Rescheduling marijuana to Schedule III marks a pivotal shift in federal drug policy by acknowledging its accepted medical use and moderate to low potential for dependence. This change promises tax relief, streamlined research, improved banking access, and clearer regulatory pathways for medical marijuana under the Controlled Substances Act.
The rescheduling process involves scientific review, rulemaking, public input, and administrative adjudication, typically spanning 12–24 months from proposal to final rule. While President Joe Biden got the process started during his term of office, it will be up to current President Donald J. Trump to complete the rescheduling of medical marijuana. The process reached administrative adjudication before stalling out in January of 2025. However, in August 2025, President Trump indicated that his administration was reviewing the issue and would decide in the “next few weeks”. Some reports suggest that advancing the rescheduling process is not a priority for his first year in office, so it’s difficult to say when or even if rescheduling will take place.
Schedule III is a drug classification under the Controlled Substances Act that recognizes compounds with accepted medical use and moderate to low risk of physical or psychological dependence. Unlike Schedule I substances—deemed to have no accepted medical use and high abuse potential—Schedule III drugs can be prescribed and studied with fewer regulatory constraints. This distinction lays the groundwork for tax reform, research expansion, and clinical prescribing frameworks as marijuana transitions from Schedule I to Schedule III status.
A Schedule III drug is characterized by three core criteria: accepted medical use, moderate to low abuse potential, and limited physical or psychological dependence risks. The DEA and HHS evaluate scientific data on pharmacology, toxicity, and public health impact before assigning Schedule III. This classification permits medical prescription under federal law subject to DEA registration, whereas Schedule I remains off-limits for prescription or routine clinical studies, maintaining marijuana’s current restrictive status.
Schedule III substances carry recognized therapeutic applications, enabling healthcare providers to prescribe them under federal authority. Their abuse potential is lower than Schedule I and Schedule II drugs, resulting in fewer prescribing restrictions and reporting requirements. Common examples of Schedule III drugs include ketamine, anabolic steroids, Tylenol with Codeine, and Buprenorphine (primarily used for treatment of opioid addiction).
In contrast, Schedule I marijuana requires special DEA research licenses with stringent security and record-keeping standards, effectively limiting clinical trials and medical distribution until rescheduling narrows the regulatory gap.
Physicians will be able to prescribe FDA-approved Schedule III cannabis therapies using standard prescription pads, subject to state medical cannabis programs. Insurance coverage for recognized formulations may expand, reducing out-of-pocket costs and integrating cannabinoid treatments into mainstream healthcare protocols. However, products that are not currently FDA-approved can still be written under recommendation from your state licensed physician and purchased at dispensaries even after the rescheduling since that is approved under state law in most states where medical marijuana is legalized.
No, Schedule III classification does not legalize non-medical recreational use. Marijuana remains a controlled substance subject to federal regulations, limiting legal access to FDA-approved medical products and licensed research entities.
States with medical marijuana programs will align their registration, testing, and prescribing standards to federal scheduling, though recreational markets may continue under state authority. Compliance frameworks will evolve to reconcile product labeling, potency limits, and distribution controls with the new federal status.
Rescheduling to Schedule III reduces federal sentencing guidelines for possession and distribution but does not override state penalties. Individuals previously charged under Schedule I statutes may seek sentence modifications, while federal enforcement priorities shift toward unlicensed trafficking and diversion.
Rescheduling marijuana to Schedule III eliminates the application of IRS Section 280E, enabling cannabis businesses to deduct ordinary operating expenses and enhance profitability. This change also reduces banking barriers, attracts capital, and spurs new market growth across cultivation, processing, and ancillary services.
IRS Section 280E currently prohibits deductions for businesses that deal in Schedule I or II substances, forcing cannabis operators to pay taxes on gross income. Removing marijuana from Schedule I and reclassifying it as Schedule III restores full expense deductibility for rent, payroll, and equipment, dramatically lowering effective tax rates and freeing capital for growth.
Schedule III recognition reduces perceived federal risk for financial institutions, allowing more banks and credit unions to open accounts for cannabis businesses. Enhanced banking integration supports electronic payments, lines of credit, and equipment financing, replacing cash-only operations with safer, more transparent transactions and fostering investor confidence.
Schedule III status eases stringent DEA research licensing, broadening scientific inquiry into cannabis’s therapeutic mechanisms. Medical professionals gain clearer pathways to prescribe FDA-approved cannabinoid drugs, improving patient access and standardizing dosing protocols.
Under Schedule III classification, researchers face reduced security, record-keeping, and import/export controls compared to Schedule I. Institutional review boards can more readily approve clinical trials, and investigators can procure research-grade cannabis without year-long DEA registration delays, accelerating studies on pain management, epilepsy, and mental health.
The FDA will evaluate cannabis extracts and isolates under its existing drug approval framework, requiring Phase I–III clinical trials to demonstrate safety and efficacy. Schedule III status provides a federally recognized pathway for standardized pharmaceutical development, opening doors for novel cannabinoid medications subject to rigorous quality and labeling standards. Currently, only three cannabis based drugs are approved by the FDA, and none of them are from natural cannabis but, rather, derived or based on the plant. Epidiolex (a purified CBD product for epilepsy), Marinol (a synthetic form of Delta-9 THC) and Syndros (synthetic dronabinol for chemotherapy-induced nausea and appetite loss), and Cesamet (synthetic nabilone for chemotherapy-induced nausea).
The Department of Health and Human Services (HHS) evaluates medical and scientific evidence and issues recommendations. The Drug Enforcement Administration (DEA) publishes a proposed rule in the Federal Register and considers HHS input. The Department of Justice (DoJ) provides legal oversight to ensure compliance with the Controlled Substances Act.
Despite Schedule III classification, certain legal, insurance, and policy hurdles will persist, requiring continued advocacy and regulatory refinement.
Marijuana will remain subject to controlled substance regulations, including manufacturing quotas and interstate transport restrictions. Variability in state licensing frameworks and lack of universal insurance coverage continue to impede consistent patient access and business expansion. Also, DEA scheduling only applies to medical marijuana. Recreational marijuana will not change and will remain legal only in certain states.
While FDA-approved cannabis pharmaceuticals may secure insurance reimbursement, many dispensary products still fall outside traditional formularies. Patients may face out-of-pocket expenses until commercial payers adjust coverage policies, maintaining a transitional cost gap in medical cannabis therapy.
Divergent state laws—ranging from full recreational legalization to medical-only regimes—can create regulatory patchworks that complicate compliance for multi-state operators.
Conflicts may arise over product labeling, potency limits, and distribution rights unless federal-state coordination frameworks evolve alongside rescheduling.
Physicians, researchers, and entrepreneurs stand to benefit from marijuana’s shift to Schedule III through clearer clinical pathways, expanded investment channels, and stronger social acceptance. While rescheduling alleviates key tax and research barriers, continued efforts will be crucial to harmonize insurance coverage, state regulations, and international obligations. Understanding each step of the DEA–HHS process, from scientific review to final rule, empowers stakeholders to navigate policy shifts proactively. As cannabis enters a new regulatory era, collaborative engagement between government agencies, industry leaders, and patient advocates will determine the long-term success of Schedule III marijuana.
Rescheduling to Schedule III would acknowledge that marijuana has accepted medical uses and a lower potential for abuse than Schedule I drugs, where it currently sits. It would significantly reduce the tax burden on state-legal cannabis businesses by allowing them to deduct normal business expenses under federal tax law. However, it would not legalize medical marijuana nationwide nor would it legalize recreational marijuana nationwide.
Until President Trump decides to move forward with rescheduling medical marijuana, many wait with great anticipation to see the impact to their their businesses, research facilities, patient accessibility, and the impact to all the industries touched by the medical marijuana industry. Until then, those in the medical marijuana industry in Louisiana, Mississippi, Texas, and throughout the country will move forward with business as usual.
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