The Trump administration has initiated the process to reschedule marijuana from Schedule I to Schedule III under the Controlled Substances Act, a move expected to bring immediate tax relief to cannabis businesses but leave other policy changes pending. The executive order directs Attorney General Pam Bondi to complete the rulemaking process expeditiously.
Rescheduling Process and Timeline
Federal drug policy changes, such as rescheduling, typically occur through a rulemaking process or an act of Congress. While President Trump's order directs expedited action, the specific path the Department of Justice (DOJ) will take remains a factor in the timeline.
- Traditional Path: The DOJ could resume the process initiated under the former Biden administration, which involved proposals from the Department of Health and Human Services and the Justice Department to reclassify cannabis to Schedule III. This path typically includes a public notice-and-comment period. The DEA's previous proposed rule for marijuana rescheduling in 2024 attracted over 43,000 public comments.
- Expedited Path: The executive order's reference to Section 811 of the Controlled Substances Act suggests a potential shortcut. This section allows the Attorney General to move a drug schedule without extensive usual steps, a method previously used for the CBD epilepsy drug Epidiolex in 2018. This path might bypass a public comment period, potentially shortening the process.
Gillian Schauer, Executive Director of the Cannabis Regulators Association, notes that rescheduling alone does not automatically revoke all federal laws targeting marijuana, and interstate commerce would likely remain illegal. Unspecified are changes to federal drug testing requirements, which await agency guidance.
Economic Impact on Cannabis Businesses
A significant immediate change anticipated from rescheduling is the cessation of Internal Revenue Code Section 280E applicability for marijuana businesses. Currently, 280E prevents these businesses from claiming standard tax deductions because their product is classified as a Schedule I drug, leading to higher effective tax rates.
- Tax Relief: Sam Brill, CEO of Ascend Wellness Holdings, stated that Section 280E "does not allow us to basically deduct normal expenses that everyone else can deduct." He cited a $38 million reserve for 2024 at his company due to these restrictions. Rescheduling is expected to alleviate this financial burden.
- Banking Services: While tax relief is immediate, the ability of cannabis businesses to accept credit cards and access standard financial services is not expected to change immediately. Most financial institutions continue to avoid providing basic banking to state-authorized marijuana operations due to potential federal liability.
Impact on Medical Research
Rescheduling is expected to ease some regulatory burdens on marijuana research. Scientists would no longer need to obtain a Schedule I license for research, and rigorous laboratory regulations for storage and security could be relaxed.
However, challenges in obtaining marijuana for study persist. Researchers are federally required to source cannabis from a limited number of approved facilities, a system that has been historically restrictive and is separate from the controlled substances schedule. Schauer indicated that while rescheduling simplifies some aspects, "there's a lot that will still be challenging in researching cannabis unless we see a lot of agency policies change and adjust."