Trump’s Executive Order Signals Possible Shift in Marijuana Policy

In a significant move for the cannabis industry, President Trump issued an executive order aimed at easing federal restrictions on marijuana. While the order is poised to provide some relief for cannabis businesses, experts caution that real changes may take time and are not as straightforward as they might seem.

Why It Matters

This executive action highlights an evolving landscape for cannabis regulation in the U.S., potentially setting the stage for expanded research, reduced tax burdens, and different banking practices. The impact on federal drug policy could prove pivotal for an industry that has long navigated complex legal challenges.

Key Developments

• Executive Order Issued: On December 18, President Trump ordered the rescheduling of marijuana from a Schedule I to Schedule III drug.
• Rescheduling Limitations: Experts emphasize that this order does not automatically alter federal drug laws governing marijuana or permit it to be transported across state lines.
• Pathway for Research: Rescheduling could facilitate easier access for medical marijuana research, though strict sourcing rules remain an obstacle.
• Tax Relief Ahead: The executive order could end the stringent IRS Section 280E tax limitations that have burdened cannabis businesses.
• Banking Challenges: Cannabis firms may continue to encounter difficulties with traditional banking services, as many institutions are hesitant to engage with marijuana-related operations.

Full Report

Rescheduling Process

While Trump’s order aims to expedite the marijuana rescheduling process, it does not grant the authority for instant changes to federal drug policy. Gillian Schauer, executive director of the Cannabis Regulators Association, notes, “The Controlled Substances Act does not grant any president the authority to unilaterally reschedule a drug.” Historically, such alterations require either a formal rule-making process or congressional action.

The order specifically instructs Attorney General Pam Bondi to fast-track the rescheduling process in compliance with federal law. This could follow paths initiated during the Biden administration, where a similar effort to downgrade marijuana’s classification was already underway. However, Trump’s directive hints at the possibility of a streamlined process, allowing the attorney general more leeway in making scheduling decisions without adhering to lengthy procedures.

Public Engagement and Timeline

The speed at which these changes occur will also depend on whether the Justice Department opts for a public comment period or chooses a more expedited pathway. If the expedited route is taken, the need for public feedback could be bypassed, potentially shortening the timeline for rescheduling. Previous proposals have generated significant public interest, as seen when over 43,000 comments were submitted in response to the DEA’s earlier rescheduling proposals.

Financial Relief and Industry Impact

One immediate financial benefit of rescheduling is the potential repeal of Section 280E, which currently prevents cannabis businesses from claiming common tax deductions. Sam Brill, CEO of Ascend Wellness Holdings, emphasizes that eliminating this restriction could liberate companies from substantial tax burdens. Currently, cannabis firms must set aside large reserves to cover potential IRS penalties due to these unique tax challenges.

Additionally, if restrictions are eased, the inability of cannabis businesses to accept credit card transactions may be alleviated, improving customer experiences and operational efficiency.

Research Implications

There are also implications for scientific research on cannabis. The shift to Schedule III would exempt researchers from the demanding requirements associated with Schedule I licenses, which have historically hampered research efforts. Neuroscientist Staci Gruber notes that regulatory easing could simplify certain operational hurdles, although limitations on marijuana sourcing will continue to pose challenges for research endeavors.

Context & Previous Events

Prior to Trump’s executive order, discussions surrounding marijuana policy had gained momentum under President Biden’s administration. In 2023, the Biden administration indicated plans to reclassify marijuana, which contributed to renewed interest and expectations regarding legislative changes.

While this executive order signals a potentially transformative moment for the cannabis industry, the complexities of U.S. drug policy suggest that stakeholders should prepare for a gradual evolution rather than an overnight shift.