President Signs Executive Order Advancing Federal Cannabis Rescheduling: What It Means for Cannabis Businesses

On December 18, 2025, President Trump signed an Executive Order directing federal agencies to reschedule cannabis under the Federal Controlled Substances Act. The Executive Order does not immediately change the legal status of cannabis, however, it represents one of the most consequential federal actions in decades for the regulated cannabis industry.

For cannabis operators, investors, and service providers, this development signals meaningful progress, especially in the areas of taxation and research.

A Shift Toward Evidence-Based Cannabis Policy

The Executive Order reflects a growing recognition that federal cannabis policy should be grounded in scientific evidence rather than outdated assumptions. By instructing the Department of Justice to complete the rulemaking process to move cannabis from Schedule I to Schedule III, the administration is acknowledging accepted medical use and a lower potential for abuse relative to Schedule I substances.

Importantly, until the Department of Justice issues a final rule, cannabis remains classified as a Schedule I substance under federal law. The timeline for final rescheduling is currently unknown and may be affected by administrative processes and potential litigation.

Tax Relief: The Most Immediate Business Impact

For state-licensed cannabis businesses, the most significant potential benefit of Schedule III rescheduling is the elimination of Internal Revenue Code Section 280E. Once cannabis is no longer classified as a Schedule I or II substance, businesses would be permitted to deduct ordinary and necessary business expenses, bringing cannabis operators closer to parity with other regulated industries.

This change could materially improve cash flow, profitability, and long-term business sustainability for compliant businesses across the country. While rescheduling alone will not solve all financial challenges in the industry, relief from 280E would be a stabilizing force for the legal market.

NOTE: Despite its importance, rescheduling is not legalization, and it does not resolve many of the structural conflicts between State and Federal law.

We will continue tracking developments at both the federal and state levels and will provide updates as the rule making process progresses. 

Contact our office to discuss how these developments may affect your business and to receive strategic guidance for your business.