EO accelerates marijuana rescheduling and signals new federal framework for hemp-derived cannabinoids

President Donald Trump has issued an Executive Order (EO), “Increasing Medical Marijuana and Cannabidiol Research,” which directs federal agencies to 1) expedite the rescheduling of marijuana from Schedule I to Schedule III under the Controlled Substances Act (CSA) and 2) develop a unified federal approach to hemp derived cannabinoid products, including cannabidiol (CBD).

These directives – combined with recent legislation closing the “hemp loophole” that had allowed the proliferation of hemp-derived intoxicating products – carry significant implications for medical research, the cannabis industry, and financial institutions operating in this sector.

This alert provides key takeaways and industry considerations below.

Background

Marijuana is currently controlled under Schedule I of the CSA. Drugs with Schedule I classification have no currently accepted medical use, demonstrate a high potential for abuse, and are not accepted as safe for use under medical supervision. Drugs with Schedule III classification have a lesser potential for abuse than the drugs or other substances in Schedules I and II, a currently accepted medical use in treatment in the United States, and a potential for moderate or low physical dependence or high psychological dependence in the event of abuse. Restrictions exist for substances classified under Schedule I that hinder the ability to study marijuana’s medical use.

The EO seeks to expedite the rescheduling of marijuana to Schedule III to facilitate medical marijuana and CBD research. The EO notes that the US Food and Drug Administration (FDA) completed a review of the medical use of marijuana in 2023 and “found scientific support for its use to treat anorexia related to a medical condition, nausea and vomiting, and pain.”

The EO also observed that 40 states, as well as the District of Columbia, have state- or locally sanctioned medical marijuana programs. In 2023, the US Department of Health and Human Services (HHS) recommended to the Drug Enforcement Agency (DEA) within the US Department of Justice that marijuana be moved to Schedule III. In May 2024, DEA issued a proposed rule to begin the process of rescheduling. The proposed rule received nearly 43,000 comments and has been awaiting an administrative law hearing. However, the rulemaking has faced significant delays.

What the EO does

The EO does not change federal law. Rather, it sets the stage for expediting the reclassification and redefinition of marijuana in the following ways:

• Marijuana rescheduling is now a priority for the Trump Administration. The EO directs the Attorney General to complete the Schedule III rulemaking “in the most expeditious manner” permitted under federal law.
  
  
• The Administration will work with Congress to revise the newly enacted statutory definition of final hemp-derived cannabinoid products to allow access to “appropriate full-spectrum CBD products while preserving the Congress’s intent to restrict the sale of products that pose serious health risks.”
  
  
• A new federal regulatory framework for hemp derived cannabinoids will be developed. This will provide guidance on tetrahydrocannabinol (THC) per serving limits, per container limits, and CBD:THC ratios.
  
  
• Federal research on medical cannabis use will be enhanced. The EO directs HHS, FDA, the Centers for Medicare and Medicaid Services (CMS), and the National Institutes of Health (NIH) to develop research methods and models utilizing real world evidence to inform standards of care for the use of medical marijuana.

Key takeaways

• Redefining the statutory definition of marijuana would materially change the legal posture of many cannabis businesses. The EO seeks to revisit recent legislation that redefined hemp by restricting total THC levels and excluding synthetic cannabinoids, creating uncertainty about which hemp-derived products will remain within the definition of marijuana.
  
  
• Rescheduling marijuana is not the same as legalizing marijuana for recreational use. Recreational use of marijuana would still be prohibited without further legislative action. This means that interstate commerce in recreational marijuana, however it is ultimately defined, would still be illegal under federal law, although some of the prohibitions would change.
  
  
• Rescheduling marijuana would have implications for financial institutions that deal in this sector. While rescheduling may provide some relief to bankers, lenders, and payment processors, not all financial restrictions will be removed. For example, although rescheduling will affect a business’s ability to deduct business expenses under Internal Revenue Code Section 280E, marijuana would still be subject to anti-money laundering rules.
  
  
• Medical cannabis research would be facilitated. Moving marijuana to Schedule III would improve access to medical research by easing some DEA controls, broadening access to standardized studies, and encouraging institutional participation. However, the study of Schedule III substances would still be regulated, including under DEA registration requirements, which could continue to pose obstacles that are unaffected by a change in scheduling.
  
  
• Rescheduling marijuana does not change legal requirements for FDA-regulated products. The Federal Food, Drug, and Cosmetic Act imposes restrictions beyond the CSA. For example, rescheduling does not relax FDA standards for safety and efficacy or protection of human subjects. Moreover, cannabinoids cannot be added to foods, cosmetics, or dietary supplements without meeting the appropriate safety standards.

Industry considerations

Those operating in the hemp and banking industries, as well as those researching medical uses of marijuana and CBD, are encouraged to monitor the changing landscape around marijuana and hemp products. This may include:

• Continuing to review product formulations to determine whether and how cannabis and hemp products are scheduled under the CSA
  
  
• Determining how potential rescheduling will impact interactions with financial institutions
  
  
• Assessing the impact on obtaining and studying marijuana for medical use
  
  
• Monitoring federal agencies and Congress for updates and clarifications, as well as participate in any rulemakings or hearings
  
  
• Assessing the impact on state laws

For assistance in navigating this changing legal landscape, please contact the authors or your DLA Piper attorney.