Trump's Cannabis Rescheduling Executive Order: What Schedule III Means, When It Happens, and How It Affects Legalization

SECTION 1: Introduction & Executive Order Overview

Trump's Cannabis Rescheduling Executive Order: What Schedule III Means, When It Happens, and How It Affects Legalization

Understanding the Most Significant Federal Cannabis Policy Change in 55 Years

On December 18, 2025, President Donald Trump signed an executive order directing the Department of Justice to expedite the rescheduling of marijuana from Schedule I to Schedule III under the Controlled Substances Act. This represents the most consequential shift in federal cannabis policy since the CSA was enacted in 1970.

But what does this actually mean? Will marijuana become legal federally? When will this take effect? And how does it impact Tennessee and other prohibition states?

Let's break down the executive order, the rescheduling process, and the real-world implications for patients, businesses, and advocates.

What Trump's Executive Order Actually Says

The Directive

The executive order, titled "Increasing Medical Marijuana and Cannabidiol Research," contains one primary instruction:

"The Attorney General shall take all necessary steps to complete the rulemaking process related to rescheduling marijuana to Schedule III of the CSA in the most expeditious manner in accordance with Federal law."

Critical point: The executive order does not reschedule marijuana by itself. Under the Controlled Substances Act, the president cannot unilaterally reschedule drugs—that authority belongs to the Attorney General and the DEA through a formal rulemaking process.

What Trump's order does is instruct Attorney General Pam Bondi to prioritize and expedite the process that was already underway under President Biden.

Additional Provisions

Beyond rescheduling, the executive order also:

Directs hemp-derived cannabinoid product reform:

Works with Congress to update the statutory definition of hemp-derived products
Allows access to "full-spectrum CBD products" while restricting intoxicating products
Develops regulatory framework including THC mg limits per serving
Establishes CBD-to-THC ratio requirements

Expands Medicare coverage:

CMS policy shift allowing doctors to recommend CBD products
Medicare covering up to $500 annually for qualifying individuals
Expected to begin April 2026

Emphasizes medical research:

Removes barriers to cannabis research
Develops "real-world evidence" research models
Federal recognition of marijuana's medical use

Trump's Statement

"This is a big day and really for many reasons. Today, I'm pleased to announce that I will be signing an executive order to reschedule marijuana from a Schedule I to Schedule III controlled substance with legitimate medical uses. For decades, this action has been requested by American patients suffering from extreme pain, incurable diseases, aggressive cancers, seizure disorders, neurological problems, and more."

He added: "I've never been inundated by so many people as I have about this particular reclassification."

SECTION 2: Understanding the Schedule System

Understanding the Schedule System

What Are Drug Schedules?

The Controlled Substances Act classifies drugs into five schedules based on three criteria:

Potential for abuse
Accepted medical use
Safety and potential for dependence

Schedule I (Most Restrictive):

No currently accepted medical use
High potential for abuse
Lack of accepted safety for use under medical supervision
Examples: Heroin, LSD, ecstasy—and marijuana (until now)

Schedule II (Highly Restrictive):

High potential for abuse
Currently accepted medical use with severe restrictions
Abuse may lead to severe psychological or physical dependence
Examples: Cocaine, methamphetamine, fentanyl, oxycodone

Schedule III (Moderately Restrictive):

Moderate to low potential for physical and psychological dependence
Currently accepted medical use
Lower abuse potential than Schedule I or II
Examples: Ketamine, Tylenol with codeine, anabolic steroids, buprenorphine

Schedule IV (Less Restrictive):

Low potential for abuse and dependence
Currently accepted medical use
Examples: Xanax, Valium, Ambien

Schedule V (Least Restrictive):

Lower potential for abuse than Schedule IV
Currently accepted medical use
Examples: Robitussin AC, Lomotil

What Schedule III Recognition Means

Moving marijuana to Schedule III represents the federal government's formal acknowledgment that:

✅ Cannabis has accepted medical use in the United States
✅ Cannabis has lower abuse potential than previously classified
✅ Cannabis has moderate to low dependence risk relative to Schedule I/II drugs

This is monumental after 55 years of federal denial.

SECTION 3: The Timeline - How We Got Here

The Rescheduling Timeline: How We Got Here

October 2022: Biden Initiates Review

President Joe Biden directed the Department of Health and Human Services (HHS) and the Drug Enforcement Administration (DEA) to review how marijuana is scheduled under the CSA.

This was the first time a sitting president had ordered such a review.

August 2023: HHS Recommends Schedule III

Based on scientific and medical evaluation, HHS recommended moving marijuana to Schedule III.

HHS findings:

More than 30,000 licensed healthcare practitioners across 43 jurisdictions authorized to recommend medical marijuana
Over 6 million registered patients using medical marijuana
Treats at least 15 medical conditions
FDA found credible scientific support for marijuana treating pain, anorexia related to medical conditions, and chemotherapy-induced nausea and vomiting
National Institute on Drug Abuse concurred with the recommendation

HHS's 252-page scientific analysis used a new two-part test to determine marijuana has "currently accepted medical use" under the CSA.

May 2024: DEA Proposes Rescheduling Rule

The Department of Justice issued a proposed rule to reschedule marijuana to Schedule III.

The proposal received 42,756 public comments—nearly 70% in support of rescheduling.

August 2024: Administrative Hearing Announced

The DEA announced it would hold an administrative law hearing on the proposed rule, scheduled to begin January 21, 2025.

Why a hearing?

Multiple parties requested hearings to debate the merits of rescheduling. Anti-cannabis groups, law enforcement organizations, and others wanted the opportunity to oppose the change.

Pro-cannabis advocates argued that former DEA Administrator Anne Milgram "stacked the deck" in favor of anti-rescheduling parties and engaged in improper communications.

January 2025: Hearing Postponed

On January 13, 2025, the administrative law judge postponed the hearing while an interlocutory appeal regarding alleged DEA bias and improper ex-parte communications is resolved.

The rescheduling process stalled.

December 18, 2025: Trump's Executive Order

President Trump signed the executive order directing Attorney General Pam Bondi to complete the rescheduling process "in the most expeditious manner."

This was Trump following through on a campaign promise from 2024 when he said he would "focus on research to unlock the medical uses of marijuana to a Schedule III drug."

SECTION 4: When Will It Happen?

When Will Schedule III Actually Happen?

The Process Ahead

For marijuana to officially become Schedule III, the following must occur:

Two Possible Pathways:

Option 1: Streamlined Process (Using Section 811 Authority)

The executive order references 21 U.S.C. § 811, which allows the Attorney General to schedule substances through an expedited process without the full notice-and-comment rulemaking typically required.

This authority was used in 2018 to schedule Epidiolex (CBD epilepsy drug) within months of FDA approval.

Steps:

Attorney General/DEA withdraw or cancel the administrative hearing
Draft final rule rescheduling marijuana to Schedule III
Inter-agency review (OMB, other agencies)
Publish final rule in Federal Register
30-60 day effective date period

Timeline: 3-6 months if prioritized

Option 2: Traditional Rulemaking Process

Complete the notice-and-comment rulemaking with administrative hearings.

Steps:

Complete administrative law hearing
Review hearing record and public comments
Draft final rule
Inter-agency review
Publish final rule
30-60 day effective date

Timeline: 6-12+ months

Expert Predictions

If the Trump administration prioritizes this:

Best case: Final rule by spring/summer 2026
Most likely: Fall 2026
Outside possibility: Early 2027 if challenged or delayed

Key factor: Political will. Trump's executive order signals this is a priority, suggesting the faster timeline is more likely.

Shane Pennington, a cannabis attorney representing pro-rescheduling participants, said both the hearing cancellation and final rule issuance "need to be done/explained in the right way, but both can certainly be done."

Potential Delays

Legal challenges: Anti-cannabis groups may sue to block rescheduling
Administrative complexities: Inter-agency coordination takes time
Political opposition: Some law enforcement and anti-drug organizations will resist

However, legal experts note that HHS's scientific findings are "binding on the DEA" and "entitled to significant deference," making it difficult to justify maintaining Schedule I status.

SECTION 5: What Schedule III DOES Change (Part 1 - 280E)

What Schedule III Does—And Doesn't—Change

What Schedule III DOES Change

1. Eliminates Section 280E Tax Burden

This is the most immediate and significant impact.

Section 280E explained:
Internal Revenue Code Section 280E prohibits businesses trafficking in Schedule I or II substances from deducting ordinary business expenses.

Cannabis businesses can only deduct Cost of Goods Sold (COGS), meaning they pay federal income tax on gross profit rather than net profit.

The impact:

Effective tax rates of 50-70%+ for cannabis businesses
State-legal cannabis companies paid $1.8 billion in excess taxes in 2022 compared to other businesses
Many profitable businesses on paper operate at losses due to 280E

What changes with Schedule III:

Cannabis businesses would be able to deduct standard expenses like:
- Rent and utilities
- Employee salaries and benefits
- Marketing and advertising
- Insurance premiums
- Legal and professional fees
- Equipment and technology
- All other ordinary and necessary business expenses

Financial impact:

Industry analysis suggests the typical dispensary could save approximately $268,000 per year
Higher-volume stores could see $800,000+ annual tax relief per location
Industry-wide: $1.6 to $2.2 billion in incremental after-tax cash flow annually

This is transformative for an industry that's

SECTION 6: What Schedule III DOES Change (Part 2 - Other Benefits)

2. Eases Research Barriers

Schedule I status made cannabis research extraordinarily difficult:

Required special DEA licenses (Schedule I researcher license)
Limited access to research-grade cannabis
Rigorous laboratory regulations
Fewer funding opportunities
Additional approval processes

Schedule III changes:

No Schedule I license required
Easier lab regulations
More research funding available
Simpler approval processes
Better access to research materials

Long-term benefit:

What Schedule III Does NOT Change

1. Cannabis Remains Federally Illegal

This is critical to understand: Rescheduling is not legalization.

Schedule III means cannabis is still a controlled substance. Manufacturing, distributing, and possessing marijuana remain federal crimes under the Controlled Substances Act and the Federal Food, Drug, and Cosmetic Act.

State-legal cannabis operators will still be violating federal law.

2. No Automatic State Legalization

Rescheduling doesn't change state laws. Tennessee's prohibition remains in effect unless Tennessee lawmakers choose to change it.

3. No Interstate Commerce

Cannabis cannot cross state lines, even between two legal states, because that would violate federal law.

4. No Recreational Legalization

Schedule III recognizes medical use, not recreational use. Federal recreational legalization requires Congressional action.

5. Employment and Drug Testing Unchanged

Employers can still maintain drug-free workplace policies
Federal employees and contractors still prohibited from using marijuana
DOT drug testing regulations unchanged (for now—may require revision)
Immigration consequences related to marijuana remain

6. Banking Not Fully Resolved

While risk perception improves, comprehensive banking access requires the SAFER Banking Act or similar Congressional legislation.

7. Federal Product Regulations Unchanged

Cannabis products don't automatically become FDA-approved. The pharmaceutical approval pathway (like Epidiolex) remains separate from state-regulated markets.

State Legalization vs. Federal Rescheduling

The Federal-State Conflict Continues

Current state of legalization (as of January 2026):

38 states + DC have medical cannabis programs
24 states have recreational cannabis legalization
14 states remain fully prohibited (including Tennessee)

What rescheduling does:

Makes state-legal programs less federally problematic (Schedule III vs Schedule I)
Doesn't make state programs fully federally legal

Does Rescheduling Make State Legalization More Likely?

Yes, but indirectly:

Political momentum: Federal recognition of medical use strengthens the case for state medical programs.
Economic pressure: 280E relief makes legal cannabis businesses dramatically more profitable, increasing tax revenue and economic disparity with prohibition states.
Public opinion shift: Federal rescheduling signals mainstream acceptance.
Precedent: Federal Schedule III classification makes full legalization more politically viable.

Tennessee-Specific Implications

For Tennessee lawmakers:

Federal government acknowledges marijuana's medical use
40+ states have medical programs
Neighboring states (Illinois, Missouri) generating hundreds of millions in tax revenue
Tennessee maintains total prohibition

Political pressure increases:

"No medical use" argument is federally rejected
Economic opportunity cost grows larger
Border states benefit while Tennessee arrests 11,000+ annually
Federal precedent undermines state justifications

Options for Tennessee:

Option 1: Medical cannabis program - Align with federal Schedule III recognition, implement medical marijuana law
Option 2: Continue prohibition - Maintain current enforcement, forgo tax revenue
Option 3: Broader reform - Push for comprehensive legalization (unlikely)

Most likely: Tennessee maintains prohibition short term but faces growing pressure.

The Path to Full Federal Legalization

Schedule III Is Not the End Goal

Schedule III is a milestone, not the destination. Advocates want:

Descheduling: complete removal from the CSA
Federal legalization regulated like alcohol or tobacco
Interstate commerce
Banking access
Criminal justice reform

What's Required for Full Legalization

Congressional action is necessary. The president cannot legalize marijuana by executive order. Congress must pass legislation to:

Deschedule marijuana
Create federal regulatory framework
Address banking and financial services
Enable interstate commerce
Implement criminal justice reform

Political Reality

Republican-controlled Congress (2025-2026):

Some support for medical marijuana and states' rights
Libertarian faction supports legalization
Law enforcement and social conservatives oppose
Banking reform has bipartisan support

Trump's position: Supports rescheduling, focused on medical use and banking legislation

Likelihood of full legalization 2025-2028:

Medical marijuana expansion: possible
Banking reform: possible
Full recreational legalization: unlikely without major political shift

What Happens Next: Key Dates and Milestones

Immediate (Q1 2026):

DOJ reviews rescheduling process
Decision on hearing cancellation
Drafting of final rule begins
Medicare coverage for CBD begins (up to $500/year)

Near-Term (Q2-Q3 2026):

Final rescheduling rule likely published (if prioritized)
30-60 day comment or effective date delay
Legal challenges possible
Schedule III takes effect, 280E relief begins

Medium-Term (2026-2027):

State legislatures consider medical marijuana bills
Tennessee could debate medical cannabis (passage unlikely)
Federal banking legislation possible
First full year of post-280E taxation
More research approved and funded
Possible trademark applications filed

Long-Term (2027+):

Medical cannabis normalization
Growing state-level legalization
Federal legalization debate continues
Potential descheduling proposals

What This Means for Different Stakeholders

Cannabis Businesses

Work with tax advisors to prepare for post-280E accounting
Plan for improved cash flow from tax savings
Consider expansion opportunities with better profitability
Explore banking options as risk perception improves
Document all expenses for future deductions
Evaluate business structure (C corp vs S corp vs partnership)

Medical Marijuana Patients

Federal recognition of medical legitimacy improves doctor-patient conversations
Potential Medicare/Medicaid coverage starting with CBD
More research leads to better treatment protocols
No change in access for prohibition state residents
Federal protections for employment, housing, and gun ownership remain unchanged
Veterans may see reduced stigma but no marijuana prescriptions yet

Tennessee Residents

Federal rescheduling doesn’t change Tennessee law
Marijuana possession remains illegal with 11,000+ arrests annually
Political pressure on lawmakers to consider reform increases
Economic opportunity cost becomes more obvious
Advocacy and voting can influence change

Employers

Drug-free workplace policies remain enforceable
May face more ADA accommodation requests
DOT drug testing regulations unchanged for now
Recommended to review policies with legal counsel

Researchers

No Schedule I license required
Easier access to research-grade cannabis
More funding and simplified approval processes
Opportunities for dosing, safety, and medical application studies

Law Enforcement

Lower abuse potential recognized federally
Federal penalties less severe
State laws remain in effect
Asset forfeiture and trafficking laws unchanged federally
Tennessee enforcement continues unchanged

Common Misconceptions About Rescheduling

Myth 1: "Schedule III means marijuana is legal now"

Reality: Marijuana remains a federally controlled substance.

Myth 2: "Big Pharma will take over cannabis"

Reality: Schedule III doesn't force cannabis into the FDA drug approval pathway; state markets continue.

Myth 3: "Rescheduling solves banking problems"

Reality: It reduces risk perception but doesn’t remove federal illegality; Congressional legislation is needed.

Myth 4: "This means recreational legalization is coming"

Reality: Schedule III recognizes medical use only; recreational legalization requires Congress.

Myth 5: "States must follow federal rescheduling"

Reality: States can maintain prohibition regardless of federal scheduling.

Myth 6: "Criminal records will be expunged"

Reality: Rescheduling does not automatically expunge convictions; separate legislation required.

Myth 7: "Tax relief is retroactive"

Reality: Relief likely applies only from the effective date forward; past taxes are unlikely recoverable.

Myth 8: "You can transport marijuana across state lines now"

Reality: Interstate transport remains a federal crime regardless of scheduling.

Looking Forward: The Cannabis Policy Landscape

The Trajectory is Clear

1970: Marijuana classified Schedule I—total prohibition
1996: California legalizes medical marijuana
2012: Colorado and Washington legalize recreational use
2018: Hemp legalized federally (Farm Bill)
2023: 38 states have medical programs
2026: Federal rescheduling to Schedule III (expected)
Future: Full federal legalization (timeline uncertain)

The Rescheduling Significance

Schedule III isn’t legalization, but it’s the most significant federal policy change in 55 years, representing:

Federal acknowledgment of marijuana’s accepted medical use
Economic relief for cannabis businesses
Political momentum toward reform
Social acceptance of medical cannabis
Expanded research opportunities

What Comes Next

Next 12 months: Final rule published, 280E relief begins, states consider medical marijuana, banking legislation possible, Tennessee under pressure

Next 3-5 years: Medical marijuana normalization, recreational legalization growth, federal legalization debate intensifies, international markets expand, Tennessee potentially enacts medical program

Next 10 years: Federal legalization likely, interstate commerce permitted, cannabis regulated like alcohol/tobacco, Tennessee likely follows

Conclusion: A Turning Point, Not the Destination

President Trump's executive order marks a historic turning point after 55 years of federal denial. It will transform industry economics, accelerate research, and build momentum for legalization. However, it does not legalize marijuana federally, automatically change state laws, or end banking challenges.

For Tennessee, the dilemma is clear: continue arresting thousands annually for a medicine now federally recognized, or join the 38 other states in reform.

Federal rescheduling is coming. Tennessee legalization may follow—but only if voters demand it.

*Federal cannabis rescheduling to Schedule III is expected to take effect in 2026. This article will be updated as the rulemaking progresses. Bookmark TennCanna.biz for updates.*

Sources

White House Executive Order (December 18, 2025)
DEA Proposed Rule (May 2024)
HHS Scientific Recommendation (August 2023)
Moritz College of Law Drug Enforcement and Policy Center
Cannabis industry legal analyses (Vicente LLP, Goodwin, Jackson Lewis, McGuireWoods, others)
Internal Revenue Code Section 280E analyses
Controlled Substances Act (21 U.S.C.)

Tennessee Cannabiz