What Changed and What Didn’t

On December 18, 2025, President Donald Trump signed an executive order directing federal agencies to proceed with rescheduling marijuana under the U.S. Controlled Substances Act (CSA). The decision represents one of the most significant federal cannabis policy developments in decades, but it does not legalize marijuana at the federal level.

Below is a clear breakdown of what the executive order does, what it does not do, and how it relates to hemp and CBD products.

Marijuana Rescheduling Under Federal Law

For decades, marijuana has been classified as a Schedule I controlled substance under the CSA. Schedule I substances are defined under federal law as having no accepted medical use and a high potential for abuse.

The December 2025 executive order directs the Attorney General and relevant federal agencies to complete the administrative process required to move marijuana from Schedule I to Schedule III.

Schedule III substances are recognized as having a lower potential for abuse than Schedule I or II substances and may be subject to different regulatory and enforcement standards.

What the Executive Order Changes

1. Federal Drug Classification

The order initiates the formal process of reclassifying marijuana to Schedule III, signaling a shift in how the federal government categorizes the substance under drug control law.

2. Research Access

Schedule I status has historically created significant barriers to federally approved research. Rescheduling may reduce certain regulatory hurdles for scientific and medical research involving marijuana.

3. Federal Tax Treatment for Cannabis Businesses

Businesses involved in state-legal marijuana operations have been subject to Internal Revenue Code Section 280E, which prevents companies dealing in Schedule I substances from claiming standard business deductions.
If marijuana is fully reclassified to Schedule III, this restriction may no longer apply.

What the Executive Order Does Not Do

No Federal Legalization

The executive order does not legalize marijuana for recreational or adult use at the federal level. Marijuana remains illegal under federal law unless separately authorized.

No Immediate Change to Criminal Enforcement

The order does not eliminate federal criminal statutes related to marijuana. It directs administrative rulemaking rather than changing existing federal prohibition laws passed by Congress.

No Automatic Banking Reform

Despite rescheduling efforts, cannabis businesses still face limited access to traditional banking services. Without separate legislative action, many financial institutions remain cautious due to ongoing federal prohibition.

How This Relates to Hemp and CBD

Hemp and hemp-derived products, including CBD, remain regulated separately under federal law.

Under the 2018 Farm Bill, hemp is defined as cannabis containing no more than 0.3% delta-9 THC on a dry-weight basis. Products that meet this definition remain federally legal.

The 2025 executive order references the need for greater regulatory clarity around hemp-derived products, but it does not change existing THC limits or automatically create new approvals for CBD products.

Federal agencies, including the FDA and USDA, continue to oversee hemp compliance, labeling, and safety standards.

Federal and State Law Context

• Medical marijuana is legal in a majority of U.S. states.

• Recreational marijuana is legal in several states.

• Federal law continues to operate separately from state cannabis programs.

Rescheduling marijuana may reduce tension between federal classification and state-level legalization, but it does not override state or federal authority.

Key Takeaways

• On December 18, 2025, President Trump signed an executive order directing the federal government to move marijuana toward Schedule III classification.

• The order does not legalize marijuana federally.

• Rescheduling may improve research access and change tax treatment for cannabis businesses.

• Hemp-derived products that meet federal THC limits remain legal under existing law.

• Broader cannabis reform still requires action by Congress and federal regulators.

Looking Ahead

The executive order marks a notable shift in federal cannabis policy, but many regulatory, legal, and enforcement questions remain unresolved. Further changes will depend on administrative rulemaking, congressional legislation, and agency guidance in 2026 and beyond.