December 19, 2025

In December 2025, President Donald Trump signed a major executive order directing federal agencies to reclassify marijuana under the Controlled Substances Act (CSA), moving it out of the strictest category but stopping short of full federal legalization.

This decision is shifting cannabis from Schedule I to Schedule III, representing one of the most significant federal policy changes in decades. But what exactly happened? And does this mean the plant is now federally legal?

Let’s unpack the news, the implications, and what could come next.

What Just Happened? The Rescheduling Executive Order

On December 18, 2025, President Trump signed an executive order directing the Justice Department and DEA to finalize a rulemaking process that would reclassify marijuana from Schedule I (no accepted medical use, high potential for abuse) to Schedule III (accepted medical use, moderate to low potential for dependence).

Under this change:

  • The federal government acknowledges marijuana has medical use.

  • It removes marijuana from the same category as heroin and LSD.

  • It places it alongside drugs like ketamine and certain pain-relievers recognized to have medical value.

However (and this is critical) although a big win, this rescheduling does not make marijuana federally legal. Recreational use remains illegal under federal law, and cannabis products remain federally controlled. 

What Schedule III Means, And What It Does Not

What It Means

Rescheduling to Schedule III could:

Provide Tax Relief for Cannabis Businesses
Schedule I status currently triggers IRS Code § 280E, which disallows ordinary business deductions, creating extremely high effective tax rates for cannabis operators. Moving to Schedule III would potentially eliminate this barrier and allow normal deductions that other industries take for granted.

Expand Research Opportunities
Schedule I restrictions have historically made federal research difficult. Schedule III status could make it easier for universities, medical institutions, and pharmaceutical companies to study cannabis’ medical applications without the heavy regulatory hurdles it now faces. 

Acknowledge Medical Use
Schedule III status means the federal government recognizes marijuana’s potential medical value, a formal acknowledgment that aligns federal policy more closely with many states. 

Possible Medicare CBD Pilot Programs
The executive order included directives to explore federal programs that could reimburse certain cannabis-related CBD treatments for seniors through Medicare.

What It Does Not Do

It does not legalize marijuana federally.
Federal criminal penalties still apply, and cannabis remains a controlled substance under the CSA. 

It does not change federal possession or distribution laws.
Even with rescheduling, possession and non-FDA-approved distribution can still be prosecuted. 

It does not guarantee banking access.
Major banks remain hesitant to work with cannabis companies because cannabis is still illegal under federal law. 

It does not automatically provide social equity reforms or criminal justice changes.
Groups like the ACLU and NACDL have stressed that true justice reforms, expungements, end to federal arrests, etc., require additional congressional action. 

Why This Matters, But Also Why It’s Not the Full Legalization

Rescheduling is an important symbolic and regulatory shift. It validates what many states have put into practice for years, that cannabis has accepted medical use and is not as dangerous as historically classified. 

But because cannabis remains part of the CSA, and because Schedule III drugs are still controlled substances, federal law continues to criminalize non-FDA-approved cannabis outside of state legal systems. 

So while this is a major milestone, it’s not full legalization. It does create momentum and may provide a smoother path toward broader reform, especially if Congress acts next.

What Could Change With Full Federal Legalization

1. Uniform National Legal Framework
Federal legalization would remove cannabis from the CSA entirely (often called descheduling), creating a nationwide legal baseline. This could allow:

  • regulated national commerce

  • interstate cannabis trade

  • standardized safety and labeling practices

State laws could still impose their own rules, but they wouldn’t face federal preemption.

2. Enhanced Banking and Financial Services
A descheduled industry would likely allow full access to FDIC-insured banking, credit cards, and capital markets, something rescheduling alone does not guarantee.

3. Taxation and Economic Expansion
Federal legalization could usher in industry norms similar to alcohol and tobacco, including federal excise taxes, regulated commerce, and clearer pathways for investment and expansion.

4. Criminal Justice and Social Equity Reform
Descheduling could open the door to:

  • expungements for past cannabis convictions

  • immigration relief where cannabis offenses have impacted status

  • reinvestment in communities disproportionately harmed by prohibition, goals that advocates continue to push for through legislation such as the MORE Act and Cannabis Administration and Opportunity Act. 

5. Workforce and Research Growth
Full federal legalization would likely accelerate scientific research, workforce development, and clinical studies on cannabis’ efficacy, safety, and long-term impacts.

Where New York Stands Amid Federal Shifts

New York has one of the most advanced, regulated cannabis markets in the country. The 2025 federal rescheduling move doesn’t change New York’s state laws, but it does:

  • validate state-level medical and adult-use programs

  • signal federal acknowledgment of cannabis’ medical relevance

  • potentially ease federal friction for businesses already operating under state compliance

Because New York already tracks products from seed to sale and enforces rigorous testing standards, the state market remains safe and reliable even as federal policy evolves.

For one of the best curated New York dispensary menus and consistent compliance with evolving standards, check out Cannabis Corner’s online menu here:
https://cannabiscornerny.dispensary.shop/rec/menu

What Happens Next?

While rescheduling is underway, a few things remain:

  • The DEA must complete its formal rulemaking process and publish the final regulation. 

  • Congress could choose to pass broader reform, such as federal legalization or banking legislation.

  • Courts or legal challenges could emerge as the new rule takes shape.

For now, this rescheduling is a historic step, not the finish line.

Bottom Line

President Trump’s action to reclassify marijuana to Schedule III is significant, it recognizes medical use, alleviates business tax burdens, and paves the way for expanded research. But it does not legalize cannabis nationwide. Real federal legalization, with uniform legal access, banking, criminal justice reform, and a national regulatory framework, still requires action from Congress.

We’ll continue watching federal policy closely and updating how it may intersect with New York’s evolving legal cannabis scene.