Key Points:

• Rescheduling push: The executive order restarts the DEA’s process to move marijuana to Schedule III, but federal law does not change until a final rule takes effect.
• 280E relief on the horizon: If rescheduled, Section 280E would end prospectively, improving margins and cash flow—start modeling scenarios and system changes now.
• CBD and research priorities: The order also emphasizes accelerating medical research, expanding access to hemp-derived, full-spectrum CBD, and supporting evidence-based standards of care.
• Banking and listings: Rescheduling will not suddenly fix banking or open NYSE/Nasdaq to U.S. operators; some providers may reengage, but core constraints remain.
• Compliance stakes rise: Schedule III likely brings greater federal scrutiny—tighten documentation, labeling, marketing claims, operational controls, and governance.

President Trump issued an executive order today that directs federal agencies to prioritize and advance the long-running effort to reclassify marijuana from Schedule I to Schedule III under the Controlled Substances Act (CSA).

The order itself does not change the law. Marijuana does not become federally legal because a pen was put to paper. But for an industry that has spent years operating in the space between state permission and federal prohibition, the directive matters. It matters because it signals momentum. And in cannabis, momentum at the federal level has been painfully rare.

The DEA rulemaking process that began in 2024 has been stalled long enough for many operators to tune it out altogether. This executive order puts that process back on the clock and, more importantly, back on the radar of investors, lenders, regulators, and competitors who have been waiting for a credible inflection point. For cannabis companies, the potential rescheduling of marijuana to Schedule III would be the most consequential federal policy shift the industry has seen to date. It is not legalization. It will not magically fix banking, interstate commerce, or exchange listings. But it would materially change the economic and regulatory terrain in ways that deserve serious preparation now.

What the DEA Still Has to Do

The executive order does not, by itself, reschedule marijuana. That authority rests with the DEA, which must complete the administrative process required under the CSA before any change becomes effective. That process is already partially built. In 2024, the Department of Justice published a proposed rule to move marijuana from Schedule I to Schedule III following a recommendation from the Department of Health and Human Services. The DEA then initiated formal proceedings, including a hearing process, that have since stalled. The executive order effectively pushes the agency to restart and complete that work. From here, the DEA must bring the rulemaking process to a conclusion. That includes resolving outstanding procedural issues, finalizing the administrative record, and issuing a final rule in the Federal Register. Only when that final rule is published, and its effective date arrives, would marijuana’s status under federal law actually change.

None of this is automatic or immune from challenge. The process could move quickly, or it could slow again. Litigation is likely once a final rule is issued. Congress also retains oversight authority. But the practical effect of the executive order is to put the rescheduling question back in active motion and to make inaction by the agency far more difficult to justify. For cannabis companies, the key takeaway is timing uncertainty paired with renewed credibility. This is no longer a theoretical debate or a political talking point. It is an active administrative process with real economic consequences that now warrants attention from executives, boards, lenders, and investors alike. 

What Changes — and What Does Not

If marijuana is ultimately moved to Schedule III, state-legal cannabis businesses would still exist in legal gray area. Adult-use cannabis would remain illegal under the CSA. Interstate commerce would still be prohibited. The Food and Drug Administration (FDA) would retain jurisdiction over cannabis products without having approved them. Federal criminal statutes would not simply disappear, and there is no reason to expect federal licensing pathways for Schedule III drugs to align cleanly with the patchwork of state cannabis regimes that exist today. At the same time, it would be a mistake to minimize what does change.

The 280E Inflection Point
The single most immediate and tangible impact of Schedule III status would be the prospective elimination of Internal Revenue Code Section 280E. For years, 280E has distorted financial statements, punished scale, and forced otherwise successful operators into cash-poor positions. Its removal would not simply improve margins. It would change how cannabis companies plan, borrow, invest, and explain their businesses to the outside world.

Companies should be thinking now about what a post-280E environment actually looks like inside their organizations. That means modeling cash flow under different timing scenarios. It means understanding how higher after-tax earnings interact with debt covenants, earn-out structures, and investor expectations. It also means making sure accounting systems are capable of tracking ordinary business deductions correctly once they become available. Expectations should remain grounded. Retroactive relief is far from guaranteed, and assuming it will materialize invites avoidable risk.

Banking and Capital Are Still Constrained
Rescheduling may slightly soften the posture of some financial institutions, but it does not suddenly make cannabis bankable in the traditional sense. Federally chartered banks remain governed by anti-money-laundering rules that turn on whether funds are derived from federally lawful activity. Schedule III does not resolve that tension.

What it may do is allow certain banks, lenders, and payment providers to engage with greater comfort in a space that now looks less like outright defiance of federal drug policy and more like an unresolved regulatory compromise. For operators, this is an opportunity to reengage in conversations that may have gone dormant. It is not a reason to expect pricing, diligence, or credit terms to resemble those offered to mainstream consumer businesses.

Public markets follow a similar logic. Rescheduling alone is unlikely to open Nasdaq or NYSE listings for U.S. plant-touching companies. Exchange standards still require compliance with federal law, and most operators will continue to fall short of that threshold. Even so, regulatory trajectory matters. Investor perception matters. Companies that use this moment to simplify structures, strengthen disclosures, and build institutional credibility will be better positioned when capital markets access eventually becomes possible.

Compliance Risk Increases, Not Decreases
What deserves the most attention is the mistaken belief that rescheduling reduces compliance risk. In many respects, it does the opposite. A Schedule III classification pulls marijuana closer to the center of federal regulatory attention. Agencies that have historically kept cannabis at arm’s length may feel more empowered to engage, ask questions, and expect answers that hold up under scrutiny.

This is a moment for discipline, not celebration. Companies should be reassessing whether their compliance programs are not only functional under state law, but also coherent, documented, and defensible through a federal lens. Marketing materials, labeling, websites, and investor communications warrant careful review. Claims that imply federal legality, FDA approval, or established medical use beyond what the law clearly supports are no longer merely aggressive. They are risky.

Operational controls matter as well. Inventory tracking, chain-of-custody documentation, quality assurance, and internal audit functions may already exist. Federal agencies tend to care less about whether policies exist and more about whether they are followed consistently and demonstrably. That distinction becomes more important as cannabis moves closer to the category of controlled substances with accepted medical use.

Governance should be reviewed with the same seriousness. Compliance responsibilities should be clearly assigned. Training should be refreshed. Document retention and response protocols should be tested before they are needed. Vendor and partner relationships should be revisited to ensure that compliance obligations are properly allocated and that downstream risk is not quietly accumulating.

CBD and Hemp Policy Developments
In addition to marijuana rescheduling, the executive order signals a more active federal posture toward hemp-derived CBD products. White House officials have framed the directive as focused on improving medical research, physician guidance, and patient access, rather than broadly liberalizing the commercial CBD market.

The order directs senior administration officials to work with Congress to preserve access to full spectrum CBD products, particularly in light of recent legislative changes that narrowed the federal definition of legal hemp. It also calls on the Department of Health and Human Services to develop improved research methods, including the use of real world evidence, to help inform standards of care related to CBD.

Separately, leadership at the Centers for Medicare and Medicaid Services has indicated plans to test a limited model allowing certain Medicare beneficiaries to receive hemp-derived CBD products at no cost when recommended by a physician, subject to quality, testing, and legal compliance requirements. Together, these steps point toward a more structured federal approach to CBD that emphasizes research credibility, product safety, and medical oversight rather than deregulation.

Research, Manufacturing and a Strategic Opening
Rescheduling also has implications beyond traditional state-licensed operations. Schedule III status lowers certain barriers for pharmaceutical and life sciences companies to engage with cannabinoids and cannabis-derived compounds. Schedule I has historically created significant research friction. Rescheduling could accelerate clinical research, intellectual property development, and FDA-regulated drug pathways involving cannabinoids, even though substantial regulatory requirements would remain.

For some cannabis operators, this shift presents a strategic opening. Companies with strong compliance infrastructure, sophisticated manufacturing capabilities, and tolerance for regulatory complexity may wish to explore whether becoming DEA-registered Schedule III manufacturers or research suppliers is viable. Such registration could allow participation in federally authorized research, support academic or pharmaceutical collaborations, or position companies within FDA-regulated development pathways.

This is not a universal solution and will not fit every business model. The costs, timelines, and operational burdens are real. But for companies thinking long-term about where federal policy is heading rather than where it has been, early evaluation of these pathways may create options that did not previously exist.

Looking Ahead

None of this is guaranteed. The DEA still must complete the rulemaking process. Legal challenges are likely. Timelines remain uncertain. Cannabis companies have learned, often the hard way, that federal progress rarely moves in straight lines.

But this moment is different enough to warrant attention. Rescheduling to Schedule III would not resolve the fundamental tension between state-legal cannabis markets and federal law. It would, however, reshape the landscape in which companies operate. Those who treat it as a serious strategic inflection point, not a victory lap and not a mirage, will be better positioned to navigate whatever comes next.

Fox Rothschild’s Cannabis Team will continue to monitor developments closely and advise clients as the federal process unfolds. Please contact any member of Fox’s Cannabis Teams for more information.

This information is intended to inform firm clients and friends about legal developments, including the decisions of courts and administrative bodies. Nothing in this alert should be construed as legal advice or a legal opinion. Readers should not act upon the information contained in this alert without seeking the advice of legal counsel. Views expressed are those of the authors and not necessarily this law firm or its clients.