This past Thursday, the US Dept of Justice (DOJ), under Acting Attorney General Todd Blanche, issued a final order immediately reclassifying medical marijuana (FDA-approved or state-licensed) from typically a Schedule I drug – the most restrictive classification under the Controlled Substances Act (CSA) – to a Schedule III drug that can be made available through prescription. The Drug Enforcement Administration (DEA), the part of the DOJ traditionally delegated the authority to reschedule drugs, also issued notice of an expedited administrative hearing starting June 29 2026 to address the full rescheduling of all marijuana to Schedule III. This comes on the heels of Trump’s executive order last Saturday directing agencies to fast-track review of “breakthrough” psychedelic drugs (1-2 months), invest in psychedelics research, and reschedule drugs that have successfully completed Phase III clinical trials. FDA actions have already been taken on psilocybin, methylone, and ibogaine.

While a major shift for the industry, the rescheduling of medical marijuana has been expected since Trump signed an executive order (EO) in Dec 2025 directing the Attorney General (AG) to complete the rulemaking. Both Biden and Trump have supported rescheduling, but industry watchers believe the DEA – a “famously conservative” law-enforcement agency – has remained skeptical, slowing down the process. According to the WSJ, the action on marijuana took place after Trump complained about agencies slow-walking his EO, asking “Will you get the rescheduling done?” at the Oval Office ceremony last Saturday for the psychedelics EO.

Notably, recreational marijuana remains illegal (Schedule I) at the federal level, and rescheduling would not “legalize” marijuana since it would still be a controlled substance. The DEA recognizes 5 categories of controlled substances from Schedule I to V, classified based on a drug’s acceptable medical use and potential for dependency/abuse. Schedule I drugs like heroin, LSD, and ecstasy have “no currently accepted medical use and a high potential for abuse.” This description contradicts the current usage of marijuana – a Schedule I drug since the CSA was enacted in 1970 – for conditions such as chronic pain, anxiety, insomnia, chemotherapy-induced nausea, pelvic pain, and Alzheimer’s-induced agitation. Schedule II drugs are still considered dangerous and highly controlled, such as cocaine, methamphetamine, Vicodin, OxyContin, fentanyl, Adderall, and Ritalin. Schedule III drugs, which have “moderate to low” risk of dependence, include ketamine, Tylenol with codeine, steroids, and testosterone. Schedule IV drugs, like Xanax, Valium, and Ambien, have a “low” risk of abuse/dependence. Schedule V drugs have the lowest risk, and generally incorporate very limited quantities of narcotics (e.g. Robitussin AC).

Of the 100+ cannabinoids in the cannabis plant, THC (tetrahydrocannabinol) is the main psychoactive compound responsible for the "high," whereas CBD (cannabidiol) offers potential benefits for health conditions without a euphoric “high.” Hemp and marijuana are varieties of the same plant, but hemp plants by legal definition contain no more than 0.3% (dry weight) delta-9 THC while marijuana might have 5-25%+ THC. The definition of hemp is being amended, effective Nov 12 2026, to institute a total THC cap and close a loophole that allows more potent, intoxicating hemp products with other derivative compounds. After Trump’s EO, the Centers for Medicare & Medicaid Services (CMS) initiated a pilot to allow providers under alternative payment models to furnish up to $500 of medically recommended, regulated, hemp-derived CBD products annually to seniors.

The rescheduling has the potential to be far-reaching. The IRS’ Section 280E disallows most tax deductions by businesses trafficking in Schedule I drugs (although growers are allowed to deduct their cost of goods sold). The IRS plans to issue forthcoming guidance, with marijuana businesses expected to be allowed to claim deductions for ordinary expenses such as salaries and rent. The final rule even encourages the IRS “to consider providing retrospective relief from Section 280E liability.” Tax deductions would dramatically alter the cost structures of cannabis-based businesses, which have had an effective tax rate of 70-80%+. Fewer than 25% of cannabis businesses are profitable. The rescheduling could help some cannabis businesses become profitable for the first time, raise valuations across the $47B industry, and make it easier to get funding.

Growers, distributors, importers/exporters, researchers, prescribing providers, pharmacies, and dispensaries will need to pay a fee and register with the DEA. The DOJ’s final rule establishes an expedited registration process (6 months for those who submit within 60 days) for entities with state medical-marijuana licenses. Registration will allow for the manufacture, distribution, and dispensing of medical marijuana under federal law. Registrants will need to maintain records and submit reports, and handle inventory (e.g. labeling, security, disposal) in accordance with the law, although registrants may be able to rely on state requirements in lieu of federal.

Employer policies could change as well. Companies may need to consider if they want to continue or change policies on drug-free workplaces, off-duty conduct, and drug testing, including how they handle employees who are medical-marijuana patients. They could see more employee requests for accommodations and more claims under the Americans with Disabilities Act (ADA). Truck drivers and other safety-sensitive transportation workers regulated by the Dept of Transportation (DOT) would still be subject to federal regulations that currently bar marijuana use.

Reclassification should make it easier to conduct clinical studies and other research on marijuana. Researchers studying Schedule I drugs need to register with the DEA and submit research protocols for review by the FDA, as well as meet stringent requirements for storage in electronic safes/vaults. Schedule III drugs are subject to fewer restrictions in general. The final rule clarifies that researchers “shall incur no civil or criminal liability” if they acquire marijuana for research purposes from a state-licensed, federally registered source, and they themselves are federally registered.

With the reclassification, doctors would have more reliable information, such as standardized dosing for medical marijuana (which is currently lacking). Eventually, there could be quality controls such as “national microbial limits for yeast, mold and pathogens; testing protocols; and required quality systems, including environmental monitoring, batch-level microbial controls, and track-and-trace production.”

Reclassification could give a boost to state programs. There are actually very few FDA-approved cannabis-related drugs (Epidiolex for epilepsy; Marinol, Syndros, and Cesamet for nausea from chemotherapy) – most medical marijuana is state-licensed. At the state level, 40 states plus DC have regulated medical marijuana programs. There has been state-level momentum gathering as well behind legalizing marijuana for recreational use. So far, 24 states plus DC have legalized marijuana for recreational use, including California, New York, New Jersey, Illinois, Washington, Colorado, and Ohio. Only 2 states (Idaho, Kansas) bar marijuana for all uses. No state has yet to reverse its legalization of medical or recreational marijuana, although there have been efforts to do so.

Not everything will change. Rescheduling won’t necessarily make it easier for cannabis businesses to access banking and financing from larger institutions, although community banks and credit unions may perceive reduced risk. Bills have been proposed to fix this at the federal level (e.g. the bipartisan SAFER Banking Act and CLIMB Act) by providing safe harbor to institutions serving the marijuana industry, but none have yet passed. Marijuana businesses may still not be able to be listed on US stock exchanges, unless the exchanges change their rules or a superseding law is passed.

Legalizing marijuana doesn’t necessarily mean the black market is fully eliminated. Not all cannabis businesses will want to take on the regulatory burden associated with DEA registration. Stringent licensing and taxes as high as 30-40% in New York and California means the black market in those states is still alive and well. In Canada, 1/3 of cannabis sales still take place on the black market. In the US and California, that figure is much higher at 60-80%. Marijuana would remain subject to the Federal Food, Drug, and Cosmetic Act (FDCA), which means it still needs specific FDA approval to be transported across state borders.

The EO comes at a time when Trump’s popularity could use a boost. A 2025 Gallup poll found that 64% of Americans support legalization of marijuana – up from 36% in 2005. The figure is higher for Democrats (85%) and independents (66%) but even among Republicans, a significant proportion (40%) support legalization. In the US, marijuana has been the most widely used drug that was still largely illegal at the federal level – 15% of Americans report they smoke marijuana. An even higher 21% report using CBD within the prior year.

Still, there are plenty of people who are skeptical about lifting the restrictions on marijuana, pointing to a host of negative ramifications, especially with higher-potency drugs. These include potential risks from impaired judgment; cannabis-related motor-vehicle crashes; cannabis poisoning and cyclical vomiting; marijuana use disorder and potential for lasting brain adaptation to the presence of marijuana; higher rates of psychosis among young people and linkages to schizophrenia and bipolar disorder; heightened anxiety, depression and suicidal ideation; emphysema and airway inflammation and increased cardiovascular risk; head and neck cancer; behavioral and cognitive problems after fetal exposure; aggressive behaviors and poorer academic outcomes; reduced fertility; and interactions with prescription drugs. Contaminants found in marijuana such as heavy metals and mold have also been linked to fungal infections, sudden numbness, fatal lung bleeding, and artery disease. The rescheduling is expected to face legal challenges.

Psychedelics are at a much earlier stage than marijuana. The Trump administration’s openness, however, to exploring their therapeutic value is a sea change from the FDA’s rejection of MDMA for PTSD in mid-2024. Despite some issues with the clinical trials, the results have been very promising in addressing mental-health disorders. With major depression affecting 8% of American adults each year, and PTSD affecting about 3.6% of American adults each year, the potential market for psychedelic-based drugs is enormous.

Dec 19 2025 (3 Shifts): Trump signs executive order reclassifying marijuana

Oct 25 2024 (3 Shifts): The first successful psychedelic drug is ketamine-based