U.S. President Donald Trump sits in the Oval Office to sign executive orders, at the White House in Washington, D.C., U.S., Dec. 18, 2025.
Evelyn Hockstein | Reuters
President Donald Trump signed an executive order Thursday directing federal agencies to reclassify marijuana, loosening long-standing restrictions on the drug and marking the most consequential shift in U.S. cannabis policy in more than half a century.
The order, once finalized by the Drug Enforcement Administration, moves cannabis out of Schedule I classification — the most restrictive category under the Controlled Substances Act, alongside heroin and LSD — to a Schedule III classification, which encompasses substances with accepted medical use and a lower potential for abuse, such as ketamine and Tylenol with codeine.
Also on Thursday, the Centers for Medicare and Medicaid Services, led by Dr. Mehmet Oz, is expected to launch a pilot program in April enabling certain Medicare-covered seniors to receive free, doctor-recommended CBD products, which must comply with all local and state laws on quality and safety, according to senior White House officials. The products must also come from a legally compliant source and undergo third-party testing for CBD levels and contaminants.
The reclassification is viewed by many analysts as a financial lifeline for the cannabis industry. The move exempts companies from IRS Code Section 280E, allowing them to deduct standard expenses like rent and payroll for the first time. It also opens the door for banking access and institutional capital previously sidelined by compliance fears.
Many on Wall Street also expect the Medicare pilot to draw major pharmaceutical players into the sector to chase federally insured revenue.
While CBD has surged in popularity in recent years, with infused consumer goods ranging from seltzers to skincare, the FDA has stopped short of granting the compound its full backing.
Studies have found “inconsistent benefits” for targeted conditions, while FDA-funded research warns that prolonged CBD use can cause liver toxicity and interfere with other life-saving medications.
Currently, the FDA has only approved one CBD-based, Epidiolex, for rare forms of epilepsy.
Experts and industry insiders told CNBC this week that a reclassification could pave the way for more research into the effects of CBD use.