President Donald Trump’s recent executive order directing federal agencies to accelerate the rescheduling of cannabis has reignited debate across the U.S. cannabis industry. While the announcement has generated widespread attention, the legal, regulatory, and commercial realities remain far more complex than early headlines suggest.
On December 19, 2025, cannabis attorneys FL Gorman, Jason Klimek, and James Mann of Harris Beach Murtha hosted a webinar examining the executive order, its legal implications, and why meaningful change may take significantly longer than anticipated. Their analysis provides important context for operators, investors, and international stakeholders navigating the evolving federal landscape.
This article synthesizes insights from that legal discussion alongside recent reporting from The New York Times to clarify what Schedule III rescheduling actually means—and what it does not.
A Brief Historical Context: How Cannabis Became Federally Prohibited
To understand the significance of rescheduling, it helps to look at how federal cannabis prohibition began. The Marihuana Tax Act of 1937, signed into law on August 2, 1937, imposed heavy taxes and regulatory hurdles that effectively criminalized recreational cannabis while allowing only limited industrial and medical use. That framework was later replaced by the Controlled Substances Act of 1970, signed on October 27, 1970, which classified cannabis as a Schedule I substance—defined as having no accepted medical use and a high potential for abuse. The 1970 Act repealed the earlier tax-based regime (which had been ruled unconstitutional in 1969) and established the foundation of modern federal cannabis prohibition that still governs the industry today.
What the Executive Order Does, and Does Not Do
The executive order signed on December 18 directs federal agencies to move cannabis from Schedule I to Schedule III under the Controlled Substances Act. Schedule III substances are recognized as having accepted medical uses and a lower potential for abuse than Schedule I or II drugs.
According to The New York Times, the order also authorizes a pilot program to reimburse Medicare patients for certain CBD-based products, signaling a broader federal acknowledgment of cannabinoid-based therapies.
However, the order does not:
- Legalize cannabis at the federal level
- Override state cannabis laws
- Permit interstate commerce
- Change current law enforcement practices
- Immediately alter tax treatment or banking access
In short, the executive order initiates a regulatory process—it does not complete one.
Why Rescheduling Will Not Happen Quickly
A central takeaway from the Harris Beach Murtha webinar is that cannabis rescheduling is procedurally complex and legally vulnerable.
The process began in 2022 when the Biden administration directed the Department of Health and Human Services (HHS) to evaluate cannabis’s medical use. HHS issued a recommendation in 2023 supporting Schedule III placement, which was then referred to the Department of Justice and the DEA for formal rulemaking.
That rulemaking process has since been paused due to ongoing litigation, including claims that the DEA’s administrative process was biased. As discussed by the Harris Beach Murtha attorneys:
- The administrative law judge overseeing the case has retired
- Proceedings may restart at an early stage
- New hearings, witnesses, and briefs may be required
- Any final decision is likely to face court challenges
Recent Supreme Court precedent eliminating Chevron deference further complicates the process, as courts no longer automatically defer to agency interpretations. Agencies must now provide highly detailed, defensible reasoning for regulatory decisions.
The consensus from the webinar: rescheduling is unlikely to be finalized in 2026 and could extend well beyond that timeframe.
What Schedule III Means for Cannabis Taxation
One of the most common misconceptions is that rescheduling automatically eliminates Internal Revenue Code Section 280E, which currently prevents cannabis businesses from deducting ordinary business expenses.
In reality:
- Section 280E remains fully in effect today
- It would only cease to apply after formal rescheduling is completed
- Retroactive tax relief is uncertain and likely to be litigated
Existing Tax Planning Options
As discussed during the Harris Beach Murtha webinar, some cannabis businesses may mitigate tax exposure by qualifying as small businesses under federal tax rules. Companies with average gross receipts below approximately $31 million per year (averaged over three years) may use accounting elections that allow broader capitalization of costs, partially offsetting 280E’s impact.
Additionally, some operators are exploring protective refund claims for open tax years (2022–2024), preserving the ability to seek refunds if federal tax treatment changes in the future.
FDA Oversight: A Potential Inflection Point
Rescheduling cannabis to Schedule III would place it squarely within the FDA’s jurisdiction under the Food, Drug, and Cosmetic Act—an outcome that could significantly reshape the industry.
Key considerations raised during the webinar include:
- FDA authority over manufacturing standards
- Increased scrutiny of health and medical claims
- Potential preemption of state cannabis markets by FDA-approved products
- Strict controls over dosage, formulation, and labeling
Historically, the FDA regulates specific pharmaceutical products, not whole-plant botanical substances. This raises the possibility of a bifurcated regulatory system:
- FDA-approved, prescription cannabis products (Schedule III)
- State-legal adult-use cannabis, potentially still treated differently under federal law
If this bifurcation occurs, regulatory, tax, and compliance obligations could diverge sharply between medical and recreational markets.
Banking and Capital Markets: No Immediate Change
Despite optimism in some quarters, the executive order does not materially improve access to banking or institutional capital in the near term.
In fact, some financial institutions may become more cautious if FDA oversight expands, as this could introduce new federal compliance risks. Without statutory reform—such as passage of federal banking legislation—most lenders are expected to remain conservative.
What Rescheduling Means for Cannabis Exports to Europe
One of the most significant downstream implications of Schedule III placement is its potential impact on international cannabis trade, particularly exports to Europe.
Current Export Landscape
- European medical cannabis markets rely heavily on GMP-certified imports
- Countries such as Germany and the U.K. operate under pharmaceutical-style frameworks
- U.S. exports remain extremely limited due to Schedule I classification
Potential Impact of Schedule III
If cannabis is rescheduled and manufactured under FDA-compliant, pharmaceutical-grade standards:
- U.S. companies could potentially export approved medical cannabis products
- Products would still need to meet EU-GMP requirements
- Only prescription-grade formulations—not state-legal flower—would qualify
This means rescheduling primarily benefits pharmaceutical-focused cannabis companies, not traditional U.S. dispensary operators. Canadian and European producers remain better positioned for near-term export due to existing GMP infrastructure.
CBD, Medicare, and Hemp Products
The executive order also references expanded access to CBD-based products, including potential Medicare reimbursement pilots. This comes amid increased federal scrutiny of intoxicating hemp products.
Key implications include:
- Renewed viability for pharmaceutical-grade CBD
- Increased FDA enforcement against unsupported health claims
- Continued pressure on hemp-derived THC products operating in legal gray areas
This signals a broader policy shift toward medical legitimacy over retail permissiveness.
What Cannabis Businesses Should Do Now
Despite the headlines, the practical guidance remains conservative:
- Continue operating under existing state frameworks
- Maintain compliant tax strategies under current law
- Avoid assuming reduced FDA enforcement
- Monitor rescheduling litigation closely
- Reassess international strategies only if pharmaceutical compliance is achievable
For most operators, the Harris Beach Murtha webinar reinforced that this moment represents process, not resolution.
Conclusion: Momentum Without Immediate Relief
The executive order marks a symbolic shift in federal cannabis policy and acknowledges cannabis’s medical potential. However, it does not resolve the core legal contradictions facing the U.S. cannabis industry.
Rescheduling may eventually reshape research, taxation, and international trade—but for now, change remains incremental, contested, and slow.
Frequently Asked Questions
Why has cannabis policy historically relied on scheduling instead of outright bans?
U.S. cannabis policy has often used classification and regulation rather than direct prohibition to control access. Scheduling allowed federal agencies to restrict research, taxation, and commerce without criminalizing all possession at once, creating a layered system of enforcement that evolved over decades.
How does cannabis rescheduling affect research and clinical trials?
Schedule III classification could reduce barriers for researchers by simplifying approvals, sourcing, and storage requirements. This may increase clinical trials and pharmaceutical development, even if broader commercial markets remain unchanged in the near term.
What happens if courts block or delay the rescheduling process?
If courts halt the rulemaking process, cannabis would remain Schedule I under federal law. Agencies would need to restart or revise their analysis, potentially delaying rescheduling for years and reinforcing uncertainty for businesses planning around regulatory change.
How do international drug treaties influence U.S. cannabis policy?
The U.S. is a signatory to international drug control treaties that influence how substances are scheduled and regulated. Any change in cannabis classification must align with—or carefully navigate—these agreements, which complicates rapid policy shifts.
Could future administrations reverse or modify cannabis rescheduling?
Yes. Executive branch actions and agency rulemaking can be altered by future administrations. Without congressional legislation, cannabis policy remains vulnerable to political shifts, making long-term stability difficult for the industry.
