Acting Attorney General Todd Blanche signed a final order on 22 April reclassifying state-licensed medical marijuana from Schedule I to Schedule III of the Controlled Substances Act. The move marks the first time the federal government has downgraded any form of cannabis since it was placed in the most restrictive category in 1970.
Why it matters: The reclassification affects dispensaries and patients in 38 states and the District of Columbia that have legalised medical cannabis. Under the old classification, marijuana sat alongside heroin and LSD, carrying the harshest criminal penalties and blocking legitimate tax deductions.
What changes immediately
Cannabis businesses operating under state medical licences are no longer subject to Section 280E of the federal tax code. That provision prevented Schedule I businesses from deducting rent, payroll, and other ordinary expenses, effectively raising their tax rates to 70% or higher in some cases, according to industry analysts.
The order also eases restrictions on academic research. Researchers will face fewer regulatory hurdles when studying the medical applications of cannabis, a process that has been constrained by Schedule I requirements for decades.
What the order does not do
Reclassification does not legalise marijuana at the federal level. Possession and distribution remain controlled under Schedule III, which includes drugs such as ketamine and anabolic steroids. State laws still govern who can purchase and sell medical cannabis.
Adult-use or recreational marijuana programmes are not covered by this order. The 24 states with legal recreational sales will see no federal change until the DEA completes a separate proceeding.
What happens next
The Drug Enforcement Administration will open an administrative hearing on 29 June to consider moving all marijuana from Schedule I to Schedule III. That broader reclassification would extend tax relief and reduced penalties to recreational programmes.
The hearing is expected to draw testimony from medical researchers, law enforcement, state regulators, and industry groups. A final rule could take months or longer depending on the volume of public comment.