Cannabis Rescheduling & What This Means For The Industry.

Part 1: A Historic Federal Shift and What It Means for Operators

This week marked one of the most consequential moments in the modern history of U.S. cannabis policy. On Thursday, December 18, 2025, President Trump signed an Executive Order directing the Attorney General to complete the rulemaking process to move cannabis from Schedule I to Schedule III under the Controlled Substances Act (CSA). For the first time since the Act’s passage in 1971, the federal government is formally abandoning the position that cannabis has “no accepted medical use” and belongs in the most restrictive category of controlled substances. In parallel, the Executive Order takes notable steps to expand federal engagement with cannabinoid-based medicine, including directing agencies to facilitate access to certain CBD products and explore pathways for Medicare coverage in defined medical contexts.

From Verdant’s perspective, this is the most significant federal cannabis policy development in more than fifty years. The order does not legalize cannabis at the federal level, nor does it instantly resolve the many operational, banking, and capital-markets challenges faced by licensed operators. But it represents a foundational shift in how cannabis is classified, understood, and treated by the federal government. That shift carries meaningful legal, financial, and symbolic implications that will shape the industry for years to come.

What Rescheduling Means for Medical Research vs. State-Licensed Operators

Rescheduling to Schedule III places cannabis in a category that explicitly recognizes accepted medical use, alongside a range of regulated prescription substances. This change materially alters the federal posture toward cannabis and unlocks several important consequences. Most notably, once the rule becomes legally effective, state-legal cannabis operators should no longer be subject to Internal Revenue Code Section 280E, one of the most punitive and distortionary features of federal cannabis policy. The timing of that relief, however, remains uncertain. As with other final agency rules, the rescheduling rule will take effect thirty days after publication in the Federal Register. Whether 280E relief applies retroactively to tax year 2025 or only prospectively beginning in 2026 will depend on the precise effective date, IRS guidance, and how courts interpret the interaction between the Controlled Substances Act and the Internal Revenue Code. Operators should be cautious about assuming retroactive relief until authoritative guidance is issued.

The Executive Order’s emphasis on CBD and Medicare access reflects a broader recognition of cannabinoid-based medicine within the federal health system. By directing agencies to explore coverage pathways for certain CBD products and to advance research and standards around medical use, the administration is signaling that cannabis policy is no longer confined to criminal law or drug control frameworks. Instead, it is increasingly being treated as a question of healthcare access, pharmaceutical regulation, and patient outcomes. While these initiatives are likely to move incrementally and will be tightly circumscribed, they reinforce the central reality that cannabis is now being acknowledged at the federal level as medicine.

It is critical, however, to distinguish between how rescheduling affects different categories of market participants. For entities that hold DEA registrations for medical research or federally authorized production, moving cannabis to Schedule III meaningfully reduces regulatory friction. Schedule III substances are subject to less onerous storage, security, and handling requirements than Schedule I drugs, and the change should facilitate expanded clinical research and pharmaceutical development within federally sanctioned channels. These operators will still be governed by DEA and FDA oversight, but the rescheduling materially improves the feasibility and scalability of legitimate medical research.

By contrast, state-licensed medical and adult-use cannabis operators that do not hold DEA registrations remain outside the federal medical supply chain. Rescheduling does not convert state-legal cannabis businesses into federally authorized manufacturers or distributors, nor does it allow physicians to issue federally recognized prescriptions for dispensary-sold cannabis. These operators will continue to function under state law, subject to federal prohibition outside the narrow contours of rescheduling’s effects. The distinction matters, particularly as federal agencies, investors, and healthcare institutions begin to reassess risk across different segments of the cannabis ecosystem.

What Federal Rescheduling Does — and Does Not — Change

Equally important is what rescheduling does not do. Moving cannabis to Schedule III does not authorize interstate commerce. Cannabis remains a controlled substance under the CSA, and absent explicit congressional action, cannabis products cannot legally cross state lines for commercial distribution. Rescheduling reduces certain penalties and regulatory burdens, but it does not dismantle the state-by-state market structure that defines the U.S. cannabis industry today.

Legal challenges to the rescheduling decision are inevitable. Any federal cannabis reform of this magnitude was always going to face opposition, whether from prohibitionist advocacy groups, states asserting federalism concerns, or other parties alleging procedural defects. Litigation may delay implementation or create uncertainty around timing. That said, the rescheduling decision rests on a multi-year administrative process initiated in 2022 and grounded in a comprehensive scientific and medical review by the Department of Health and Human Services. Courts historically afford substantial deference to agency determinations in this area, particularly where the administrative record is robust.

Beyond its immediate legal and financial effects, rescheduling carries enormous symbolic and institutional weight. Schedule I has long been the federal government’s most stigmatizing designation, reserved for substances deemed to have no medical value. Removing cannabis from that category is a formal acknowledgment that decades of federal policy were misaligned with medical evidence, state experimentation, and lived experience. This shift will influence how banks, insurers, institutional investors, landlords, and professional service providers assess cannabis-related risk, even if many barriers remain in place.

From Verdant’s vantage point, rescheduling should be understood as a structural reset rather than a finish line. It corrects one of the most glaring contradictions in federal cannabis policy, but it leaves many others intact. Operators should approach this moment with measured optimism and strategic discipline. Improved cash flow from 280E relief, when it arrives, should be deployed thoughtfully toward strengthening balance sheets, investing in compliance, paying down debt, and positioning businesses for a more competitive and capital-efficient future.

This commentary is Part 1 of a broader Verdant Strategies series on cannabis rescheduling. In Part 2, we will examine how this shift materially improves the prospects for additional federal legislation in 2026, including banking and other reforms that have historically stalled while cannabis remained in Schedule I. In Part 3, we will assess state-level implications, including how rescheduling may accelerate adult-use or medical reform in states that have been hesitant to act under a more prohibitive federal regime.

As the national conversation around cannabis enters a new phase, the decisions operators make in the coming months, around tax planning, capital allocation, compliance, and growth, will shape their ability to benefit from this shift. Verdant Strategies remains committed to helping its partners navigate this evolving landscape with clarity, realism, and strategic foresight as this new chapter in federal cannabis policy unfolds.