- Key insight: The Department of Justice is moving federal and state-approved medical products immediately to Schedule III, and will consider fully rescheduling the substance in a hearing this coming June.
- Expert quote: "We expect this action, along with the broader rescheduling effort currently under review, to drive increased interest from banks and credit unions," said Terry Mendez, CEO of cannabis compliance firm Safe Harbor Financial. "As perceived federal risk moderates, more institutions are likely to explore cannabis banking, expanding the addressable market for compliant, technology-enabled solutions."
- Forward look: The Drug Enforcement Administration is also withdrawing an existing rescheduling process launched by the Biden administration and restarting it under a new expedited timeline, with a hearing set for June 29.
The Justice Department on Thursday announced it would issue a final order immediately reclassifying Federal Drug Administration-approved drugs and state-approved medical products as Schedule III substances.
The move follows President Trump's executive order late last year
"Under the direction of President Trump and Acting Attorney General [Todd] Blanche, DEA is expeditiously moving forward with the administrative hearing process — bringing consistency and oversight to an area that has lacked both," DEA administrator Terry Cole
The administration
"The Department of Justice is delivering on President Trump's promise to expand Americans' access to medical treatment options," said acting Attorney General Todd Blanche. "This rescheduling action allows for research on the safety and efficacy of this substance, ultimately providing patients with better care and doctors with more reliable information."
As part of Thursday's announcement, the DOJ said it was making procedural changes to hasten the rulemaking process required "to fully" move marijuana to Schedule III.
Cannabis has been classified as a Schedule I substance since 1970. The Biden Justice Department
Trump's December executive
Rescheduling to Schedule III would eliminate a key tax restriction and free up capital for cannabis firms. Under current law, Section 280E of the Internal Revenue Code prevents companies trafficking controlled substances from taking standard business deductions. Because 280E applies only to Schedule I and II substances, a move to Schedule III would allow the industry to deduct expenses on federal filings, improving cash flow, margins, and lending eligibility.
Kevin Hart, CEO and co-founder of Green Check, a fintech that specializes in cannabis banking compliance, said the move will open up new opportunities for the industry, but also new rules and regulatory expectations.
"Rescheduling won't simply give banking a green light. In fact, it will usher in new and likely more complex rules and regulatory expectations for both cannabis businesses and financial institutions. With multiple federal agencies involved, each side should anticipate additional layers of oversight. The ability to connect these requirements across every point where plant and money movement intersect will become absolutely essential."
Adam J. Smith, executive director of the Marijuana Policy Project, which advocates for cannabis policy reforms, called Thursday's action a "move toward sanity." Yet he says the move stops short of treating cannabis like other legal substances such as alcohol, which he'd ultimately like to see.
"We hope that this will open the door to more medical research, inspire states to guarantee access to safe, regulated cannabinoids for patients who desperately need them, and that the regulated industry might finally be treated more fairly under the federal tax code," Smith said. "It does nothing to end hundreds of thousands of possession arrests each year, nor does it do anything to fix the untenable, ongoing disconnect between federal prohibition and the regulated state markets under which more than half of American adults live."
Josh Kesselman, publisher of High Times Magazine, said the move rightly acknowledges the medical uses for cannabis, but that it leaves deeper issues at play.
"Let's not pretend it is the finish line," Kesselman said. "It is not legalization, it is not descheduling, and it does not automatically fix the deeper problems in federal cannabis policy. If Washington gets this wrong, reform could end up favoring the biggest, best-connected players while leaving small farmers, independent operators and the people who built this movement behind."
Terry Mendez, CEO of cannabis compliance firm Safe Harbor Financial, called the move "the most significant federal action on cannabis policy in more than fifty years," but added "it is important to understand both its scope and its limitations."
"Relief from 280E should improve operator liquidity, financial transparency, and credit quality, all of which are foundational to sustainable banking relationships," Mendez said. "This action does not extend to adult-use cannabis, does not legalize marijuana federally, and does not change existing obligations under the Bank Secrecy Act. Financial institutions must continue to adhere to Fincen guidance, including [suspicious activity report] and [currency transaction report] reporting and enhanced due diligence requirements."
Mendez added that the order also does not provide retroactive 280E relief, though it encourages the Treasury Department to consider the possibility. "We expect this action, along with the broader rescheduling effort currently under review, to drive increased interest from banks and credit unions," Mendez continued. "As perceived federal risk moderates, more institutions are likely to explore cannabis banking, expanding the addressable market for compliant, technology-enabled solutions."
