Oops, We Did It Again? Executive Action Revives Federal Marijuana Rescheduling Efforts and Sets Research and CBD Policy Priorities

Standing alone, the EO does not change federal marijuana scheduling. Rather, it builds on the prior Administration’s October 2022 directive to review cannabis scheduling, the US Department of Health and Human Services (HHS) and the US Food and Drug Administration’s (FDA) scientific review, and the US Drug Enforcement Administration’s (DEA) notice of proposed rulemaking. It further clarifies that rescheduling would not legalize recreational marijuana and emphasizes parallel efforts to strengthen research infrastructure and expand lawful access to hemp‑derived CBD. Through the EO, the Administration also directs expedited completion of the process and outlines near‑term agency priorities that could affect researchers, health systems, hemp and cannabis businesses, and investors.

Procedural Posture and What the Order Changes

The procedural history frames both timing and risk. In October 2022, President Biden directed agencies to reassess marijuana’s Schedule I status. HHS, informed by the FDA and the National Institute on Drug Abuse, concluded in 2023 that marijuana has a currently accepted medical use and a lower abuse potential relative to other Schedule I and II substances. In May 2024, after an Office of Legal Counsel opinion concluded that neither treaty obligations nor the statute required keeping marijuana in Schedule I, the US Department of Justice (DOJ) recommended rescheduling. The DEA then issued a proposed rule to move marijuana to Schedule III and collected extensive comments. However, progress stalled through most of 2025.

The EO directs the Attorney General to take all necessary steps to complete rescheduling “in the most expeditious manner” permitted by law. Again, the EO does not move marijuana to Schedule III; it instructs the DOJ and DEA to finish the rulemaking. The rule must still meet administrative law requirements, including compiling the record and, if the DEA chooses, conducting a hearing and post‑hearing briefing before issuing a final rule. Timing therefore remains contingent on agency process and potential litigation, but the EO resolves a key institutional question by making rescheduling an executive branch priority.

What the EO does not change is equally important. It does not legalize adult‑use cannabis, preempt state law, or authorize commercial activity outside the CSA framework. Schedule III status would reflect accepted medical use and a lower abuse potential, but criminal penalties and regulatory controls would continue to apply to marijuana outside lawful channels. The EO restricts its scope to existing statutory authorities and does not create private rights or entitlements. In short, it reactivates a stalled process and signals policy direction while leaving mechanics to established administrative procedures.

Rationale for Schedule III

The case for rescheduling turns on accepted medical use and relative risk. The HHS analysis credited the widespread, regulated state medical cannabis programs in concluding that marijuana meets federal criteria for a currently accepted medical use. The evaluation cited clinical use by licensed practitioners across multiple indications, including anorexia related to medical illness, chemotherapy‑induced nausea and vomiting, and pain management, against a public health backdrop in which chronic pain is prevalent and interest in opioid alternatives is strong.

Under the CSA, Schedule III substances have a lower abuse potential than those in Schedules I and II, an accepted medical use, and lower dependence risks than substances in higher schedules. HHS concluded marijuana aligns with those criteria based on comparative harms and patterns of use, and the DOJ relied on that scientific evaluation in recommending rescheduling. The record reflects both support and opposition, including concerns about public health impacts and youth exposure, as evidenced by the volume of comments and the previously canceled hearing this year.

A key legal development has been the DOJ Office of Legal Counsel’s opinion that neither international drug control treaties nor the CSA compels marijuana’s continued placement in Schedule I. Alongside HHS’ scientific findings, that opinion underpinned the DEA’s proposed rule and will likely anchor the final rule if the DEA proceeds. The new EO leans on this existing analysis rather than reopening core questions, suggesting agencies will focus on completing the administrative steps rather than re-litigating scientific criteria.

Business, Tax, and Compliance Implications of Schedule III

The most immediate business impact of a final rescheduling rule would be relief from Internal Revenue Code Section 280E, which denies ordinary and necessary deductions to traffickers in Schedule I and II substances. If marijuana moves to Schedule III, state‑legal cannabis businesses would prospectively be able to claim ordinary deductions at the federal level, reducing effective tax rates and improving cash flow. The change would not be retroactive, absent further action, so taxpayers should plan around the effective date of any final rule and consider whether and how to adjust estimated payments and financial reporting in the interim.

Rescheduling would not, by itself, resolve banking, payments, or anti‑money laundering issues. Financial institutions will continue to evaluate risk under the Bank Secrecy Act and applicable guidance, and many will await a final rule before revisiting cannabis‑related customer policies. DEA registration, recordkeeping, and diversion control requirements presumably would apply to anyone handling marijuana plants or products. Companies should expect continued scrutiny of supply chain integrity and labeling, especially where marijuana and hemp‑derived cannabinoids intersect in consumer markets.

Research Infrastructure: Opportunities and Constraints

The EO emphasizes improved research infrastructure for medical marijuana and hemp‑derived cannabinoids, including the use of real‑world evidence to inform clinical practice. It directs HHS leadership, the FDA, the Centers for Medicare & Medicaid Services (CMS), and the National Institutes of Health (NIH) to develop methods and models that reflect actual patient use. The policy rationale highlights substantial CBD use among adults and seniors and recognizes that inconsistent labeling and quality have complicated risk‑benefit assessment and clinical guidance. Federal regulators are being asked to connect data generation with standards of care, rather than rely solely on traditional randomized trials.

Expectations that rescheduling alone will dramatically accelerate research should be tempered. Researchers will likely see some burdens lifted, especially those tied to Schedule I status, but other constraints, such as sourcing standardized materials, institutional review processes, and DEA registration for specified activities, presumably will persist. Universities and sponsors should plan for incremental improvements and watch for guidance clarifying which processes will change and when.

A critical open question is how federal regulators will actually integrate real‑world evidence into regulatory decision‑making for cannabis and cannabinoid products. The EO’s call for method development signals a desire for pragmatic data reflecting use patterns, comorbidities, and polypharmacy in vulnerable populations such as older adults and adolescents. That work will take time and require coordination across HHS subagencies, including alignment on data standards, privacy safeguards, and analytic frameworks. Sponsors and health systems should consider participating in registries and observational studies that can generate decision‑grade evidence aligned with agency expectations.

Hemp‑Derived CBD and the Consumer Cannabinoid Market

The EO acknowledges the unsettled regulatory landscape for hemp‑derived cannabinoids and pairs a research agenda with policy development focused on access and safety. It calls for coordination between the executive branch and Congress to address statutory constraints that limit the FDA’s ability to regulate CBD as a conventional food or dietary ingredient, including definitional issues around “hemp.” That engagement is urgent given recent federal spending legislation containing language that could curtail most consumable hemp products beginning next November, which would significantly reshape the market absent a tailored legislative fix.

In the near term, the EO does not set numeric THC limits per serving or package or mandate CBD‑to‑THC ratios. Instead, it directs agencies to develop research methods to build the evidence base for durable standards of care and risk‑based policy. The FDA remains responsible for addressing mislabeling, adulteration, and unsafe products under existing authorities, and enforcement posture may evolve as evidence accumulates and as Congress clarifies the statutory framework. Companies marketing hemp‑derived products should prepare for tighter quality controls and clearer disclosures, particularly for full‑spectrum products that may contain more THC than consumers expect.

Payers and providers will also watch CMS’ response to the research mandate. Coverage decisions for cannabinoid products, whether prescription or over‑the‑counter, often hinge on real‑world effectiveness and safety evidence in Medicare and Medicaid populations. Methodological guidance from CMS, developed with the FDA and NIH, could influence benefit design and utilization management even before comprehensive product‑specific rules are finalized.

What Rescheduling Would — and Would Not — Do for Enforcement and Public Health

Moving marijuana to Schedule III would recognize accepted medical use and a lower abuse potential relative to Schedules I and II, aligning marijuana with substances such as certain anabolic steroids, ketamine, and codeine combination products. This change would facilitate research access and ease certain administrative burdens associated with legitimate medical handling. It would also reduce punitive tax treatment for compliant businesses and could better harmonize aspects of federal and state policy related to medical use.

However, rescheduling would not authorize non‑medical commercial activity under federal law. The CSA would continue to prohibit manufacture, distribution, and possession outside lawful channels, and state‑legal adult‑use programs would remain in tension with federal law unless Congress acts.

Implementation Outlook, Timing, and Litigation Risk

From EO to effective rescheduling, the path runs through administrative law. The DEA will still need to finalize a rule supported by an administrative record that addresses material comments and issues preserved during the aborted 2024-2025 hearing process. Given high public engagement and policy salience, litigation under the Administrative Procedure Act (APA) is quite possible, including challenges to the scientific basis for accepted medical use and the agency’s analysis of abuse potential and dependence. Courts may be asked for stays or injunctions that could affect timing even after a final rule is published.

The effective date also remains uncertain. The instruction to proceed expeditiously signals urgency, but completion depends on how the DEA manages the record and whether it reopens or supplements procedures before finalization. Stakeholders should plan for multiple scenarios, including a final rule that becomes effective without interruption in 2026 and alternatives in which litigation delays implementation. Companies should also monitor for interim Internal Revenue Service guidance on Section 280E transition and for financial regulators’ expectations as rescheduling approaches.

Updated Summary of the EO’s Research and Policy Directives

Beyond rescheduling, the EO directs HHS leadership, the FDA, CMS, and NIH to develop research methods that leverage real‑world evidence to evaluate medical marijuana and hemp‑derived cannabinoids, with particular attention to seniors and adolescents. It emphasizes aligning research outputs with standards of care so clinicians and payers can make informed decisions. It also calls for executive branch engagement with Congress to modernize statutory definitions and authorities affecting access to CBD‑only products and regulation of the broader hemp‑derived cannabinoid category. These directives respond to widespread consumer use of CBD, variability in product content and labeling, and a patchwork of state rules that leave gaps in safety and consistency.

This agenda will require sustained interagency collaboration and resourcing. Agencies will need to identify priority conditions, clarify endpoints that matter to patients and clinicians, and harmonize data collection to support comparative effectiveness assessments. Industry should anticipate a phased approach, with methodological guidance and pilot programs preceding more formal regulatory policies as evidence accrues. In the meantime, enforcement against misbranded or adulterated products is likely to continue under existing authorities, especially where products present acute safety concerns.

Final Takeaways

The December 18 EO restarts a stalled federal process to move marijuana from Schedule I to Schedule III and sets a parallel agenda for research and consumer protection in cannabinoid markets. The action builds on the prior Administration’s review, HHS’ scientific evaluation, the DOJ’s recommendation, and the DEA’s proposed rule. If finalized, rescheduling would not legalize adult‑use marijuana, but it would materially reduce tax burdens by lifting Section 280E restrictions, modestly ease research constraints, and better align federal policy with widespread state‑recognized medical use. Material uncertainties remain, including administrative timing, potential APA litigation, state tax conformity, and the shape of future federal policy on hemp‑derived cannabinoids. Prudent planning involves preparing for a 2026 effective date while retaining flexibility for delay, reassessing tax and financial reporting positions, engaging in evidence generation aligned with the EO’s research priorities, and monitoring congressional activity that could redefine the CBD marketplace.

ArentFox Schiff’s Cannabis group will continue to track developments through final rulemaking and implementation. For further information on regulatory changes and research initiatives in the medical marijuana and CBD sectors, contact one of the authors or the AFS attorney with whom you normally work.