PRESIDENT DONALD Trump has ordered the federal government to begin the process of moving marijuana from Schedule 1 to Schedule 3 of the Controlled Substances Act, marking the potential of a new dawn for the legal cannabis trade and marijuana research.
The change would move cannabis from the same schedule that applies to heroin and cocaine to Schedule 3, which is designated for substances that have accepted medical use and lower risk of abuse.
While the order does not legalize marijuana or change state cannabis programs, it has far-reaching implications for licensed cannabis operators, investors and the adjacent hemp market.
The executive order directs the U.S. Department of Justice to take “all necessary steps” to complete the rescheduling as quickly as federal law allows.
The 280E tax relief executives have waited for
For plant-touching cannabis businesses, the most consequential change tied to Schedule 3 is relief from Section 280E of the
Internal Revenue Code. That provision bars businesses trafficking in Schedule 1 substances from deducting ordinary and necessary business expenses, often resulting in effective tax rates that dwarf those of comparable industries.
If marijuana is formally moved to Schedule 3, 280E would no longer apply to state-legal cannabis operators. For growers, processors and retailers, that could mean materially lower federal tax bills, improved cash flow and healthier margins almost immediately.
Many executives also expect the change to unlock new institutional investment and potentially open the door to listings on major exchanges such as NASDAQ, which have largely stayed on the sidelines.
Rescheduling could also modestly ease other constraints.
Congressional researchers note that certain federal advertising penalties are tied specifically to Schedule 1 substances and would no longer apply to marijuana if it moves to Schedule 3, even though most federal prohibitions would remain in place.
Medicare, CBD and the hemp wildcard
The executive order also gestures toward the hemp and CBD market, which faces its own uncertainty later this year as new federal limits on hemp-derived THC products are scheduled to take effect.
The order directs federal agencies to work with Congress on updating the hemp definition to preserve access to full-spectrum CBD products.
Separately, Centers for Medicare & Medicaid Services
Administrator Mehmet Oz announced plans for a pilot project that could allow certain Medicare beneficiaries to receive up to $500 annually for doctor-recommended, hemp-derived CBD products that meet safety and quality standards.
While not part of the executive order itself, the pilot signals growing federal openness to cannabinoid-based therapies, particularly for seniors.
What still has to happen before it is real
Despite the executive order, rescheduling is not automatic. The Justice Department must either revive and finalize a stalled Biden- era proposed rule or withdraw it and issue a new proposal. Either path requires a formal rulemaking process, including publication in the Federal Register and an opportunity for public comment.
The final step rests with Attorney General Pam Bondi, who must sign off on the final rule. Legal challenges from rescheduling opponents are widely expected and could delay implementation.
One thing to note: Rescheduling does not legalize recreational marijuana, authorize interstate commerce or resolve banking constraints. Cannabis sold through state-legal dispensaries would still not be federally lawful absent Food and Drug Administration approval, which experts view as unlikely for existing botanical products.
What executives should watch next
In the months ahead, the DOJ will work on proposed regulations that will include a number of provisions that will affect cannabis businesses, and it will be important to keep an eye on the process.
Key milestones include whether the DOJ restarts the rescheduling process, how quickly a final rule is issued and whether courts intervene. At the same time, companies should model the financial impact of 280E relief, reassess capital strategies and monitor how investors and lenders respond.