President Donald Trump issued an executive order on December 18, 2025, directing the Department of Justice to expedite a rule to reclassify marijuana from a Schedule I drug to Schedule III — alongside less dangerous drugs like ketamine and Tylenol with codeine. The order also calls for enhanced research on hemp-derived cannabinoid products, helping to inform patients and doctors about their potential role in managing common health conditions.

Of particular importance to the hemp industry is the fact that the order also asks Congress to update the statutory definitions to allow the use of full spectrum CBD products. Congress inserted a provision into H.R. 1 — also referred to as the One Big Beautiful Bill Act — last month that will essentially ban those products beginning in March 2026. Thus, there is a short window to modify that definition.

It is a historic move that could send ripple effects for cannabis and hemp companies located across the Southeast as well as for pharmaceutical and other related industries and research institutions.

The rule would not legalize marijuana for recreational use nationwide. But as more states, such as Virginia (as well as Washington, DC), adopt their own rules to allow for recreational use, the reclassification does beg the question of whether states like North Carolina, South Carolina, and Georgia, among others, will follow suit.

The proposed rule represents a middle ground for the federal government to explore in this debate.

Here’s a look at the proposal to reclassify marijuana to Schedule III, and the potential impacts it will have if approved.

Possible Impacts of Moving Marijuana to Schedule III

Marijuana is classified by the U.S. Drug Enforcement Administration as a Schedule I drug, the same category as drugs such as heroin and ecstasy. Schedule I drugs, substances, or chemicals have "no currently accepted medical use and a high potential for abuse," according to the DEA.

Under the proposed rule, marijuana would fall under Schedule III. This DEA category is for drugs, substances, or chemicals that have a "moderate to low potential for physical and psychological dependence" as well as a lower potential for abuse. Other Schedule III drugs include ketamine and some anabolic steroids.

The biggest impact of this shift in schedules is creating opportunities for research.

Universities, hospitals, pharmaceutical companies, and others would now be allowed and encouraged to research cannabis and its potential uses for treating ailments or being prescribed to treat medical conditions.

One example of this research is studying how cannabinoids — including the ones that do not have psychoactive effects on the body — can be used to help manage chronic pain, anxiety, nausea, and a host of other health issues.

Another possible outcome of the reclassification is tax-related.

The cannabis industry in the United States is prohibited from taking federal business tax deductions because it is involved in a business dealing with a Schedule I drug. But the move to Schedule III is the first step into federal agencies like the Internal Revenue Service potentially allowing for tax deductions for these businesses.

There are other possible outcomes, too, that we will be tracking in the coming months. Will other industries that have stayed away from the marijuana business start to jump in? Does the pharmaceutical industry join in? Any practitioner licensed by the DEA is legally allowed to prescribe a Schedule III drug, which could lead to new industries in this space.

Final Takeaway

The proposed rule envisioned in the order is just the beginning of what could be major changes to the cannabis and marijuana industry in the United States.

While the rule would not implement legalization for recreational use, the reclassification has the potential to open the door to businesses and institutions that have traditionally shied away from the marijuana industry.

More businesses might see the Schedule III classification as an entry point into cannabis while some existing businesses should pay attention to other impacts like tax write offs.

The hemp industry may have received a lifeline if Congress follows the directive to end the new restrictions on hemp products.

There will be much more discussion on the rule and further congressional action on hemp so businesses, institutions, and local governments should be on the lookout for any further updates.

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