Executive Order on Cannabis Rescheduling Fails to Deliver Immediate Changes for Industry
Trump's executive order on cannabis rescheduling fails to change legal status or business operations, leaving the industry in a state of uncertainty
Key Points
- 1Executive order does not change cannabis legal status or operations
- 2Rescheduling process initiated by Biden administration remains stalled
- 3Tax liabilities and banking restrictions for cannabis businesses unchanged
- 4Schedule III rescheduling would benefit pharmaceutical companies, not state-licensed operators
- 5Comprehensive legislative efforts are needed for meaningful cannabis reform
The recent executive order signed by former President Donald Trump, aimed at expediting the rescheduling of cannabis to Schedule III, has sparked considerable attention. However, the order does not bring immediate changes to the cannabis industry. As reported by High Times, the executive order has not altered the current legal status of cannabis, nor has it impacted the business operations of cannabis companies
The rescheduling process, which began in 2022 under the Biden administration, remains stalled. The Department of Health and Human Services recommended moving cannabis to Schedule III in 2023, but the Drug Enforcement Administration (DEA) has yet to complete the necessary rulemaking. Legal challenges have further delayed progress, with a federal judge halting the DEA's rescheduling hearings in early 2025 due to allegations of bias and conflicts of interest, leaving the process in legal limbo
Despite the executive order, cannabis companies face unchanged tax liabilities under Section 280E of the Internal Revenue Code. According to the IRS announcement in 2024, cannabis businesses remain subject to these tax rules until a final rule on rescheduling is enacted. The executive order also fails to address banking restrictions, as financial institutions continue to face regulatory risks in dealing with cannabis businesses without additional legislative changes
The rescheduling to Schedule III, if it occurs, would not automatically legalize interstate cannabis commerce or provide broader banking protections. State-licensed operators would still be confined to intrastate markets, and federal compliance would be necessary for any cannabis product to gain legitimacy. As High Times notes, only companies with DEA registration and FDA-approved products would benefit from such a shift
The primary beneficiaries of a potential rescheduling to Schedule III are likely pharmaceutical companies and research institutions, rather than state-licensed cannabis operators. These entities are better positioned to navigate federal regulations and capitalize on any changes. The executive order highlights the complex nature of cannabis reform, which cannot be resolved through a single executive action. It underscores the need for comprehensive legislative efforts to address the multifaceted challenges faced by the cannabis industry