Marijuana was officially rescheduled from Schedule I to Schedule III under federal law by President Donald Trump on December 18, 2025, via executive order. This change acknowledges marijuana’s lower potential for abuse and recognizes its accepted medical uses, marking a major shift in federal cannabis policy. While this does not federally legalize marijuana, it opens the door for significant changes in taxation, banking, and research for both the cannabis and hemp industries.
What Rescheduling Means for the Hemp Industry
- Rescheduling marijuana to Schedule III removes the application of IRS Section 280E, allowing cannabis and hemp businesses to claim ordinary business deductions on federal taxes, improving financial health and liquidity.
- Hemp-derived CBD products may benefit from increased federal research funding and expanded access, as the executive order specifically supports patient access and real-world data collection on hemp and cannabis products.
- The change could lead to more favorable banking opportunities for hemp businesses, as financial institutions may be more willing to serve the industry due to reduced regulatory risk.
- However, some hemp products may still face regulatory challenges, particularly if they contain THC above the legal threshold, and the effective date and implementation details of rescheduling are still being clarified by federal agencies.
Impact on Payment Processing and Banking
- Cannabis and hemp businesses may see increased competition among banks and payment processors, as the reduced regulatory burden makes it more attractive for financial institutions to enter the market.
- High-risk payment processors like Canna Merchant Accounts will remain essential, as many banks and processors still require specialized expertise to handle compliance, fraud, and regulatory changes in the cannabis space.
- The rescheduling may lead to lower processing fees and better service for cannabis businesses as the market becomes more competitive, but businesses should continue to work with processors experienced in navigating the evolving regulatory landscape.
Business Financing and Operational Implications
- With improved access to banking and potential tax relief, cannabis and hemp businesses may find it easier to secure business financing and expand operations.
- Payment processors and financing providers will need to stay up-to-date with federal and state regulatory changes to ensure continued compliance and service for their clients.
- The rescheduling is a significant step forward, but businesses should still operate with caution and maintain strict compliance, as full federal legalization has not occurred and regulatory uncertainty remains.
This executive order represents a pivotal moment for the cannabis and hemp industries, with tangible benefits for taxation, banking, and research, but continued vigilance and compliance will be key for businesses moving forward.