DOJ Reclassifies Marijuana to Schedule III Under Trump Administration

Final Rule Published in Federal Register

The Drug Enforcement Administration published the final rule moving marijuana to Schedule III effective immediately, ending its classification alongside heroin and LSD. Acting DEA Administrator Timothy Shea signed the reclassification. It was published in the Federal Register at 9:00 a.m. Eastern on May 17, according to the official docket entry. The rule takes effect 30 days from publication, on June 16, 2026.

The final rule adopts the language proposed in the Notice of Proposed Rulemaking published on May 21, 2024, with minor technical corrections to citation formatting. No substantive changes were made to the scheduling criteria or the scope of substances covered. During the comment period that closed in July 2024, the DEA received 43,000 public comments.

Schedule III Classification and Legal Implications

Schedule III drugs are defined as substances with moderate to low potential for physical and psychological dependence and accepted medical use in treatment. Marijuana now shares classification with ketamine, anabolic steroids, and products containing less than 90 milligrams of codeine per dosage unit. The reclassification doesn't legalize recreational marijuana under federal law, nor does it alter state-level prohibitions in the 12 states that haven't enacted medical or adult-use programs.

The move resolves a procedural question that's hung over the cannabis industry since August 2023, when the Department of Health and Human Services recommended rescheduling in response to President Biden's October 2022 directive. Under the Controlled Substances Act, the DEA retained final authority to accept or reject HHS recommendations—and the Trump administration chose to finalize the rule without modification.

Tax Relief Under Section 280E

Rescheduling to Schedule III eliminates the application of Internal Revenue Code Section 280E to state-licensed cannabis operators, allowing standard business deductions for the first time. Section 280E prohibits businesses trafficking in Schedule I or Schedule II controlled substances from deducting ordinary business expenses such as payroll, rent, and marketing costs. Due to this restriction, cannabis companies have operated under effective tax rates exceeding 70 percent in some cases.

The effective date of June 16, 2026, means operators can claim deductions for expenses incurred on or after that date. The IRS hasn't issued guidance on mid-year transitions, but tax attorneys expect the agency to apply a bright-line rule based on the expense date. Operators with fiscal years ending after June 16 will see immediate balance-sheet relief. Multi-state operators including Curaleaf, Trulieve, and Green Thumb Industries have projected combined annual tax savings exceeding 400 million dollars once the rule takes effect.

Research and Development Access

Schedule III classification expands access to federally approved research protocols and reduces administrative barriers for clinical trials. Researchers will no longer require a DEA Schedule I license, which previously limited marijuana research to a single federally approved cultivation site at the University of Mississippi. In a May 17 statement, the National Institute on Drug Abuse—which controls the Mississippi grow facility—announced it will accept applications for expanded research-grade cannabis production from private cultivators beginning July 1, 2026.

The FDA hasn't approved any marijuana-derived drug products outside of Epidiolex, Marinol, Syndros, and Cesamet, all of which contain isolated cannabinoids rather than whole-plant formulations. Schedule III status doesn't automatically grant FDA approval. But it removes a procedural hurdle that's deterred pharmaceutical investment in cannabinoid therapies.

State-Level Enforcement and Interstate Commerce

The reclassification doesn't authorize interstate commerce in marijuana or preempt state-level prohibitions. Cannabis remains illegal to transport across state lines under the Controlled Substances Act regardless of schedule. States with medical or adult-use programs will continue to operate closed-loop regulatory systems in which cultivation, processing, and retail occur within state borders. The Justice Department hasn't issued updated enforcement guidance, and the 2013 Cole Memorandum remains rescinded following the 2018 Sessions memo.

Twelve states—Idaho, Kansas, Nebraska, South Carolina, Tennessee, Wisconsin, Wyoming, Indiana, Iowa, Kentucky, North Carolina, and Texas—prohibit all forms of marijuana including low-THC medical products. Federal rescheduling doesn't compel those states to establish medical programs or decriminalize possession. State attorneys general in Idaho and Nebraska filed comments opposing rescheduling during the public comment period, arguing that federal policy shouldn't undermine state enforcement priorities.

Banking and Financial Services

Schedule III classification doesn't resolve cannabis banking restrictions under the Bank Secrecy Act or federal anti-money-laundering statutes. In 2014, the Financial Crimes Enforcement Network issued guidance outlining conditions under which banks may serve marijuana businesses, but most national banks have declined to offer services due to ongoing federal illegality. The SAFE Banking Act, which would provide explicit safe harbor for financial institutions serving state-licensed operators, hasn't advanced in the 119th Congress.

Industry groups including the National Cannabis Industry Association and the U.S. Cannabis Council have stated that rescheduling alone won't open access to traditional banking or capital markets. Cannabis companies remain excluded from listing on the New York Stock Exchange and Nasdaq. Most institutional investors classify the sector as non-investable due to federal Schedule III status. Full descheduling or passage of standalone banking legislation would be required to normalize financial access.

Next Signals and Litigation Risk

The final rule is subject to judicial review, and at least two organizations have indicated intent to file challenges in federal court. Smart Approaches to Marijuana, an anti-legalization advocacy group, released a statement on May 17 announcing plans to petition for review in the U.S. Court of Appeals for the District of Columbia Circuit. The group argues that the DEA failed to adequately address public comments raising concerns about youth access and impaired driving. A separate challenge is expected from the Cannabis Industry Victims Educating Litigators coalition, which opposes any form of federal liberalization.

The DEA has 60 days from the date of any petition to file an administrative record with the court. Litigation could delay implementation if a court issues a stay, though legal analysts consider that outcome unlikely given the extensive record compiled during the two-year rulemaking process. For complete background on the rescheduling timeline and procedural history, see the CannIntel topic hub on DEA rescheduling.