As 2025 comes to a close, we are taking a moment to look back on the year’s federal developments on cannabis and hemp. Is rescheduling actually going to happen? And is hemp now illegal?!
Historical Context of Cannabis Rescheduling
Let’s take a step back. As you can see in our previous articles about the effects of cannabis rescheduling on trademark owners and taxes,the cannabis rescheduling rumblings began in 2023 under the Biden Administration, when the Department of Health and Human Services (HHS) recommended to the Drug Enforcement Agency (DEA) that marijuana be controlled under Schedule III of the Controlled Substances Act (CSA). In May of 2024, reports circulated that the DEA had agreed to reschedule marijuana, changing it from a Schedule I drug (on par with heroin and LSD) to a Schedule III drug (on par with ketamine and Tylenol® with codeine). The basis for the move was a historic, federal recognition of the potential for medical uses for cannabis. And rescheduling would have positive tax implications for state-legal cannabusinesses.
The rulemaking process for rescheduling has been underway for quite some time, but the DEA has been holding up the process. And in November 2025, things were looking a bit bleak for what had seemed to be a monumental shift in federal attitude toward cannabis when, via an appropriations bill to re-open the government after the longest shutdown in U.S. history, Congress included language that practically speaking will eliminate a lot of currently-legal hemp products (more on this below). If hemp is dead, what is the hope for cannabis?
Potential Effects of Cannabis Rescheduling on Hemp
Enter Trump’s Executive Order (EO) titled “Increasing Medical Marijuana and Cannabidiol Research.” Issued December 18, 2025, the EO again recognizes the potential medical benefits of cannabis, stating, “[T]he Federal Government’s long delay in recognizing the medical use of marijuana does not serve the Americans who report health benefits from the medical use of marijuana to ease chronic pain and other various medically recognized ailments,” and noting that “the current Schedule I position of marijuana has impeded research. The lack of appropriate research on medical marijuana and consequent lack of FDA approval leaves American patients and doctors without adequate guidance on appropriate prescribing and utilization.” The EO also recognizes the potential medical benefit of CBD products, stating, “[E]vidence suggests that the amount of THC in hemp-derived cannabinoid products can affect both pain treatment efficacy and adverse events.” Thanks to the 2018 Farm Bill, hemp-derived cannabinoids (CBD derived from hemp having less than 0.3% delta-9 THC on a dry-weight basis) are not currently controlled substances under the CSA; but under the November 2025 appropriations bill, most CBD products will suddenly become illegal once again under the CSA next November, due to such factors as the product’s package size (such that the product contains too much CBD) and the amount and type of tetrahydrocannabinols in the CBD other than delta-9 THC. While, as the EO notes, some commercially available CBD products have been found to be incorrectly labeled regarding their CBD composition, not all CBD products suffer from this flaw, and certainly the November 2025 appropriations bill has left the hemp and CBD industry reeling.
Citing a “policy . . . to increase medical marijuana and CBD research to better inform patients and doctors,” the EO specifically directs the Attorney General to “take all necessary steps to complete the rulemaking process related to rescheduling marijuana to Schedule III of the CSA in the most expeditious manner in accordance with Federal law.” It also calls for persons in the administration to “work with Congress to update the statutory definition of final hemp-derived cannabinoid products to allow Americans to benefit from access to appropriate full-spectrum CBD products while preserving the Congress’s intent to restrict the sale of products that pose serious health risks,” providing (potentially) some breathing room for hemp-derived CBD products despite the bad news in November.
Cannabis Rescheduling Takeaways for Trademark Owners and Taxes
Rescheduling requires administrative rulemaking to be completed before it will actually occur; the EO does not itself reschedule cannabis. Nor does the EO change anything about the November appropriations bill’s perceived impact on the hemp industry, and Congress could decline to “work with” the administration to “update” the statutory definition of hemp-derived CBD products. However, it is noteworthy that a bill titled the American Hemp Protection Act of 2025 has already been introduced in the House to repeal the hemp language before it takes effect on November 12, 2026.
As we mentioned in our 2024 article about the effects of cannabis rescheduling on trademark owners, it’s helpful to remember what rescheduling is not: it is not federal legalization. Generally speaking, Schedule III drugs are prescription only and not available over the counter; while this may align with at least some state medical cannabis programs, it does not align with recreational use, meaning much of the cannabis legally sold under state laws today will remain federally illegal. From a trademark registration perspective, then, cannabusinesses still will not be able to obtain federal trademark registrations for their recreational cannabis products since the use in commerce needed to support a federal registration must be lawful use in commerce. But it does beg the question of whether federal registration may become possible for medical cannabis products, which would be a first.
The rescheduling picture is a bit brighter on the tax side. As mentioned in our 2024 article about the effects of cannabis rescheduling on taxes, rescheduling should eliminate the impacts of section 280E of the Internal Revenue Code for federal income tax purposes. Section 280E applies when a taxpayer is trafficking a Schedule I or II controlled substance within the meaning of the CSA. The switch to Schedule III turns off section 280E as currently drafted. However, it is unclear what the effective date for rescheduling might be. There is also an open question as to whether taxpayers might be able to file amended tax returns for open years and obtain tax refunds once rescheduling occurs. That may be too “high” a hope (pun intended); the IRS may issue guidance that rescheduling only impacts taxes prospectively after the rule becomes final.
Miller Nash's cannabis team will continue to provide updates as these cannabis rescheduling and hemp legality issues develop.
This article is provided for informational purposes only—it does not constitute legal advice and does not create an attorney-client relationship between the firm and the reader. Readers should consult legal counsel before taking action relating to the subject matter of this article.
