal agencies to revisit outdated thresholds and create new standards for hemp-derived cannabinoid products. It also directs the HHS, FDA, Centers for Medicare and Medicaid Services ("CMS"), and the National Institutes of Health ("NIH") to develop research models using real-world evidence to guide clinical best practices and inform future regulatory policy.
Moving Marijuana from Schedule I to Schedule III Under the CSA
There has been federal activity in the past related to rescheduling, including former President Biden’s directive to re-evaluate the control status and the stalled administrative hearings under the Biden Administration. President Trump’s EO, starts the process to move marijuana from its inappropriate Schedule I classification and re-classify it as a Schedule III drug under the CSA.
Schedule I drugs are defined as drugs with no currently accepted medical use and a high potential for abuse. Heroin is an example of a Schedule I drug, as well as other well-known illicit drugs such as lysergic acid diethylamide (LSD) and 3,4-methylenedioxymethamphetamine (ecstasy). It is illegal to produce, dispense, or possess Schedule I substances except in the context of federally approved scientific studies. Unauthorized activities involving Schedule I controlled substances are federal crimes that may give rise to significant legal liability, including substantial fines and jail time. Marijuana has been a Schedule I drug since the enactment of the CSA under Nixon in 1970, but now will move to Schedule III.
Most notably, rescheduling formally recognizes the cannabis plant’s medical use and lower abuse potential. Unlike Schedule I drugs, drugs classified as Schedule III are recognized as having only a moderate-to-low potential for physical and psychological dependence. Additionally, rescheduling eliminates the punitive IRS Section 280E tax burden and positions the industry to ease research barriers.
While a valuable incremental change, rescheduling does not legalize marijuana nor solve the longstanding federal-state conflict and associated challenges facing cannabis businesses in state-regulated markets.
Federal Efforts to Reschedule Marijuana
Rescheduling entered the cannabis lexicon in earnest in October 2022 when then-President Biden directed the Secretary of Health and Human Services and the U.S. Attorney General to initiate the administrative process to review expeditiously how marijuana is scheduled under the federal CSA.
Nearly a year later, in August 2023, HHS recommended that marijuana be transferred to Schedule III under the CSA, concluding that it has a currently accepted medical use and a lower potential for abuse than Schedule I or II substances. In April 2024, the DOJ Office of Legal Counsel advised that HHS’s scientific and medical findings are binding on the Drug Enforcement Administration (“DEA”) prior to rulemaking and entitled to significant deference thereafter, prompting the DOJ to issue a Notice of Proposed Rulemaking on May 21, 2024, while noting that the DEA had not yet reached its own determination.
Although the DEA initially scheduled an administrative hearing for January 2025, the Chief Administrative Law Judge stayed the proceedings pending resolution of an interlocutory appeal concerning alleged improper ex parte communications. Following President Trump’s inauguration in January 2025, the rulemaking was placed on hold while the new administration reviewed the matter. In August 2025, President Trump stated that his administration was “very strongly” considering an Executive Order to finalize rescheduling to Schedule III, which was issued on December 18, 2025.
Read: Trump Signals Cannabis Rescheduling: Schedule III Marijuana Decision Expected Soon
Impact of Rescheduling on the Federal Legality of Marijuana
Schedule III status does not automatically bring state-authorized cannabis operators into compliance with federal law or resolve the federal-state conflict. State marijuana businesses will continue to operate in violation of the federal CSA and the Federal Food, Drug, and Cosmetic Act (“FFDCA”). As long as marijuana remains a controlled substance, whether in Schedule I or Schedule III, the manufacture, distribution, and possession of state-legal marijuana generally remain federal crimes. Legalization demands further action from Congress.
In recent decades, nearly all states have changed their laws to authorize the use of cannabis for medical purposes. A significant number of states with medical programs have authorized recreational sales for adults. Others have adopted state-regulated hemp programs. Due to the Supremacy Clause of Article VI, Clause 2, of the U.S. Constitution, however, states cannot actually legalize marijuana because they cannot override its illegal status under federal law. Thus, as long as marijuana is a controlled substance under the CSA, all unauthorized activities involving marijuana are considered federal crimes anywhere in the United States. This includes cannabis-related activities in states that have authorized medical and/or adult use marijuana under state law.
While Schedule III substances have an accepted medical use and may be dispensed by prescription, federal FDA approval and a prescription issued by a DEA-registered practitioner is required. Currently, state medical marijuana programs rely on physician "recommendations" or "certifications" rather than valid federal prescriptions to avoid conflicting with federal law. Rescheduling alone does not convert state-level "recommendations" into valid federal prescriptions, nor does it authorize pharmacists to dispense botanical cannabis. While some criminal penalties for CSA violations are lower for Schedule III substances, mandatory minimum sentences based on the quantity of marijuana trafficked would remain unchanged. Federal collateral consequences regarding gun ownership, housing, and immigration would also largely remain in effect.
Immediate Impacts of Cannabis Rescheduling
The move of marijuana from Schedule I to Schedule III is the most significant federal cannabis policy shift in nearly half a century. While rescheduling does not legalize state-authorized cannabis programs or resolve all conflicts with federal law, it brings several positive immediate impacts to taxation, financing, medical research, and access pathways, as well as significant indirect impacts for future needed reforms.
Taxation
Perhaps the most immediate benefit will be a relief from Internal Revenue Code Section 280E (IRS 280E), which currently prevents cannabis companies from deducting ordinary business expenses that other businesses can claim. Schedule III status removes this barrier and significantly improves the potential profitability for cannabis businesses, freeing capital for reinvestment, hiring, research, innovation, and expansion.
Banking & Finance
Although rescheduling would not legalize state cannabis markets or guarantee full access to traditional banking, it could reduce perceived legal risk. This shift may encourage more financial institutions to provide services to licensed operators, including the availability of loans, gradually improving the industry’s financial stability. Rescheduling establishes a political environment in which Congress is more likely to support banking and capital markets reform, such as the proposals contemplated by the Secure and Fair Enforcement Regulation (“SAFER”) Banking Act and the Capital Lending and Investment for Marijuana Businesses (“CLIMB”) Act.
Read: 4 Major Implications of Cannabis Moving to Schedule III
Medical Research and Schedule III Drugs
Rescheduling acknowledges cannabis’s accepted medical use and lower abuse potential. Researchers will still be required to obtain materials through DEA-registered manufacturers rather than state dispensaries due to the CSA's "closed system," but a move to Schedule III could broaden the pool of registered suppliers and streamline the registration process.
This improved regulatory environment may facilitate the collection of more robust clinical safety and efficacy data, though researchers may still face unique statutory requirements imposed by the Medical Marijuana and Cannabidiol Research Expansion Act. Importantly, rescheduling to Schedule III would signal to universities and hospitals that cannabis research can be conducted within federal law, assuaging concerns that such work jeopardizes federal funding or carries professional stigma. This reduced institutional risk encourages broader participation from the medical community, allowing researchers to more easily secure federal grants that can be used to generate the robust clinical data necessary to guide treatment and ensure patient safety. This could lead to immeasurable potential benefits, including new medical breakthroughs and health impact studies.
Prescription Pathways
Under the current federal paradigm, only FDA-approved cannabinoid medicines, such as Epidiolex, Marinol, and Syndros may be lawfully prescribed by DEA-registered practitioners and dispensed by pharmacies. Rescheduling to Schedule III does not alter the FFDCA requirement that a drug must undergo the rigorous New Drug Application process to be legally marketed and prescribed in interstate commerce. Instead, rescheduling would likely facilitate the development of new, standardized cannabis-derived medications by reducing the heavy regulatory burdens and costs associated with Schedule I research, thereby encouraging pharmaceutical companies to seek FDA approval for new formulations.
Rescheduling does not bring state-authorized dispensaries into compliance with federal law. The botanical cannabis products they sell lack FDA approval and remain "unapproved new drugs" under the FFDCA that cannot be legally dispensed by licensed pharmacists. Still, while federal law compliance remains at issue for state-authorized dispensaries, the federal government’s formal acknowledgement that cannabis has a “currently accepted medical use” would legitimize its therapeutic potential within the medical community, potentially reducing provider stigma and paving the way for standardized dosing protocols that are currently absent in state markets.
Read: The Legality of Distributing and Dispensing Botanical Cannabis under Schedule III
Looking Ahead
President Trump’s Executive Order directing the rescheduling of marijuana is a watershed moment, bringing federal drug policy closer to science, medicine, and public opinion. While rescheduling alone does not resolve the longstanding tension between federal law and state-legal cannabis programs, or between existing federal drug policy and bipartisan public sentiment, it represents a meaningful and long-overdue step forward.
Rescheduling cannabis to Schedule III will deliver immediate economic relief through the elimination of Section 280E, while creating energy for broader reform. At the same time, recent congressional action narrowing the federal definition of hemp makes clear that THC regulation, across both marijuana and hemp-derived products, remains unsettled. Taken together, these developments underscore the need for a coherent, evidence-based federal framework that protects consumers without stifling innovation. And while significant work remains, rescheduling and the momentum it creates mark the beginning of a renaissance for the American cannabis industry.
Vicente LLP continues to monitor federal cannabis rescheduling developments and their implications for businesses, policymakers, and advocates. Vicente’s attorneys work at the intersection of law and policy to advance responsible cannabis regulation and support equitable, evidence-based reform.
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