On December 18, 2025 President Trump signed an executive order that will fundamentally reshape how the federal government views cannabis, and by extension CBD.
For the first time in more than 50 years, federal policy is shifting away from the idea that cannabis must be treated the same as substances with no recognized uses. While this executive order does not legalize marijuana, it directs federal agencies to reevaluate how cannabis is scheduled: opening the door to a long-overdue realignment between federal rules and the reality in most U.S. states. This is the most significant shift in cannabis policy since the Controlled Substances Act was created in 1970.
On December 18, 2025, President Trump signed an executive order directing the federal government to reschedule cannabis to Schedule III, moving it out of the most restrictive drug category. While it does not legalize marijuana, the order begins a formal regulatory process with major implications for research, taxation, and federal cannabis policy, including a Medicare pilot program for hemp-derived CBD beginning in 2026.
What is Cannabis Rescheduling?
Under the Controlled Substances Act, substances are placed into five “schedules” based on federal criteria including potential for abuse and recognition of accepted uses. Since 1970, cannabis has been held in Schedule I, the most restrictive classification.
Schedule I Drugs
Schedule I is designed for substances that federal law considers to have no accepted medical use and a high potential for abuse.
Schedule III Drugs
Schedule III, by contrast, is a category for substances with recognized uses and lower risk profiles.
President Trump’s executive order directs the Attorney General Pam Bondi to begin the administrative process of cannabis rescheduling to Schedule III. This direction follows multiple federal agency evaluations, including a scientific review by HHS and FDA. The order effectively accelerates a process that has been discussed for years but stalled at the federal level.
This action represents a policy shift, not an endorsement of medical claims, and does not change the legal status of CBD or hemp products.
Why Cannabis Rescheduled to Schedule III Matters?
Rescheduling cannabis has far-reaching implications across industries, scientific research, and federal taxation, even though it does not legalize marijuana.
What is Section 280E? The Cannabis Tax Burden
For decades, the federal government has treated cannabis businesses the same as drug traffickers under the tax code. Section 280E of the Internal Revenue Code prevents any business associated with Schedule I or II substances from deducting ordinary operating expenses. This includes costs like rent, payroll, utilities, insurance, and marketing, expenses that every other type of business is allowed to write off.
This has resulted in cannabis companies facing an effective tax rate far higher than most industries, with many analysts estimating effective tax rates between 60% and 80%. For comparison, the typical U.S. business often faces an effective tax rate closer to 25%.
Moving cannabis from Schedule I to Schedule III eliminates this burden entirely. Industry analysts widely predict that rescheduling could unlock billions of dollars across the legal cannabis market. These funds could be redirected toward compliance improvements, research, product development, job creation, and – depending on market dynamics – potentially more competitive pricing within regulated cannabis markets.
Researching Without the Roadblock
More than just taxes, the Schedule I designation has long restricted scientific research. Researchers studying cannabis have faced limited access to materials, extensive federal registration requirements, and complicated approval pathways that slowed progress. These barriers often made cannabis research far more difficult than research involving other regulated substances.
Rescheduling to Schedule III does not eliminate federal controls, but it meaningfully lowers the administrative burden. Universities that rely on federal funding may be more willing to participate in cannabis research, and regulatory processes for research approval may become more practical. While this change does not imply any specific medical outcomes, it does create an environment in which more data can be collected, shared, and evaluated by the scientific and policy communities.
Symbolism Matters
Beyond procedural changes, the shift away from Schedule I carries symbolic significance. For over five decades, federal policy treated cannabis as a substance with no recognized uses, the same category as heroin. Meanwhile, state-level policies evolved dramatically: more than 40 states now operate medical cannabis programs, serving millions of registered patients under regulated frameworks.
The rescheduling directive signals that federal policy is beginning to reflect this broader national landscape. As John Kagia, Policy Director at New York’s Office of Cannabis Management, told The New York Times: “This is a really significant shift and signal on normalization of cannabis in America, in the American economy, and in American society.”
“The most immediate impact would be psychological as much as operational,” says Craig Henderson, CEO of Extract Labs. “Reclassification would signal that the federal government is finally acknowledging reality, which could unlock more research, ease some financial constraints, and bring greater legitimacy to the industry. For businesses, it would create cautious optimism, but not overnight change.”
What Does Cannabis Rescheduling Mean for CBD and Hemp?
While most public attention has focused on marijuana, the executive order also addresses regulatory questions that directly affect hemp-derived cannabinoids.
Full Spectrum CBD Gets Federal Attention
The order directs federal agencies to work with Congress to reexamine statutory definitions that impact hemp-derived cannabinoid products, including full spectrum CBD. This could influence how future rules define compliant hemp products and how THC limits are interpreted.
This does not reverse the 0.4 mg THC per-container limit established in 2025, but it signals that policymakers recognize the need for clarity, especially in distinguishing between lawful hemp products and higher-THC cannabis.
“That’s the tension the industry is wrestling with right now,” Henderson explains. “On one hand, reclassifying cannabis suggests progress; on the other, efforts to restrict or ban hemp-derived products point to fragmentation in federal policy. Until there’s alignment across agencies, businesses will still be navigating uncertainty—even with positive headline announcements.”
Craig Henderson, CEO of Extract Labs
Learn more about our full spectrum CBD products and why the entourage effect matters.
Medicare Coverage for CBD
In a first for federal health policy, the executive order directs the Centers for Medicare and Medicaid Services to establish a pilot program that would allow eligible Medicare participants to access hemp-derived CBD products when recommended by a healthcare provider. Scheduled to launch in Q2 2026, this initiative will operate within existing federal and state compliance requirements.
CMS leadership has indicated that the program could ultimately apply to millions of Medicare beneficiaries once fully implemented. Any CBD products included in the pilot must meet strict regulatory standards, such as lawful sourcing, third-party testing for CBD levels and contaminants, and adherence to all state and federal rules governing hemp-derived cannabinoids.
For an industry that has largely operated in a legal gray area, federal health insurance coverage even in pilot form, represents a huge shift toward legitimacy.
Consumers who want to better understand CBD quality and safety standards can consult publicly available third-party laboratory results and regulatory guidelines. At Extract Labs, we have maintained comprehensive third-party testing practices since 2016, and our full batch database is available online to help customers review how we verify product consistency and regulatory compliance.
Why Does This Matter for CBD Users?
With these changes, the federal government is officially recognizing CBD as a legitimate wellness option something users have believed for years. One in five American adults and nearly 15% of seniors have reported using CBD within the past year. While this executive order does not solve all of the regulatory issues, it’s a meaningful step forward in federal cannabis policy.
What This Does Not Do
With news this significant, it’s easy to get swept up in what is changing, but it’s just as important to stay grounded in what isn’t. This is a major step forward, not the finish line.
This Is Not Legalization
President Trump emphasized that this executive order does not legalize marijuana in any form. Cannabis rescheduling does not legalize marijuana, possession without a prescription remains a federal offense. The state-by-state patchwork of recreational and medical laws still technically conflicts with federal law.
Possession Is Still Federally Illegal
Even with rescheduling underway, unauthorized possession remains unlawful at the federal level. State laws may determine day-to-day enforcement, but the Controlled Substances Act still applies nationally.
A White House official clarified that “anyone possessing marijuana would be in violation of the CSA and still remain subject to arrest under federal law. The Schedule III change is not changing federal policy regarding that.”
State Laws Still Govern Access
Rescheduling does not create a national market for cannabis.
If you live in a state that does not have a medical or adult-use program, this executive order does not change your access.
The 40 states with medical programs, and the 24 with recreational markets, will continue operating under their existing regulatory structures.
Anyone unsure of their state’s status should consult local regulatory updates, as these laws evolve separately from federal scheduling.
The Process Isn’t Finished
It is important to stress that this order directs the Attorney General to complete the rescheduling process “in the most expeditious manner” but does not set a specific timeline. When does cannabis rescheduling take effect? There is no firm date yet. Keep in mind that this process was originally approached in 2022, and only now has made it this far. There is still a rulemaking process, a public comment period, and likely legal challenges. Already, advocacy groups such as Smart Approaches to Marijuana have indicated plans to sue.
“One risk is assuming reclassification alone solves everything,” Henderson cautions. “It doesn’t automatically fix banking access, interstate commerce, or state-by-state inconsistencies. There’s also a chance that new regulations could favor larger players and make compliance more difficult for small, responsible businesses if not implemented thoughtfully. How it’s rolled out will matter just as much as the decision itself.”
| What it does | What it does not do |
|---|---|
| Move cannabis from Schedule I to Schedule III | Legalize marijuana for recreational use |
| Recognizes cannabis as having medical use | Change federal possession laws |
| Eliminates Section 280E tax burden | Override state cannabis laws |
| Establishes Medicare CBD Pilot Program | Set a firm timeline |
| Directs congress to revisit hemp/CBD definitions | Reverse the .4mg THC limit from November 2025 |
Looking Ahead: Where Do We Go From Here?
The executive order begins – not ends – the federal rescheduling process. The Attorney General must still conduct formal rulemaking, and Congress will likely revisit hemp and CBD definitions in the coming year. Legal challenges are also expected, which could influence the timing of implementation.
For the cannabis and hemp sectors, the next 12–18 months will likely shape the national regulatory landscape for years to come.
Our Commitment
Since 2016, we’ve built Extract Labs on a simple foundation: transparency, rigorous third-party testing, and products made with integrity. We’ve navigated every regulatory shift thrown at this industry — from the 2018 Farm Bill to evolving state-by-state requirements, without wavering from those standards.
While this executive order marks meaningful progress, it’s only one step toward the recognition and legitimacy the cannabis and hemp industries have worked toward for decades. There is still plenty of work ahead. But no matter what happens in Washington, our commitment to you stays the same: consistently tested products, honest labeling, and quality you can trust.
After 55 years, the federal government is finally catching up. We will be here for whatever comes next.
Frequently Asked Questions
Common questions about cannabis rescheduling and what it means for CBD
Does cannabis rescheduling legalize marijuana?
No. It reclassifies the substance but does not legalize possession or use at the federal level.
When does cannabis rescheduling take effect?
There is no specific date yet. The executive order instructs agencies to move quickly, but formal rulemaking still needs to occur.
What is Section 280E?
A tax rule preventing cannabis businesses from deducting ordinary business expenses. Rescheduling to Schedule III removes this limitation.
How does rescheduling affect CBD products?
It does not immediately change CBD regulations, but the executive order includes directives for reviewing hemp definitions and establishing a Medicare pilot program.
Sources
INCREASING MEDICAL MARIJUANA AND CANNABIDIOL RESEARCH
Fact Sheet: President Donald J. Trump is Increasing Medical Marijuana and Cannabidiol Research
How Rescheduling Marijuana could affect Colorado’s industry
Trump Signs Order to Ease Restrictions on Marijuana
Trump signs executive order fast-tracking reclassification of marijuana
Trump signs executive order easing marijuana restrictions by reclassifying drug
Trump signs executive order that could reclassify marijuana as a less dangerous drug
