On April 23, the Department of Justice announced that it had issued a Final Order reclassifying any marijuana products that are approved by the federal Food and Drug Administration or which are regulated by state medical marijuana laws from Schedule I (i.e., substances with no currently accepted medical use and a high potential for abuse) to Schedule III (substances with a moderate to low potential for physical and psychological dependence) under the authority of the federal Controlled Substances Act. The Final Order is effective immediately, and DOJ has announced an expedited hearing process to evaluate a broader rescheduling of all marijuana to Schedule III.
While DOJ’s reclassification does not “legalize” marijuana under federal law, the decision is expected to “expand Americans’ access to medical treatment options” while allowing “for research on the safety and efficacy of [marijuana], ultimately providing patients with better care and doctors with more reliable information,” according to Acting Attorney General Todd Blanche. Moreover, reclassification is likely to reduce barriers to the development of potential medications and therapies that utilize marijuana, and barriers faced by state-licensed or state-approved businesses to obtain business and financial services. Finally, reclassification could allow marijuana businesses to deduct business expenses on federal tax returns, something that was prohibited by Section 280E of the Internal Revenue Code, given marijuana’s presence in Schedule I (however, the Treasury Department has not yet issued guidance or regulations based on DOJ’s rescheduling). This could allow marijuana businesses to increase cash flow, internal investment, and access to capital.
A majority of states have passed legislation permitting some use and possession of marijuana—currently, 40 states have established medical marijuana programs, and 24 permit the sale of marijuana products for recreational purposes—but marijuana remains illegal under federal law. This dual status creates uncertainty for individuals using or possessing marijuana in marijuana-legal states, for marijuana businesses operating under the auspices of state regulatory regimes, and businesses seeking to provide financial and other services to such businesses.
Over the years, given the increasing prevalence of state legislation permitting marijuana use in certain circumstances and the lack of change in federal law, the federal government developed a “light touch” framework for marijuana businesses operating in compliance with state regulatory systems. During President Obama’s second term, Deputy Attorney General James Cole announced that DOJ would prioritize enforcement activities to safeguard the health and safety of young people and to prevent criminal enterprises, gangs, and cartels from profiting on the marijuana trade. In 2014, Mr. Cole announced that DOJ would take a similar approach regarding financial activity related to marijuana businesses, which, given the illegality of marijuana under the CSA could be viewed to run afoul of federal banking and money laundering statutes, an approach that was adopted with corresponding guidance by the Treasury Department. While these efforts created an informal “safe harbor” from federal criminal law, businesses remained wary of the potential enforcement risks and the administrative burdens that complying with DOJ/Treasury Department guidance presented. For instance, many financial institutions have declined to offer banking services to marijuana-related business, resulting in a lack of banking options for such businesses. Changing approaches to marijuana policy across administrations has highlighted these uncertainties—Attorney General Jeff Sessions repealed the so-called “Cole Memos” during the first Trump administration, though as a practical matter DOJ’s enforcement priorities did not appear to change as a result.
Official efforts to reform marijuana’s treatment under federal law have been in the works for at least the past two presidential administrations. During President Biden’s term in office, the United States Department for Health and Human Services (HHS) published a rescheduling recommendation, noting marijuana’s increasingly accepted medical uses and the emerging view that it posed a lesser potential for abuse than other substances in Schedules I and II. President Biden instructed DOJ and HHS to review marijuana’s classification under the CSA, culminating in the issuance of a Proposed Rule in May 2024 that would reclassify marijuana. In December 2025, President Trump signed an executive order directing DOJ to expedite its reclassification efforts, now resulting in the DOJ’s publication of the Final Rule by acting Attorney General Todd Blanche. There had been no action taken while Attorney General Pam Bondi led DOJ; she had opposed marijuana reforms while serving as Florida’s attorney general. While Congress has considered bills related to marijuana businesses over the years, legislative efforts have generally been unsuccessful —for example, the SAFE Banking Act, which would have expressly prohibited federal banking regulators from penalizing financial institutions for providing services to marijuana businesses licensed under state law, passed the House of Representatives in 2019 but failed to move out of committee in the Senate. While Congressional action represents the most enduring way to reform treatment of marijuana under federal law, DOJ’s recent efforts offer increased clarity to the burgeoning medical and recreational marijuana industry, and to individuals who use and possess marijuana.
In short, while marijuana remains a controlled substance, the Final Order provides expanded access and additional support for state-regulated programs. SKO attorneys will continue assisting clients in navigating the complex interplay between state and federal marijuana laws. This work has included helping businesses offering services to medical marijuana businesses as well as assisting practitioners and businesses seeking to be licensed under Kentucky’s medical cannabis program.
