On December 18, 2025, President Donald Trump issued Executive Order 14370, titled "Increasing Medical Marijuana and Cannabidiol Research." This directive marks a pivotal shift in federal cannabis policy, signaling an intent to modernize regulations that have long stifled the industry. While the order itself does not immediately legalize marijuana or decriminalize its use, it sets in motion a series of federal actions that could fundamentally reshape the landscape for medical marijuana, CBD, and hemp-derived products.
The core of the "Marijuana EO" is a directive for federal agencies to accelerate the process of reclassifying marijuana from a Schedule I to a Schedule III drug under the Controlled Substances Act (CSA). Additionally, it mandates expanded federal research into the medical benefits of cannabis and calls for the creation of a regulatory framework to improve patient access. For an industry hamstrung by conflicting state and federal laws, inconsistent regulations, and punitive tax codes, these changes could be transformative.
The Current Patchwork: Hemp vs. Marijuana
To understand the significance of this order, one must look at the current regulatory environment. The Agriculture Improvement Act of 2018 (the 2018 Farm Bill) legalized hemp by removing it from the CSA, defining it as cannabis with no more than 0.3 percent THC by dry weight. This opened the door for a booming market in CBD and other hemp derivatives. However, the recent FY2026 Agriculture Appropriations Act (P.L. 119-37) introduced new complications by banning "intoxicating hemp-derived cannabinoid products" and capping total THC levels, even if derived from legal hemp.
Meanwhile, cannabis with more than 0.3 percent THC remains classified as "marijuana," a Schedule I controlled substance with "no currently accepted medical use." This classification has persisted despite the FDA approving specific cannabinoid-based drugs like Epidiolex (CBD) and dronabinol (synthetic THC), and despite widespread state-level medical marijuana programs.
Key Directives of Executive Order 14370
The Marijuana EO tasks key federal figures—including the Assistant to the President, the Secretary of Health and Human Services, and the FDA Commissioner—with several critical objectives:
- Update Statutory Definitions: Work with Congress to refine the definition of hemp-derived products, balancing patient access with the need to restrict products posing serious health risks.
- Expand Research: Develop new research methods utilizing "real-world evidence" to study medical marijuana and CBD. This aims to inform standards of care and improve access in accordance with federal law.
- Create a Regulatory Framework: Establish a regime that provides guidance and safeguards for CBD products, addressing current issues like inaccurate labeling and inconsistent quality control.
Implications for the Industry
A New Path for "Medical" Marijuana?
The EO repeatedly highlights the benefits of medical marijuana, particularly for chronic pain. Since the traditional FDA drug approval process is lengthy and costly, the order's call for a "regulatory framework" to "improve access" suggests a potential new pathway for non-pharmaceutical cannabinoid products. Currently, Schedule III drugs require a prescription and pharmacy distribution. It remains to be seen if the FDA will create a novel category for medical marijuana or force it into existing pharmaceutical models.
Addressing the THC Threshold
The order acknowledges the tension created by the FY2026 Appropriations Act, which could reclassify some full-spectrum CBD products as marijuana if their total THC content exceeds new per-container limits. The FDA is now required to publish lists of naturally occurring and synthetic cannabinoids within 90 days, which will likely clarify—and potentially limit—what can be sold as a hemp product.
The End of the 280E Tax Nightmare
Perhaps the most immediate financial impact of rescheduling to Schedule III would be the relief from **Section 280E of the Internal Revenue Code**. Currently, this code prohibits marijuana businesses from deducting standard business expenses (like rent, payroll, and marketing) because they are trafficking in a Schedule I substance. This results in effective tax rates that can exceed 70%. Moving to Schedule III would allow these businesses to operate like normal enterprises, taxing them on net income rather than gross income. This shift would unlock capital, reduce borrowing costs, and likely attract significant institutional investment.
Strategic Takeaways for Businesses
While the Executive Order is a directive rather than an immediate law change, businesses should proactively prepare for the coming regulatory shift:
- Prepare for Interstate Commerce Rules: Schedule III status will likely involve strict FDA and DEA compliance for interstate sales, potentially requiring a prescription model rather than the current dispensary system.
- Engage in Rulemaking: As agencies draft new rules, businesses should actively submit comments. This input can shape the final regulations and preserve legal rights.
- Audit Product Portfolios: With a renewed focus on total THC content, companies should assess their products to ensure they won't fall afoul of new limits on intoxicating hemp derivatives.
- Reevaluate Financial Planning: The potential end of Section 280E warrants a review of tax strategies and accounting systems to maximize future deductions and profitability.
