On December 18th, 2025, Donald Trump issued an executive order directing federal agencies to complete the process of reclassifying marijuana from Schedule I to Schedule III under the Controlled Substances Act. For most, this is a long time in the making and brings a more common-sense approach to cannabis regulation.
The announcement immediately launched headlines suggesting that cannabis had been “federally legalized.” It hasn’t, and the move is far more nuanced. Reclassification is a meaningful step forward—but it is not the finish line for the cannabis industry. There are clear things this reclassification does and does not do, and it will undergo an appeal process before it can become law.
What the Executive Order Actually Does
Cannabis Reclassification to Schedule III
It directs federal agencies—primarily the Drug Enforcement Administration and the Department of Justice—to finalize the formal rulemaking process. The executive order does not instantly change federal law.
The point being?
- Signals strong executive support for rescheduling
- Accelerates an already active administrative process
- Instructs agencies to move efficiently toward a final rule
Essentially, it is telling these agencies it’s time to seriously look at the substance and its current classification. Think of it as pushing the process forward—not flipping the switch.
How Marijuana Reclassification Becomes Law
For marijuana to officially become a Schedule III substance, the federal government must complete the full administrative rulemaking process, which isn’t easy. Despite what many in the US think, an executive order is not truly a “law” until this process is complete.
That process includes:
- Review of scientific, medical, and public-interest evidence
- Consideration of public comments and administrative records
- Issuance of a final rule by the DEA itself
- Publication in the Federal Register with an official effective date
Usually, the rule takes effect about 30 days after publication (which has not yet occurred), unless a different timeline is specified. Until that happens—or if it never makes it to the end—marijuana remains classified as Schedule I at the federal level, as it currently is.
Can Reclassification Be Challenged or Delayed?
Yes, and it already is. Even after a final rule is issued, it may face legal challenges in federal court. This is already underway, as there are opposing forces in both the political and medical realms regarding this classification.
This creates two potential timing variables:
- Administrative timing: when the final rule is issued and takes effect
- Litigation timing: whether lawsuits delay or temporarily pause enforcement
While courts do not automatically block new rules, challenges could slow or complicate implementation. There are already a number of organizations, as well as conservative political and religious groups, opposing this change and taking action.
What Would Schedule III Change for Cannabis Businesses
It really depends on what a particular business is doing in the space, and it won’t affect all cannabis operators the same way. Once effective, Schedule III classification would bring several real-world, tangible benefits—especially for compliant, state-legal operators. Tax relief is a major one, along with expanded medical research opportunities.
- Relief from IRS Section 280E: Cannabis businesses may be able to deduct normal operating expenses again, dramatically improving cash flow and profitability. This has been one of the largest barriers to profitability for U.S. cannabis operators.
- Expanded medical and clinical research: Schedule III substances face fewer research barriers than Schedule I drugs, paving the way for more legitimate medical research and broader acceptance within the medical community.
- Improved regulatory perception: While still controlled, cannabis would no longer be classified alongside heroin or LSD. For many, this is long-overdue common sense.
For many operators, the 280E change alone could be one of the most financially impactful developments in decades. Farmers, producers, and retail dispensaries alike have faced massive profitability challenges due to extreme tax burdens.
What Schedule III Does Not Do
Despite optimistic headlines, reclassification has clear limits, and it does not remove all regulatory challenges for cannabis operators.
It does not:
- Federally legalize recreational or medical marijuana
- Override state-level cannabis laws or licensing structures
- Automatically allow interstate cannabis commerce
- Instantly open the door to Visa, Mastercard, or major national banks
- Eliminate compliance requirements or federal oversight
Cannabis would remain a controlled substance, and the federal–state conflict would still exist.
What It Means for the Cannabis Payments Industry
From a payments perspective, not much changes immediately. Cannabis remains federally illegal, even if it does move to Schedule III. The shift is helpful and moves the industry in the right direction—but it is not transformative overnight.
Here’s what to realistically expect:
Incremental improvement, not instant normalization
- Some financial institutions may reassess their risk posture
- Many large banks will continue to wait for congressional safe-harbor protections before offering services
Continued reliance on alternative payment rails like BPS.
- Cashless ATM systems will likely remain the primary payment method for U.S. dispensaries
- Working with experienced cannabis payment providers remains critical
Final Thoughts on the Executive Order
For cannabis payments and banking, there are still major changes needed before the proverbial “floodgates” open. Progress will likely come in steps, not a single breakthrough moment. That makes experienced payment partners more important than ever in navigating this evolving regulatory landscape.
Learn more about our Cannabis Cashless ATM options for U.S. cannabis retailers.