President Trump's executive order aims to initiate the loosening of U.S. restrictions on marijuana by directing the Attorney General to complete the rescheduling process for cannabis. While some changes are anticipated to be immediate, experts indicate that other effects will materialize over time due to the complexities of federal drug policy.
Policy and Legal Framework
Gillian Schauer, executive director of the Cannabis Regulators Association, clarifies that a presidential order alone is insufficient to unilaterally rewrite federal drug policy that has been in place for over 50 years. Historically, such changes are implemented either through a formal rulemaking process or an act of Congress. Rescheduling marijuana to Schedule III would not automatically revoke existing federal laws targeting cannabis, nor would it legalize interstate commerce. Additionally, potential alterations to federal drug testing requirements await guidance from relevant agencies.
Rescheduling Process and Timeline
Trump's order directs Attorney General Pam Bondi to undertake the necessary steps to complete the rulemaking process for rescheduling marijuana to Schedule III of the Controlled Substances Act (CSA) in an expeditious manner. This could involve continuing the process initiated under former President Joe Biden, which saw the Department of Health and Human Services and the Justice Department propose reclassifying cannabis from Schedule I (high potential for abuse, no accepted medical use) to Schedule III (lower risk, includes substances like ketamine).
The executive order's reference to Section 811 of the CSA suggests a potential expedited path. This section allows the Attorney General to adjust a drug's schedule without following the typical steps, often used for international drug treaty obligations or scheduling new medications, such as the CBD epilepsy drug Epidiolex in 2018.
Public Comment and Legal Challenges
The Trump administration's approach to administrative hearings and public comment periods will influence the timeline. Utilizing an expedited option under Section 811 might bypass a public comment period, potentially shortening the process. Conversely, following the traditional notice-and-comment procedure would extend it, as evidenced by the Drug Enforcement Administration's (DEA) 2024 proposed rescheduling rule for marijuana, which garnered over 43,000 comments. The Justice Department is expected to balance the call for expedience with the need to legally defend its actions against anticipated challenges from anti-marijuana advocacy groups.
Impact on Cannabis Businesses
Tax Relief: Sam Brill, CEO of Ascend Wellness Holdings, a multistate dispensary company, highlights that one immediate benefit of rescheduling would be the cessation of Internal Revenue Code Section 280E application to marijuana businesses. This provision currently prevents businesses dealing with Schedule I substances from claiming standard tax deductions, leading to a higher effective tax rate. Removing 280E would allow deductions for operational expenses like rent and employee costs, potentially releasing significant capital for companies (e.g., an estimated $38 million in reserves for Ascend Wellness Holdings for 2024).
Financial Services: While tax relief is anticipated to be immediate, other financial restrictions are likely to persist initially. Most financial institutions continue to refrain from offering basic banking services, including credit card processing, to state-authorized marijuana businesses due to concerns about potential federal liability.
Implications for Medical Research
Scientists anticipate that rescheduling could ease some barriers to medical research. It would eliminate the requirement for researchers to obtain burdensome Schedule I licenses and relax stringent laboratory regulations concerning storage and security. However, obtaining research-grade marijuana remains an obstacle. Federal rules dictating the sourcing of marijuana, currently limited to a few suppliers, are determined separately from the controlled substances schedule. Therefore, comprehensive agency policy adjustments beyond rescheduling will be necessary to significantly facilitate cannabis research.