President Trump signed an executive order in December directing the attorney general to speed up moving marijuana from Schedule I to Schedule III. It also seeks more research on medical marijuana and cannabidiol and asks Congress to set rules for hemp products. 

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This picks up where a 2023 recommendation from the Department of Health and Human Services and a stalled 2024 proposal from the Drug Enforcement Administration left off. The push to move fast suggests rescheduling could happen in early 2026. But marijuana is still Schedule I until the DEA publishes the rule making the change.

The order directs federal agencies to finish DEA rulemaking for Schedule III as quickly as possible. It also pushes for more research using real-world data, especially focused on at-risk groups. And it asks for rules around hemp and CBD products, including tetrahydrocannabinol limits and possible Medicare pilots for seniors.

What it doesn’t do is reschedule marijuana immediately. It doesn’t legalize recreational use at the federal level. And it doesn’t fix the state-federal conflicts or banking problems on its own. Advocates want marijuana removed from the controlled substances schedule entirely. Others worry about risks to children and increased usage rates.

Currently, 40 states, four territories (Guam, the Northern Mariana Islands, Puerto Rico and the U.S. Virgin Islands), and Washington D.C. allow the use of medical cannabis. Recreational marijuana is currently legal in 24 states plus Washington D.C.

Section 280E is a provision in the Tax Code that only applies to businesses trafficking in Schedule I or II drugs. It blocks them from deducting ordinary business expenses. Schedule III drugs don’t face this restriction.

Right now, cannabis businesses operating legally under state law still can’t deduct basic costs like rent, salaries or marketing. They can only deduct the cost of goods sold. That creates effective tax rates that can hit 70% or more. It’s also why so many operators struggle to turn a profit even when their revenue looks good. If marijuana moves to Schedule III, that will change significantly. Businesses would be able to deduct business expenses under Section 162, just like any other company. Effective tax rates would drop significantly.

The focus would shift from maximizing cost of goods sold to standard record-keeping for deductions. But this change won’t apply retroactively. Section 280E rules continue to apply until the DEA publishes a final rule with an effective date. Companies with fiscal years that cross that date will need to split their accounting.

Company valuations could rise as earnings improve without the 280E hit. That makes businesses more attractive to lenders and investors.

Banking may become incrementally easier over time, but rescheduling by itself doesn’t change federal banking laws. Cannabis remains federally illegal outside FDA-approved uses, and banks will still face SAR requirements and money-laundering risk unless Congress enacts specific banking reforms, or banking regulators or FinCEN revise existing guidance. That said, as effective tax rates fall and earnings improve post-280E, some lenders and investors may view state-legal operators as more creditworthy. That could slowly expand access to basic banking and credit, especially in markets where local institutions already bank cannabis under existing Treasury guidance.

Many operators have built complicated structures just to deal with 280E. Some run separate entities to isolate the cost of goods sold. Others use management agreements or licensing deals to move money around legally. If 280E is eliminated for cannabis businesses, those structures might not be necessary any longer.

State taxes are another question. Some states tie their tax codes to federal law. Others don’t. How each state handles this will vary. Advisors need to understand what their state does and plan accordingly. And mergers and acquisitions could pick up. When profits look better on paper, deals get easier to structure. Investors and potential suitors who stayed away because of the tax burden might start looking again.

The process of rescheduling could take longer than expected. Lawsuits could slow things down. The DEA must follow certain steps required by law. Even with an executive order pushing for speed, there are procedural hoops to jump through.

Schedule III also comes with its own rules. It means stricter prescription requirements long-term. That could favor pharmaceutical companies over state-licensed dispensaries, potentially hurting smaller operators.

Critics of marijuana legalization point to risks around youth use, addiction and brain development. Expect more calls for warning labels, education campaigns and restrictions on marketing. Some of that might come with rescheduling as part of the political compromise.

And workplace drug testing isn’t changing. Employers, especially in safety-sensitive industries, can still test for marijuana and make hiring decisions based on results. Federal rescheduling doesn’t affect employment law in most cases.

First, follow 280E for 2025 and all open prior years. Maximize allowable cost of goods sold and keep detailed records. Second, run scenarios. Model what cash flow, valuations and tax payments look like with and without 280E. Help your clients understand what could change and when. Third, tighten up expense tracking and policies. If 280E goes away, you’ll need clean books to take full advantage of deductions. Get systems in place so you’re ready when the time comes.Fourth, review company structures. Flag anything that was built just to work around 280E. And start thinking about whether those structures still make sense in a post-280E world.

The executive order shows the federal government is serious about recognizing marijuana’s medical uses and trying to align with what many states are already doing. For the cannabis industry, it could mean the end of a tax burden that’s held the sector back for years. But nothing has changed yet. Marijuana is still Schedule I. Section 280E still applies. 

In any case, if the DEA moves as fast as the order suggests, 2026 could be a turning point for much of the industry as well as the legal and accounting professionals that advise cannabis companies.