Cannabis remains classified as a Schedule I substance under the federal Controlled Substances Act (“CSA”)—a designation reserved for drugs deemed to have a high potential for abuse, no currently accepted medical use, and a lack of accepted safety for use under medical supervision. Despite its state-level legalization for medical or recreational purposes in the majority of U.S. states, cannabis is still federally categorized alongside heroin and more restricted than fentanyl, a Schedule II substance.
Rescheduling cannabis would mark a transformative shift in federal drug policy. The implications are sweeping: removal of prohibitive tax burdens under Internal Revenue Code § 280E, expanded access for clinical research, and improved banking access for cannabis businesses. Moving cannabis from Schedule I to Schedule III would not legalize it federally, but it would mark a foundational shift in how cannabis is treated by the public, regulators, scientists, and financial institutions.
In late 2022, the Biden administration launched a federal review of cannabis scheduling, raising hopes for meaningful reform. After the Department of Health and Human Services (“HHS”) recommended moving cannabis to Schedule III in August 2023, the Department of Justice (“DOJ”) advanced a proposed rule in May 2024. But by January 2025, the process stalled amid procedural irregularities and interlocutory motions. As of April 2025, the rescheduling process appears to be stalled indefinitely.
The CSA organizes federally regulated drugs into five schedules, based on their potential for abuse, accepted medical use, and the likelihood of dependence. Cannabis is currently listed in the most restrictive category—Schedule I. As a result, cannabis businesses operating in states that have legalized medical or adult-use cannabis are hindered by these restrictions, including ineligibility for standard tax deductions under Internal Revenue Code § 280E, and limited access to banking services.
Under 21 U.S.C. § 811, the rescheduling process begins with HHS, which conducts a scientific and medical evaluation of the substance at issue. HHS’s recommendation, while not binding on final scheduling, controls medical and scientific findings. The DEA then manages a rulemaking process that includes public notice, potential hearings, and a final decision. This process is governed by rulemaking provisions under the Administrative Procedure Act (“APA”), which prohibits ex parte communications and imposes transparency and fairness requirements on agency decision-making.
In October 2022, President Joe Biden directed the HHS and the DOJ to initiate a review of cannabis's classification under the CSA. In August 2023, the HHS formally recommended that cannabis be moved from Schedule I to Schedule III, acknowledging its medical utility and stating it has a lower potential for abuse than substances in Schedules I and II. In May 2024, the DOJ transmitted a proposed rule to the DEA, which in turn announced administrative hearings for January 2025 to evaluate the proposal.
However, days before proceedings were set to begin, Chief Administrative Law Judge John J. Mulrooney granted an interlocutory appeal, abruptly pausing the hearings amid allegations of procedural misconduct by DEA officials. The interlocutory appeal stemmed from accusations that DEA officials engaged in ex parte communications with anti-rescheduling participants, a potential violation of the APA. The movants—comprising pro-rescheduling organizations such as Village Farms International and Hemp for Victory—alleged that DEA selectively coordinated with prohibitionist entities to shape the evidentiary record. Judge Mulrooney stayed the hearing process indefinitely. As of April 2025, no briefing schedule has been issued, with no visible effort to resolve the procedural dispute or restart the process.
Despite continued industry optimism, meaningful progress remains out of reach as agency inaction persists.
During the 60-day public comment period on the DEA's proposed rescheduling of cannabis, nearly 43,000 comments were submitted—the highest number ever received for a DEA rule change. Analyses revealed that a significant majority of these comments favored more substantial reforms: approximately 69% advocated for full legalization or decriminalization, while around 35% supported rescheduling to Schedule III.
Amid stalled rescheduling proceedings, industry stakeholders have mobilized to influence outcomes through lobbying, litigation, and public messaging. Pro-rescheduling advocates—including the U.S. Cannabis Roundtable, NORML, Village Farms International, and veterans’ organizations like Hemp for Victory—continue to push for action. These groups emphasize cannabis’s medical value, economic potential, and the harm of maintaining Schedule I status. On the other side, opposition groups such as Smart Approaches to Marijuana (“SAM”) argue that rescheduling would pose public health risks and undermine drug enforcement efforts.
Allegations of procedural bias have escalated tensions. For example, Doctors for Drug Policy Reform (“D4DPR”) filed a 56-page brief arguing the DEA violated the APA by selectively picking anti-rescheduling entities to participate in the January 2025 rescheduling hearing. Thereafter, the DEA disclosed previously secret communications, revealing that DEA officials issued “cure letters” selectively to anti-rescheduling entities. D4DPR has since withdrawn its legal challenge without prejudice.
Legal pressure may soon escalate further. If the DEA continues to delay its decision on the interlocutory appeal, stakeholders could seek judicial relief under the APA for “unreasonable delay”—a standard courts have previously applied to compel agency action when mandated processes stall without explanation.
If the DEA ultimately moves cannabis to Schedule III, the change would exempt cannabis businesses from the burdens of Internal Revenue Code § 280E, allowing them to deduct ordinary business expenses and significantly improving their bottom lines. The change would have limited immediate effect on criminal enforcement, as federal prosecutions for simple possession are already rare. Still, it could influence prosecutorial discretion and signal a broader federal shift.
Caution is warranted, however. In early 2025, Congress introduced two bills—S. 471 and H.R. 1447, both titled the “No Deductions for Marijuana Businesses Act”—that would preserve 280E restrictions even if cannabis is rescheduled. These efforts highlight the fragility of reform progress and the persistence of ideological resistance in federal policymaking.
Even assuming Congress does not pass S. 471 or H.R. 1447, the federal rescheduling of cannabis remains procedurally paralyzed. Despite the HHS’s recommendation to reclassify cannabis to Schedule III, the rulemaking process has stalled under the weight of administrative delay, contested procedures, and leadership uncertainty. As of May 2025, there is no timeline for resolution of the interlocutory appeal, and the DEA has taken no concrete steps to advance the process. It appears the DEA is willing to let the matter languish.
The next phase of reform may hinge on three potential catalysts:
Until one of these levers is pulled, cannabis rescheduling stands at a frustrating crossroads—with a legal pathway forward but no administrative will for progress. For now, the issue remains mired in bureaucratic inertia, even as public support and state-level legalization surge ahead. Until progress comes from the courts, new agency leadership, or the Oval Office, federal cannabis reform will remain on pause.
