By Brittany Bonetti and Benjamin Ojserkis
On December 18, 2025, President Trump signed an Executive Order which: (i) directed the United States Attorney General to expedite the rulemaking process related to rescheduling marijuana from Schedule I to Schedule III under the federal Controlled Substances Act (CSA); (ii) directs executive branch staff to work with Congress to update the statutory definition of final hemp-derived cannabinoid products to allow full spectrum CBD products while preserving the intent to restrict products that create serious health risks; and (iii) directs federal agencies to develop research methods to improve access to hemp-derived cannabinoid products.
Notably, the Executive Order does not itself reschedule marijuana from Schedule I to Schedule III. Rather, the Executive Order signal’s the Trump Administration’s policy direction toward rescheduling marijuana.
Recent History of Marijuana Reclassification
The federal rulemaking process to reschedule marijuana from Schedule I to Schedule III under the CSA began in October of 2022 when President Biden issued a similar executive order directed the Department of Health and Human Services (HHS) to initiate a review of marijuana’s classification under the CSA. In 2023, HHS recommended rescheduling based on FDA scientific findings. Then in May 2024, the Drug Enforcement Administration took a major step forward by publishing a notice of proposed rulemaking accepting HHS’s recommendation to reschedule marijuana.
Under the proposed 2024 rule, rescheduling would apply to cannabis and cannabis extracts, but would not apply to synthetically derived THC, which would retain a Schedule I classification. An administrative law judge was appointed to oversee the formal rulemaking process. However, due to an interlocutory appeal, the process was stayed and progress towards enacting the new rule stopped.
This recent Executive Order does not lift the stay or immediately reclassify marijuana; instead it signals the Trump Administration’s goal of moving the proposed rule out of legal limbo by directing the Attorney General and Department of Justice to expedite the process of enacting the rescheduling rule.
What does Rescheduling Mean
Schedule I drugs are defined under the federal CSA as drugs with no currently accepted medical use, a high potential for abuse, and a lack of accepted safety for use of the drug under medical supervision. The Schedule I classification of marijuana has inhibited medical research of marijuana, has acted as a barrier to traditional banking services by cannabis businesses, and has prohibited cannabis businesses from taking ordinary business deductions or credits for purposes of federal taxes.
Schedule III drugs are classified as having a potential for abuse less than the drugs or other substances with Schedules I and II classification. Schedule III drugs also have a currently accepted medical use in treatment in the United States and a potential for moderate or low physical dependence or high psychological dependence in the event of drug abuse.
Potential Effects of Rescheduling – Section 280E
It must be noted that even if marijuana is ultimately rescheduled, it will remain federally illegal. However, that does not mean rescheduling will not have beneficial effects for marijuana businesses.
Should marijuana be reclassified to Schedule III, marijuana businesses will no longer have to comply with the dreaded Section 280E of the Internal Revenue Code. Section 280E, which applies to Schedule I and Schedule II controlled substances, prevents marijuana businesses from deducting ordinary and necessary business expenses. This causes marijuana businesses to pay a far higher effective tax rate than other businesses, which are able to deduct ordinary and necessary business expenses from their taxes. The Section 280E restrictions have been a major obstacle and a constant issue for marijuana businesses. Therefore, eliminating Section 280E would be a major boon, as marijuana businesses would finally be treated the same as other non-marijuana businesses for federal tax purposes.
Moving Forward
Reclassification of marijuana will not occur immediately and will likely be subject to prolonged litigation. In the meantime, marijuana businesses should use this period to plan for how a potential reclassification to Schedule III may affect their operations.
Cooper Levenson’s Cannabis Industry Practice Group will continue to monitor developments in this space and stands ready to assist businesses that may be affected by this change in federal policy. We welcome the opportunity to discuss how these developments may affect your business.
Brittany Bonetti, Esq., Partner and Chair of the Cannabis Industry Practice Group can be reached at (609) 572-7380 and bbonetti@cooperlevenson.com.
Benjamin Ojserkis, Esq. is a member of the Cannabis Industry Practice Group and can be reached at (609) 572-7550 and bojserkis@cooperlevenson.com.
The content of this post should not be construed as legal advice. You should consult a lawyer concerning your particular situation and any specific legal question you may have.