backOn December 18, 2025, President Donald Trump signed an executive order directing federal agencies to reclassify marijuana from Schedule I to Schedule III of the Controlled Substances Act (CSA) (Increasing Medical Marijuana and Cannabidiol Research).1Exec. Order, “Increasing Medical Marijuana and Cannabidiol Research,” White House: Presidential Actions (Dec. 18, 2025), https://www.whitehouse.gov/presidential-actions/2025/12/increasing-medical-marijuana-and-cannabidiol-research/. This action marks the most consequential shift in U.S. cannabis policy in more than fifty years and carries significant implications for research, banking, and tax law.
For decades, marijuana has been classified as a Schedule I drug under the CSA, a category of substances with no accepted medical use and a high potential for abuse. This classification has severely constrained clinical and observational research on cannabis and cannabis-derived products (including tetrahydrocannabinol (THC), cannabidiol (CBD)), and other minor cannabinoids recently gaining popularity) due to Schedule I controls, limited authorized sources of investigational CBD and THC drugs, and complicated study approvals. In 2023, the Department of Health and Human Services (HHS) recommended that marijuana be moved to Schedule III, which includes substances with a Currently Accepted Medical Use (CAMU) and a lower potential for abuse.2U.S. Dept. of Health & Human Servs., Office of the Assistant Sec’y for Health, Letter to DEA Administrator Anne Milgram Recommending Rescheduling of Marijuana (Aug. 29, 2023), https://www.hhs.gov/sites/default/files/hhs-marijuana-scheduling-recommendation-letter-2023.pdf. This executive order acts on that recommendation, formally recognizing marijuana’s medical use and unlocking new regulatory pathways for cannabis-derived products with medical intended uses.
Key Directives of the Executive Order
The executive order outlines several key directives. It instructs the Attorney General to finalize the rulemaking process for rescheduling marijuana to Schedule III expeditiously. It also calls for the development of a regulatory framework for hemp-derived cannabinoid products to ensure safety. Furthermore, the administration is expected to be launching a Medicare pilot program for certain CBD products, potentially integrating cannabis-derived therapies into federally insured healthcare for the first time.
Practical Implications
With the removal of restrictive Schedule I research barriers, academic medical centers, biopharma companies, and contract research organizations (CROs) can expect significantly streamlined pathways for clinical trials. Researchers will find it easier to procure study materials and gain authorizations. This opens new opportunities to conduct the rigorous studies needed to establish safety and efficacy for cannabis-derived products and to inform standards of care for patients.
Another significant impact for the cannabis industry of the rescheduling from Schedule I to Schedule III is exemption from IRS Code Section 280E.326 U.S.C. § 280E. This provision has prohibited businesses selling Schedule I or II substances from taking standard business deductions. With marijuana moved to Schedule III, state-legal cannabis companies will now be able to deduct ordinary expenses like rent and payroll, providing a major financial lifeline. Rescheduling is therefore expected to open the door to mainstream banking services and institutional capital. Many financial institutions have previously avoided the cannabis sector due to compliance fears associated with Schedule I status.
Near-Term Actions
Cannabis businesses should consult with tax advisors to understand and prepare for the implications of Section 280E no longer applying to their operations. Researchers should begin planning for new studies under the less restrictive Schedule III framework and monitor for updated guidance from the Drug Enforcement Administration (DEA) and the Food and Drug Administration (FDA) on research involving cannabis-derived investigational drugs. All stakeholders should also be prepared to engage with the DEA during the forthcoming rulemaking comment period.
Open Questions
While the executive order is a landmark event, several key questions remain. What is the exact timeline for the Attorney General to complete the rulemaking process? What specific standards will be included in the new regulatory framework for cannabis-derived products? How will the Medicare pilot program be structured and what will be its scope? Finally, how will federal agencies manage the potential market entry of major pharmaceutical firms and international companies into the U.S. cannabis sector?
Alignment with Recent Federal Cannabis Developments
This executive order is the culmination of years of shifting federal perspectives and scientific review. It directly follows the 2023 recommendation from HHS to reschedule marijuana based on credible evidence of its medical use. The order now aligns federal policy with the reality of state-level medical marijuana programs and growing patient use.
How We Can Help
King & Spalding LLP offers comprehensive, strategic guidance to clients navigating the evolving landscape of cannabis regulation following the recent executive order rescheduling marijuana. Our multidisciplinary team—including former senior officials from FDA—leverages decades of regulatory experience to help clients address the most sensitive and enterprise-critical challenges in this space, including:
- FDA regulatory pathways for Schedule III cannabis-derived products
- Research protocols and compliance for cannabis-derived investigational drugs
- Interpreting new federal frameworks for hemp and cannabis-derived products
- Preparing for and responding to DEA rulemaking and comment periods
- Tax, banking, and operational implications arising from changes to IRS Code Section 280E
If you have questions about how these changes affect your organization or need tailored support to ensure compliance and strategic positioning, our team stands ready to assist.